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Quota share

Proportional reinsurance treaty where the reinsurer shares a fixed percentage of every premium and every loss.

Definition

Quota share is the simplest form of proportional reinsurance. The cedant cedes a fixed percentage (cession rate) of every policy in the portfolio, receiving in return a ceding commission and transferring the same fraction of every loss. With a 30% quota share, the reinsurer receives 30% of premiums and pays 30% of each loss. Quota share is used to reduce volatility, release capital or facilitate the launch of a new portfolio. It also transfers profits proportionally: in a good year the cedant shares its gains. Its limitation is its lack of differentiation: it cedes the same proportion on small, well-controlled risks as on large, volatile ones, so the cedant can end up ceding more profit than necessary. It is often found at young or fast-growing insurers that need capacity and capital, and on new, poorly understood lines, as cyber was for a long time. It differs from surplus share, which only applies to risks exceeding the cedant's full retention.

Its 13 cross-references, woven across the glossary's 18 categories
Quota share: Reinsurance glossary illustration, AlgoPolis
Example

Textbook case: 40% QS: GWP 10 M EUR → ceded premiums 4 M EUR, commission received 1 M EUR (25%). 500K EUR loss → cedant 300K EUR (60%), reinsurer 200K EUR (40%).

Read next
ReinsuranceCession ratioProportion of gross premiums ceded to reinsurers, measuring the degree of risk transfer.Read the entry →ReinsuranceExcess of loss treaty (XL)A non-proportional treaty in which the reinsurer responds only beyond a loss threshold, the retention, up to a defined limit.Read the entry →ReinsuranceCeding commissionAmounts the reinsurer pays back to the cedant in proportional reinsurance, to share costs and reward the quality of the portfolio ceded.Read the entry →
Put it to work
QuizReinsurance fundamentalsAcademy questions on this concept, each one marked and explained.Test yourself →
Related terms
Related articles
#03Silent Cyber: from Gray Zone to Explicit Clause
On the Wire, where this term came up
September 29, 2026Jefferies sees no floor for reinsurance pricing before 2030
Go further at the Academy
Course · RT-1Who carries what, and at what price?LessonQuota share, or the split that never looks at the lossLessonSurplus, or the split that changes with every riskQuizModule check: what a quota share does not do
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