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🔑 '''Per-risk reinsurance''' is any [[Definition:Reinsurance | reinsurance]] structure — whether [[Definition:Proportional reinsurance | proportional]] or [[Definition:Non-proportional reinsurance | non-proportional]] — designed to limit a [[Definition:Cedent | ceding insurer's]] exposure on an individual risk basis rather than on an aggregate or event basis. In [[Definition:Quota share reinsurance | quota share]] or [[Definition:Surplus share reinsurance | surplus share]] treaties, it means the sharing percentages or cession amounts are applied risk by risk; in [[Definition:Excess of loss reinsurance | excess-of-loss]] treaties, the [[Definition:Retention | retention]] and limit attach to losses arising from a single insured risk. The concept is foundational in [[Definition:Property insurance | property]] and [[Definition:Casualty insurance | casualty]] [[Definition:Underwriting | underwriting]], where individual policies can carry widely varying exposure sizes.

⚙️ Under a per-risk surplus share treaty, for example, the [[Definition:Insurance carrier | carrier]] might retain the first $1 million of exposure on each risk and cede the excess to [[Definition:Reinsurer | reinsurers]] up to a multiple of that retention. A $5 million building would see $1 million retained and $4 million ceded; a $500,000 building would be retained entirely. This mechanism lets the carrier keep manageable exposures net while still being able to issue [[Definition:Policy | policies]] on larger assets. In contrast, a per-risk excess-of-loss treaty operates on actual losses rather than on sums insured, paying out only when a single risk's [[Definition:Claim | claim]] breaches the attachment. Both flavors serve the same strategic purpose: controlling the volatility that any one risk can inject into the carrier's results.

💡 The practical value of per-risk reinsurance becomes clear in [[Definition:Capital management | capital planning]] and [[Definition:Regulatory compliance | regulatory analysis]]. Carriers use it to manage their [[Definition:Probable maximum loss (PML) | probable maximum loss]] on individual accounts, maintain compliance with [[Definition:Risk-based capital (RBC) | risk-based capital]] requirements, and present a stable [[Definition:Loss ratio | loss ratio]] to [[Definition:Rating agency | rating agencies]] and investors. Without per-risk protection, a primary insurer writing heterogeneous account sizes would face dramatic swings in net results whenever a large risk produced a significant loss. In [[Definition:Treaty reinsurance | treaty]] negotiations, the definition of what constitutes a single "risk" — one building, one location, one policy — is carefully specified because it determines when and how the reinsurance responds.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Per-risk excess of loss]]
* [[Definition:Surplus share reinsurance]]
* [[Definition:Quota share reinsurance]]
* [[Definition:Treaty reinsurance]]
* [[Definition:Net retained liability]]
* [[Definition:Proportional reinsurance]]
{{Div col end}}

Definition:Per-risk reinsurance - Revision history

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