Framework agreement by which a reinsurer commits to automatically covering a defined tranche of an insurer's entire portfolio of ceded risks, without risk-by-risk review.
Treaty reinsurance is the most common form of reinsurance. It differs from facultative reinsurance in that it binds the reinsurer and cedant for a pre-defined set of risks, without the reinsurer having to accept or decline each risk individually. The cedant commits to cede and the reinsurer commits to automatically accept any risk falling within the treaty's scope. The two main forms are proportional treaty (quota share and surplus lines), where premiums and losses are shared in a fixed proportion, and non-proportional treaty (excess of loss, stop-loss), where the reinsurer only intervenes above a retention threshold. In the cyber context, Lloyd's creation of risk codes RY and RZ in 2024 distinguished cyber treaty reinsurance (RY/RZ codes) from direct cyber insurance (CY/CZ codes) and facultative reinsurance. LMA 5629, 5630 and 5631 were specifically drafted for cyber treaties, so that reinsurers have cyber war clauses adapted to the treaty structure rather than the direct policy clauses of the 5564-5567 series.
A reinsurer signs in January 2024 a cyber quota-share treaty covering 30% of a French insurer's SME portfolio. It uses LMA 5630 for the cyber war component. Thanks to the Difference in Conditions provision, it can follow the cedant's exclusion if that exclusion is Type 3 compliant. Without the treaty, it would have to review each cyber policy individually.
treaty reinsurance, traité de réassurance, traité proportionnel, traité non proportionnel