Two common types of proportional reinsurance policies include quota share and surplus share. In the first case, the reinsurer and the ceding company share losses and premiums as per a predetermined percentage. Here, a primary insurance company shares a considerable portion of its risk with its preferred reinsurance partner.
In a surplus treaty, a ceding firm establishes the maximum loss it can bear in a policy term. Every risk that demands coverage above the retained line is proportionately shared with the reinsurance company. This proportion is subject to vary as per the size of the risk.