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📐 '''Non-proportional reinsurance''' is a category of [[Definition:Reinsurance | reinsurance]] in which the [[Definition:Reinsurer | reinsurer's]] liability is triggered only when the [[Definition:Cedent | ceding company's]] losses exceed a predetermined threshold, known as the [[Definition:Retention | retention]] or [[Definition:Attachment point | attachment point]]. Unlike [[Definition:Proportional reinsurance | proportional reinsurance]], where premiums and losses are shared according to a fixed percentage from the first dollar, non-proportional structures are driven purely by the size of the loss. This makes them the primary tool insurers use to protect their balance sheets against large, infrequent events — from major [[Definition:Catastrophe loss | catastrophe losses]] to individual claims that breach expected severity levels.

🔄 The most common forms are [[Definition:Excess of loss reinsurance | excess of loss]] (XOL) and [[Definition:Stop-loss reinsurance | stop-loss]] (or aggregate excess of loss) treaties. A per-occurrence XOL treaty might specify that the reinsurer covers losses between $5 million and $25 million per event, with the ceding insurer retaining the first $5 million. [[Definition:Catastrophe excess of loss reinsurance | Catastrophe XOL]] layers protect against the accumulation of losses from a single event across many policies, while per-risk XOL applies to individual large [[Definition:Claim | claims]]. Aggregate stop-loss covers activate when total losses across a portfolio over a defined period exceed a threshold, capping the insurer's annual loss burden. Pricing these contracts relies heavily on [[Definition:Catastrophe modeling | catastrophe models]], [[Definition:Actuarial analysis | actuarial analysis]] of tail risk, and historical [[Definition:Loss experience | loss experience]] at the relevant attachment levels.

💡 For [[Definition:Insurance carrier | carriers]] navigating volatile [[Definition:Line of business | lines of business]] — property catastrophe, [[Definition:Directors and officers liability insurance | directors and officers]], or [[Definition:Excess casualty insurance | excess casualty]] — non-proportional reinsurance is not optional; it is a structural necessity. It enables an insurer to write gross limits far larger than its own [[Definition:Surplus | surplus]] would otherwise support, effectively renting additional capacity from the reinsurance market. [[Definition:Rating agency | Rating agencies]] and regulators evaluate the quality and breadth of a carrier's non-proportional program as a key indicator of [[Definition:Enterprise risk management (ERM) | risk management]] discipline. In recent years, rising [[Definition:Reinsurance rate | reinsurance rates]] and higher attachment points imposed by reinsurers have forced cedents to retain more risk at the lower layers, reshaping [[Definition:Net retention | net retention]] strategies across the industry.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Proportional reinsurance]]
* [[Definition:Excess of loss reinsurance]]
* [[Definition:Attachment point]]
* [[Definition:Catastrophe excess of loss reinsurance]]
* [[Definition:Stop-loss reinsurance]]
* [[Definition:Cedent]]
{{Div col end}}

Definition:Non-proportional reinsurance - Revision history

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