What is quota share reinsurance?

Quota share is proportional treaty reinsurance. A fixed percentage of premium and of loss moves to the reinsurer for a defined class. In a 30 percent quota share, 30 percent of the subject book is meant to move, on the definitions in the wording, not on the definitions in last quarter's spreadsheet header. The cedent usually takes a ceding commission. That commission is a clause, not a habit.

Quota share does not fail because someone forgot the meaning of 30 percent. It fails because 30 percent of the wrong rows is a different treaty.

How it works

The wording names the share, the class, the territory, the period, exclusions, the commission basis, and any profit commission formula. Extraction has to pull those fields with spans. Inbound premium rows are then tested against those spans. Claims rows follow the same share, on the same year of account, with event date and report date that the basis actually uses.

Surplus is the sibling, not the synonym. Surplus still shares premium and loss, but the cession varies by risk size above a line. Excess of loss does not share a percentage of every loss. It attaches. If a new joiner conflates share with attachment, send them to the comparison page rather than paraphrasing both into one email.

Special acceptances are quota-share operations. A risk outside class or occupancy is declined, accepted in writing, or it leaks into the bordereau and becomes a silent extra. The acceptance needs a span, a period, and a join to the policy reference.

Worked example

Wording: 30 percent property quota share, construction permitted, flood zone named as excluded, inception 1 January 2026. Premium bordereau row: ACME Construction Ltd, acme.example, policy ACME-PROP-2026, gross written premium USD 180,000. Cession of premium is USD 54,000 if the row is in. A later claims bordereau posts a warehouse loss of USD 8,400,000. The reinsurer's share is USD 2,520,000 if the warehouse is on cover and inside territory.

The schedule still shows TIV USD 47,100,000 against a placing figure of USD 42,000,000. If the extra warehouse is in the excluded zone, you do not take 30 percent of USD 8,400,000. You exception the row and cite the exclusion. If ceding commission in the accounts uses 25 percent because that was last year's email, and the wording says 20 percent, that is a conflict on commission, not a rounding of the ACME premium.

What goes wrong

Class column drifts. Branch codes get mapped as occupancy. Profit commission uses a loss ratio on a different earned premium basis. Currency mixed without a rate as-at. Year of account follows the spreadsheet tab name. A facultative leftover is left on the quota share bordereau because the premium looked small.

Related reading

The operating system is treaty reinsurance. The file loop is the bordereaux automation guide. Share versus attachment is quota share versus excess of loss.