What is Surplus treaty ?

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.