Minimum and deposit premium
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 floor corrects an asymmetry at the end of the period. Without it, a cedant whose book contracts would pay a token premium for capacity the reinsurer has tied up all year and could not sell twice. The floor pays for that commitment. It is usually paid in quarterly installments, 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 gets 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.
Follow the research
One letter a week. First, the week's underwriting note, when one is published: a dated, argued decision, signed by Paul Bernardski. Then what the observatory published on cyber risk, political risk and insurance. No account, no tracking.
No spam, one-click unsubscribe, no data ever sold.