Return by the reinsurer of a portion of its profit to the cedant when treaty loss experience is favorable.
The profit commission is a clause allowing the cedant to receive retrospectively a share of the reinsurer's profit on the treaty when loss experience falls below an agreed threshold. Typical formula: PC = rate × (ceded premiums − loadings − ceded losses), if positive. The loading includes the reinsurer's expenses and the base commission already paid. Profit commission incentivizes the cedant to manage its loss experience well and retain an interest in good years. More common in proportional (QS) than XL reinsurance. A sliding scale profit commission varies according to actual loss experience.
QS treaty: ceded premiums 3 M EUR, loadings 600K EUR, ceded losses 1,200K EUR. Profit = 1,200K EUR. 25% PC = 300K EUR returned to the cedant.
profit commission, PC, commission bénéficiaire, profit sharing commission