Surplus reassurance meaning

Surplus reassurance (also called surplus reinsurance; “reassurance” is commonly used in life assurance) is a proportional reinsurance treaty under which the ceding company (cedant) retains each risk up to a fixed retention and cedes the excess (the surplus) above that amount to reinsurers, up to an agreed maximum (often expressed in “lines”). Premium and claims are shared in the same proportion as the cession for each risk. The term is a market description rather than one defined in legislation or case law. Its legal effect arises from the reinsurance contract, typically governed by English or Irish law, and its usage is broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland. Key features and practical significance: - Retention is set per life, per risk or per policy; surplus capacity is stated as multiples of the retention or an absolute limit on the sum insured/sum assured. - Unlike quota share, the ceded percentage varies by risk, enabling the cedant to write larger amounts while controlling accumulation, volatility and Solvency II capital. - Usually arranged as a treaty; facultative cover may supplement where a risk exceeds treaty limits or falls outside scope.