Page "Reinsurance" Paragraph 26

The ceding company may seek surplus reinsurance simply to limit the losses it might incur from a small number of large claims as a result of random fluctuations in experience.

In a 9 line surplus treaty the reinsurer would then accept up to $ 900, 000 ( 9 lines ).

So if the insurance company issues a policy for $ 100, 000, they would keep all of the premiums and losses from that policy.

If they issue a $ 200, 000 policy, they would give ( cede ) half of the premiums and losses to the reinsurer ( 1 line each ).

The maximum automatic underwriting capacity of the cedant would be $ 1, 000, 000 in this example.

( Any policy larger than this would require facultative reinsurance.