What is the definition of Treaty Reinsurance?

Treaty Reinsurance refers to an established agreement between the insurance company and the reinsurers.

Under the terms of the treaty, the insurance company is obligated to pass on a certain percentage of its business to the reinsurer and the reinsurer is to automatically accept this portion of the business.

This is usually composed of a class of policies from the reinsurer. For example, the treaty agrees to cover casualty insurance policies. What happens is that the insurance company automatically passes on casualty risk to the reinsurance company.

This can be contrasted to another type of reinsurance contract - the facultative policy, where the reinsurer makes a decision whether to accept a risk or not.

• Insolvency
• Misstatement of Age or Sex Provision
• Modified Premium Policies
• Moral Hazard
• Comprehensive Coverage