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Finite quota share

Proportional multiyear reinsurance differing from a conventional quota share. The insurer cedes an agreed percentage of unearned premium but the reinsurer’s liability is finite, i.e. capped by an aggregate amount. The reinsurance is structured to assist the cedant’s solvency position by paying a large amount of commission in the early stages and smaller amounts at the end.

Finite Reinsurance (also known as Financial Reinsurance, Limited Risk Reinsurance, Nontraditional Reinsurance, Structured Reinsurance)

A broad spectrum of treaty reinsurance arrangements that provide reinsurance coverage at lower margins than traditional reinsurance, in return for a lower probability of loss to the reinsurer. This reinsurance is often multi-year and often provides a means of sharing positive or negative claims experience with the cedent beyond that usually provided by traditional reinsurance.

Finite risk reinsurance

Similar to financial reinsurance but has more risk transfer. It is a retrospectively rated rein surance in which the reinsurer’s liability is finite, i.e. capped. The multi-year contract enables the reinsurer to smooth the cedant’s losses over time by providing funds for paying losses that are eventually restored to the reinsurer under an adjustable clause. The cedant gets credit enhancement by an improvement in key ratios. Investment income is an underwriting component. Finite products include: finite quota share; loss portfolio transfers; time and distance; adverse development cover; spread loss cover; financial quota share.
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A form of retrospectively rated reinsurance in which the reinsurer’s ultimate liability over the term of the contract is typically limited to no more than 300 percent of the premium ceded. Its primary objectives are to stabilize earnings and reduce reinsurance costs.