Glossary

Treaty reinsurance

A reinsurance contract that automatically covers a defined portfolio of an insurer's policies, instead of reinsuring one risk at a time.

Also called: reinsurance treaty, treaty cover, automatic reinsurance

Treaty reinsurance is a contract between an insurer (the cedent) and a reinsurer covering a whole class or book of business, such as all commercial property policies written in a year. The cedent does not submit individual risks. Eligible policies are covered automatically, and the reinsurer follows the cedent's underwriting and claims decisions within the treaty terms. That is the opposite of facultative reinsurance, which is negotiated risk by risk.

Treaties come in two families. Proportional treaties, such as quota share, split premium and losses by a fixed percentage. A 25% quota share sends 25% of the premium to the reinsurer, who pays 25% of each loss and returns a ceding commission to cover the cedent's expenses. Non-proportional treaties, such as excess of loss, pay only the portion of a loss above a retention, up to a limit. Say a $10 million layer excess of $5 million: on an $8 million loss it pays $3 million (hypothetical).

Many property catastrophe treaties renew January 1, and the price set there flows into the premiums business buyers see during the year. The guide on treaty vs facultative reinsurance: how insurers share risk compares the structures, and The January 1 reinsurance renewals explained: the 2026 results explains the renewal.

Last reviewed October 10, 2026

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Related terms

Facultative reinsurance Reinsurance negotiated for one specific risk or policy rather than a whole book of business, usually because the risk is large or unusual. Cedent The insurer that passes part of its risk and premium to a reinsurer, and stays liable to its own policyholders for the whole. Reinsurance Insurance an insurer buys from a reinsurer to transfer part of its risk, add capacity and protect its capital from large or accumulated losses. Retrocession Reinsurance bought by a reinsurer to pass part of the risk it has assumed to other reinsurers or investors, usually to manage peak catastrophe exposure. Attachment point The loss amount at which an excess, umbrella or reinsurance layer starts paying, normally the top of the underlying limits or retention beneath it.

Related guides

The January 1 reinsurance renewals explained: the 2026 results Why January 1 sets the reinsurance market, what Guy Carpenter, Gallagher Re and Howden Re reported for 1/1/2026, and how softer cat pricing reaches buyers. The world's largest reinsurers: 2026 rankings and what they mean AM Best's 2026 ranking of the world's largest reinsurers, with Munich Re first, how to read it, and why the names matter when you buy U.S. commercial coverage. Treaty vs facultative reinsurance: how insurers share risk Treaty reinsurance covers a whole book automatically; facultative covers one risk by negotiation. How each works, a worked split, and what it means for buyers. What is reinsurance, and why it affects your business premium Reinsurance is insurance for insurers. How treaty and facultative cover work, how it limits what your carrier will write, and how it shows up in your renewal.