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Non proportional Reinsurance is where by the reinsurance company responds only when a loss is suffered by the insurer exceeds a certain amount known as retention amount.This is based on size of LOSSES rather than on size of RISK.

In Surplus Treaty a certain retention amount is fixed in which the reinsurance company only responds if the retention amount is crossed. A surplus treaty is a reinsurance arrangement which allows the insurance company to totally retain risks, or policies, up to a specific sum insured (equal to its retention); and to reinsure that proportion of a risk, or policy, which exceeds its retention . In Surplus Share, the X % is NOT FIXED for each risk in the ceded portfolio. A retention amount is FIXED for each.

In quota share a certain percentage is fixed between the insurance company and Reinsurance company. For each risk to be ceded, a percentage X% is determined. Reinsurer takes X% of the risk, Cedant keeps (100-X)%. In Quota Share, the X % is FIXED for each risk in the ceded portfolio.

Proportional Reinsurance is the system where the Reinsurer shares loses in the same way as it shares premium. In Proportional Reinsurance a certain percentage is fixed as X%, where by the Reinsurer keeps the X% and the Ceding company keeps (100-X%). And if a claim occurs both the ceding company and the reinsurer shares the claims in the same way.

1. Insurer/ Cedent/ Ceding Company: The company which cedes the business to the insurance company. 2. Broker: A person who negotiates the reinsurance contracts between the insurance company and reinsurance company. The broker generally represents the ceding company and takes commission, brokerage or other fees for proposing such business. 3. Reinsurer : The Company which takes over the business from the ceding company is known as Reinsurer.

Re insurance company helps insurance company in the following ways : 1. Re insurance provides security to insurance company. 2. Helps its risk of liquidation. 3. Helps in smooth fluctuation of business. 4. Increases the underwriting capacity. 5. It helps in providing financial assistance. 6. Helps to improve new products.

Basically, ReInsurance company helps in avoiding too many small risks or  single large risk which would be always a threat of existence of the insurance company. Reinsurance provides security to the insurance company. Insurance company has to be stable as it has promised to pay to the insured after an unfortunate incident.

Reinsurance is Insurance for the Insurer. For Example : A is Insurance company and if A is insured by B. Then B is the Reinsurance Company.