Treaty Structures
Profit Commission
Definition
Additional commission paid to the cedent when a proportional treaty produces underwriting profit for the reinsurer.
Practical Example
Cedent receives 20% of underwriting profit above target loss ratio.
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Related Terms
Reinsurance Operations
Ceding Commission
Commission paid by the reinsurer to the cedent on proportional treaties to compensate for acquisition costs and expenses.
Loss Metrics
Loss Ratio
Ratio of incurred losses to earned premiums, expressed as percentage. Key profitability metric for insurance and reinsurance.