Ace the Alberta General Insurance Level 1 Exam 2026 – Insure Your Success Today!

The method that involves sharing losses above a certain amount but not exceeding a limit is non-proportional reinsurance. This type of reinsurance is structured to protect the ceding insurer against high losses by only covering losses that exceed a specified threshold, known as the attachment point. Once losses reach this point, the reinsurer takes on the liability up to a predetermined limit.

This approach is particularly beneficial for insurers looking to mitigate the risks associated with catastrophic losses without affecting their regular loss experience. It contrasts with proportional reinsurance, where the reinsurer and the cedent share losses in a pre-agreed proportion, making non-proportional reinsurance suitable for managing unpredictable high-risk scenarios.

Unlike treaty reinsurance, which is an agreement that covers a portfolio of risks, and facultative reinsurance, which is negotiated on a case-by-case basis, non-proportional reinsurance focuses specifically on loss amounts that exceed certain thresholds, providing a layer of financial protection for severe and unexpected claims.