Negotiating every risk individually is impractical for high-volume portfolios. Treaty reinsurance is an automatic agreement under which the reinsurer covers a defined class of the cedent’s business according to pre-agreed terms, without separate negotiation of each risk.

Proportional treaties share premium and losses by percentage. Non-proportional treaties respond when losses exceed a retention. The treaty sets the scope of covered business, exclusions, limits, commissions, and reporting duties. Bordereaux or accounts keep the reinsurer informed of the portfolio and claims.

Treaties give the cedent certainty of capacity and speed of placement. They also bind the reinsurer to risks it has not individually underwritten, so the treaty wording and the cedent’s underwriting discipline are critical. Long-term relationships and periodic renegotiation shape the ongoing terms.

• Automatic reinsurance for a defined portfolio
• May be proportional or excess of loss
• Eliminates case-by-case negotiation
• Relies on clear scope and cedent underwriting quality