Sometimes the simplest way to share risk is to split everything by a fixed percentage. Quota share is a proportional reinsurance arrangement in which the reinsurer takes a set percentage of every risk written by the cedent within the defined class of business, receiving the same percentage of premium and paying the same percentage of losses.

A 30 percent quota share means the reinsurer receives 30 percent of the premium and pays 30 percent of each loss, subject to any commission and limits in the treaty. The arrangement automatically follows the fortunes of the cedent’s underwriting.

Quota share provides surplus relief, stabilizes results, and can supply underwriting expertise from the reinsurer. It also shares profitable business, not only the losses. Cedents use it when they want capacity and balance-sheet support without the complexity of excess-of-loss structures.

• Proportional reinsurance by fixed percentage
• Shares premium and losses equally by that percentage
• Provides capacity and surplus relief
• Simple structure that follows the cedent’s results