Quota share reinsurance is a proportional arrangement under which an insurer cedes a fixed share of every risk covered by the agreement to a reinsurer.
Quota share reinsurance is a form of proportional reinsurance. The insurer cedes an agreed fixed share of every risk covered by the agreement. The related premium and covered losses are divided in the same proportion unless the contract adds specific restrictions.
In simple terms:
The parties first define the portfolio or class of business covered by the treaty. They then agree the reinsurer's participation. When the insurer accepts an eligible risk, the corresponding share of liability and premium is ceded under the treaty. If a covered loss occurs, the reinsurer participates in the same contractual proportion.
This structure helps an insurer manage its portfolio and insurance capacity. It does not make a large risk unlimited: the treaty may cap liability for an original policy or for the portfolio.
In quota share reinsurance, the percentage is the same for each included risk. Under surplus share reinsurance, the ceded proportion varies with the insurer's retention and the size of the individual risk.
Non-proportional cover works differently. It responds after a loss exceeds an agreed retention and only within the relevant layer. The words share and limit alone therefore do not identify the form of reinsurance; the calculation mechanism matters.
The reinsurer receives its agreed share of premium. A reinsurance commission may recognise the insurer's acquisition and administration costs. Its amount, calculation basis and any profit commission are not universal and must be stated in the agreement.
Ceded premium should not be confused with earned premium. Recognition of premium over time and settlements between the parties are related but distinct matters.
The parties should check:
The original policyholder is normally not a party to the reinsurance agreement. Their protection continues to depend on the original policy. If an event is an exclusion under that policy, quota share reinsurance does not create cover by itself.
Quota share is relatively straightforward to administer and distributes the results of the selected portfolio. It may support business growth and make the insurer's net exposure more predictable. The trade-off is that the insurer cedes the same share of profitable and difficult risks together with part of the premium.
Reinsurance does not replace underwriting or precise policy wording. The guide to insurance in Uzbekistan explains the wider policy review, while available lines are listed in the insurance product catalogue. The actual division of liability always depends on the agreement.
An insurer included a portfolio of property policies in a quota share treaty. One covered location was damaged by fire.
The insurer handled the policyholder's claim under the original policy, and the reinsurer reimbursed its contractual share of the covered loss.
A large warehouse entered the portfolio, but the reinsurer's liability for any one original policy was capped.
The loss was shared at the quota only within the agreed limit. The remaining burden depended on the insurer's retention and any other protection.
An insurer assumed that the fixed quota would apply to every new class of insurance it began to write.
The new class was not listed in the treaty. The reinsurer did not participate because the scope of the quota share agreement had not been extended.
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