How to approach reinsurance
For an insurer, the first question is not which reinsurance to buy but what problem it should solve: reducing earnings volatility, protecting capital against catastrophes, supporting growth in a new line or meeting regulatory requirements.
Once objectives are clear, the company can compare structures. Proportional treaties such as quota share help with capital and growth, while excess-of-loss covers cap the impact of large individual losses or events. Facultative reinsurance fills gaps for individual risks that fall outside treaties.
Good reinsurance relationships also matter. Long-term partners who understand the portfolio tend to provide more stable capacity through market cycles. Our explainers on types of reinsurance and facultative versus treaty cover the options in more depth.