how quota share treaties work
think of a quota share treaty as giving away a part of an insurer s retention in return the insurer gets to increase its acceptance capacity with automatic cover a quota share treaty reduces financial exposure to adverse claim fluctuations the cedent can continue to participate in the underwriting gains in some negotiated percentage even though it has reinsured the business and has access to outside expertise from a professional reinsurer consider an insurance company looking to reduce its exposure to the liabilities created through its underwriting activities it enters into a quota share reinsurance contract the contract has the insurance company retaining 40 of its premiums losses and coverage limits but cedes the remaining 60 to a reinsurer this treaty would be called a 60 quota share treaty because the reinsurer is taking on that percentage of the insurer s liabilities 