A premium paid in advance on a non-proportional treaty that also sets the floor for the final premium.
A minimum and deposit premium is the sum paid by the cedant at inception of a non-proportional treaty whose final premium will depend on a base not yet known, generally the subject premium of the protected line. It plays two roles in one payment: it is the reinsurer's cash advance, and it sets the floor below which the final premium cannot fall, even if the base turns out lower than expected. The problem it solves is the asymmetry of the end of period calculation: with no floor, a cedant whose book contracts would pay a derisory premium for capacity the reinsurer has tied up all year and could not sell twice. The floor pays for that commitment. It is usually settled in quarterly quarters, with final adjustment once the actual base is reported, producing an additional premium if the base has grown and nothing at all if it has fallen below the threshold.
A 15 million xs 5 layer is rated in 2026 at 4.2 percent of the subject premium base, with a minimum and deposit premium of 2.1 million euros matching a projected base of 50 million. The actual base comes in at 44 million: the calculated premium would be 1.85 million, but the cedant keeps no refund on the 2.1 million already paid. Had the base reached 58 million, it would have paid a further 336,000 euros of adjustment.
Minimum and deposit premium, MDP, M&D premium, Prime de dépôt, Prime minimum