treaty reinsurance

Treaty reinsurance is an agreement where a primary insurance company (cedent) transfers a broad portion of its risks to a reinsurance company. Instead of negotiating individual policies, the reinsurer agrees to cover certain types or categories of claims over a set period. This helps the primary insurer manage its exposure, stabilize financial results, and increase capacity to write more business. Essentially, it's a way for insurance companies to share risks with specialized partners, ensuring they remain financially stable and capable of handling large or numerous claims.