What is Treaty Reinsurance?
Treaty reinsurance is a contractual agreement between a cedent and a reinsurer that automatically covers all exposures falling within defined parameters over a specified period (typically 12 months). Unlike facultative reinsurance, which is negotiated on a risk-by-risk basis, treaty arrangements provide predetermined capacity, coverage limits, and pricing. This automatic nature allows cedents to underwrite with greater confidence, knowing they have reliable capacity to transfer defined portions of their portfolio. For reinsurers, treaties create stable premium income and enable portfolio-level analysis and management.
Proportional Treaties
Quota Share
Under a quota share arrangement, GUARANT assumes a fixed percentage of every risk the cedent writes within the treaty scope, earning the same percentage of premium and paying the same percentage of losses. A cedent might, for example, cede 20% of their property account to GUARANT, transferring 20% of premium and claims.
Benefits: Stable loss ratios for both parties, transparent premium and loss allocation, minimal underwriting disputes. Quota share works well for cedents seeking to cap portfolio growth, stabilize earnings, or transfer capital requirements proportionally. Reinsurers benefit from predictable risk profiles and diversified exposure across the cedent's entire book.
Surplus Share
A surplus share arrangement defines a "line" of retention—the cedent's maximum net exposure per risk. Risks exceeding the cedent's retention are ceded to GUARANT, up to a defined surplus limit. A cedent with a USD 500,000 retention and a 2-line surplus facility cedes exposures between USD 500,000 and USD 1.5 million (assuming 200% of the retention).
Benefits: Cedents retain large or favorable risks, ceding only exposures exceeding their appetite. This preserves profit on desirable business while transferring outlier risks. Cedents pay lower average premiums than quota share because they retain the best risks. Reinsurers obtain a more selective portfolio, insulating them from loss inflation on the cedent's most marginal business.
Non-Proportional Treaties
Per-Risk Excess of Loss (XoL)
An excess of loss structure caps the cedent's loss on any single risk. The cedent retains losses up to a defined amount (the "deductible"), and GUARANT pays losses exceeding that amount up to a limit. For example, a cedent with a USD 100,000 deductible and USD 500,000 limit would pay the first USD 100,000 of loss and GUARANT would pay the next USD 400,000.
This structure protects against catastrophic loss on individual risks without transferring all premium or profit. Cedents remain incentivized to manage risk and price accurately, because they retain a substantial portion of loss. GUARANT's exposure is capped, and the account's loss distribution is stabilized, enabling both cedent and reinsurer to forecast earnings.
Per-Occurrence / Catastrophe Excess of Loss
Protects against losses arising from a single catastrophic event (hurricane, earthquake, industrial explosion) that affects multiple risks simultaneously. The cedent retains losses up to a deductible; GUARANT covers losses from that deductible up to a limit. For a cedent in a hurricane-exposed region, this might be structured as USD 2M deductible, USD 10M limit, applying to aggregated losses across the cedent's entire portfolio from any single event.
Catastrophe XoL is essential for cedents in exposed geographies and enables them to underwrite with confidence despite tail-risk exposure. It transfers the catastrophe volatility that could otherwise deplete capital, while leaving cedents responsible for managing their underlying portfolio and loss control.
Aggregate Stop-Loss
A safety net that limits the cedent's total claims burden across their entire portfolio over a specified period. The cedent pays losses up to a deductible (often expressed as a loss ratio, e.g., 80% of earned premium); GUARANT covers aggregate losses exceeding that level, up to a limit. This protects cedents against sustained loss volatility across their entire book, not just catastrophes.
Aggregate stop-loss allows smaller cedents and newer carriers to operate with less capital than pure retention would require. By capping tail-end loss scenarios, it stabilizes earnings and enables more confident business planning. Reinsurers benefit from portfolio-level risk mitigation and predictable loss scenarios.
Lines We Cover
GUARANT provides treaty reinsurance capacity across our 10 lines of business. Each has its own underwriting approach, pricing philosophy, and risk management infrastructure:
Property
Commercial, industrial, catastrophe exposure
Marine
Cargo, hull, marine liability
Aviation
Aircraft liability and hull
Engineering
Contractors, installation, projects
Agriculture
Crop and livestock coverage
Casualty
GL, D&O, E&O, professional lines
Surety & Bonds
Performance, bid, fidelity bonds
Energy
Oil & gas, renewables liability
Life & Health
Group and individual coverage
Motor
Auto, fleet, commercial vehicles
Pricing Approach
Experience-Rated Pricing
For cedents with substantial loss history in our books, we establish treaty rates based on the cedent's historical loss ratio, severity distribution, and claims trends. This rewards cedents who have demonstrated favorable loss experience and allows rate adjustments that reflect developing trends in the cedent's book.
Exposure-Rated Pricing
For newer cedents or new lines of business, we price based on exposure analysis: industry benchmarks, geographic distribution, hazard profiles, and underwriting standards. As experience develops, pricing adjusts to reflect actual results. This ensures new partners begin with competitive rates while we build confidence in their underwriting quality.
Treaty Onboarding Process
Initial Discussion
We meet with your leadership to understand your underwriting strategy, risk appetite, and capital position. This conversation establishes mutual fit and outlines potential structures.
Submission Review
You provide detailed underwriting submissions: historical loss data, current portfolio composition, risk concentrations, claims patterns. We analyze to assess pricing and terms.
Terms Proposal
We submit a detailed proposal outlining structure (quota share, surplus share, XoL), premiums, retention, limits, conditions, and any carve-outs. You review and counter if needed.
Treaty Documentation
Legal teams finalize treaty language reflecting agreed-upon terms. We execute the treaty, and systems are configured for premium and claims processing.
Ongoing Management
Regular communication, quarterly loss reviews, and annual renewal discussions ensure the treaty remains aligned with your business and continue delivering mutual value.