Quota Share Reinsurance

Quota share reinsurance is a type of reinsurance agreement in which the insurer cedes a fixed percentage of each insurance policy to the reinsurer. This means that the reinsurer is responsible for paying a fixed percentage of the losses incurred by the insurer, and also receives a corresponding percentage of the premium. Quota share reinsurance is often used by insurers to reduce their risk exposure, while still retaining a portion of the premium. For example, an insurer has a quota share agreement with a reinsurer for 30%. The insurer collects $10,000 in premiums and pays out $5,000 in claims. The reinsurer receives $3,000 of the premium payments and is responsible for covering $1,500 of claims.