What it is: An agreement where a reinsurer accepts a portion of all policies of a certain type from the primary insurer.
Why it’s needed: Helps insurance companies manage risk, stabilize loss experience, and maintain solvency.
Typical premium: 5%–15% of ceded premiums.
Example: $10M in policies ceded → reinsurer receives ~$1M (10%).

What it is: Reinsurance purchased on a case-by-case basis for specific high-risk policies.
Why it’s needed: Protects insurers against unusually large exposures or high-value risks.
Typical premium: 5%–20% of the policy premium, depending on risk.
Example: $2M single policy → reinsurer premium ~$300,000 (15%).

What it is: Covers losses above a certain threshold, often for natural disasters or catastrophic events.
Why it’s needed: Protects insurers from catastrophic losses that could exceed their reserves.
Typical premium: 2%–10% of covered policy values.
Example: $50M insured property layer → ~$2.5M/year (5%).