--- title: "✅ What is a reinsurance tool? | Reinsurance tutorials #4 • The Basics" description: Understand what is a reinsurance tool - easily explained with a video. 📌These tutorials will offer you all the basics you need to master reinsurance image: https://blog.arundore.com/hubfs/Vignette%20Reinsurance%20Tool%20LN.jpg --- [![Arundo_Logo_RVB-1](https://blog.arundore.com/hs-fs/hubfs/Arundo_Logo_RVB-1.png?width=115&height=76&name=Arundo_Logo_RVB-1.png)](https://www.ccr-re.com/en/home) - [News](https://blog.arundore.com/en) - [Reinsurance Tutorials](https://info.arundore.com/reinsurance-tutorials) - [Women of Power](https://info.arundore.com/women-of-power) - [MTPL Losses France Study](https://info.arundore.com/assessing-the-losses-of-severe-personal-injury-victims-in-motor-liability-cases) - [Arundo Re Talks](https://www.arundore.com/en/arundo-re-talks) - [français-FRANCE](https://blog.arundore.com/fr/qu-est-ce-qu-un-outil-de-reassurance) [Home](https://blog.arundore.com/) [The reinsurance and insurance blog of Arundo Re](https://blog.arundore.com/en) What is a reinsurance tool? 6 October 2020 1 min read # What is a reinsurance tool? ## Reinsurance tutorials #4 • The Basics   ## What is a reinsurance tool? Insurance companies want to protect themselves against deviation in their budgeted claims load in terms of frequency or severity. Reinsurers offer two main types of protection contracts called **proportional** or **non proportional**. These covers protect against a single risk that will be on a facultative basis, or book of risks of a line of business, such as Fire or Motor etc, then called a treaty.   Of course, there may be various combinations, both with regards to the mix of tools and to the line of business covered. ## **What is Proportional reinsurance?** If a reinsurer takes **20%** of the risk from the insurer, that is to say **the sum insured** for that risk, he will receive **20%** of the premium paid by the insured to the insurer, and should there be a loss on that risk, he will pay **20%** of the loss paid by the insurer to the insured.    Due to this proportional reinsurance, the insurance company will be able to offer to their clients a large cover either directly or through brokers (underwriting capacity).   Depending on the financial strength of the company, the risk appetite of top management and their shareholders, and the cost of reinsurance, the insurance company will buy more or less capacity, that is to say it will cede more or less of its premium.   There is a wide array of proportional treaties (Quota share, Surplus, Covers…) with their own purposes, advantages and disadvantages.   ## **What is Non Proportional reinsurance?  ** While Proportional reinsurance is based on the sum insured**,** Non Proportional reinsurance uses **the size** **of** **the claim** to design the cover.   The insurance company decides the claim amount it can assume for itself on one single risk or on one event involving many risks: that is the **retention.**   Claims exceeding that **loss** amount will be taken over by the **Excess of Loss** or XL cover, be it an **XL per risk** or an **XL per** **event,** up to the limit agreed between the insurer and his reinsurers this against a price which is agreed upon according to different factors.   There are different types of non proportional covers: Excess of Loss, Stop loss, Aggregates… What we could call vertical or horizontal covers with their own purposes.   Reinsurance is a service, and it comes at a **price** which varies depending on many factors: type of reinsurance, claims experience, exposure to the cover, not to forget market competition.     ---       ## 📺 More episodes to come... Subscribe now to receive them in advance before their public release! 📥 [mailto:?subject=What%20is%20a%20reinsurance%20tool?&BODY=I%20found%20this%20article%20interesting%20and%20thought%20of%20sharing%20it%20with%20you.%20Check%20it%20out:%20https://blog.arundore.com/en/what-is-a-reinsurance-tool](mailto:?subject=What%20is%20a%20reinsurance%20tool?&BODY=I%20found%20this%20article%20interesting%20and%20thought%20of%20sharing%20it%20with%20you.%20Check%20it%20out:%20https://blog.arundore.com/en/what-is-a-reinsurance-tool) ## Latest articles #### 7 October 2025 ### [🌞 Local features seen by our LATAM Underwriters](https://blog.arundore.com/en/local-features-seen-by-our-latam-underwriters) Another meeting with The Reinsurance Tutorials, episode #9 - Season 4 ### [+](https://blog.arundore.com/en/local-features-seen-by-our-latam-underwriters) #### 16 September 2025 ### [🌎 LATAM Non-Life Reinsurance: A 24-Market Masterclass](https://blog.arundore.com/en/latam-non-life-reinsurance-a-24-market-masterclass) Penultimate meeting with The Reinsurance Tutorials, episode #8 - Season 4 ### [+](https://blog.arundore.com/en/latam-non-life-reinsurance-a-24-market-masterclass) #### 27 August 2025 ### [🦠 LATAM Life/ Non-Life Reinsurance: Assessing Pandemic Impacts Masterclass](https://blog.arundore.com/en/latam-life/-non-life-reinsurance-assessing-pandemic-impacts-masterclass) Seventh meeting with The Reinsurance Tutorials, episode #7 - Season 4 ### [+](https://blog.arundore.com/en/latam-life/-non-life-reinsurance-assessing-pandemic-impacts-masterclass) #### 5 August 2025 ### [🏜️ Local features seen by our MENA Underwriters](https://blog.arundore.com/en/️-local-features-seen-by-our-mena-underwriters) Sixth meeting with The Reinsurance Tutorials, episode #6 - Season 4 ### [+](https://blog.arundore.com/en/️-local-features-seen-by-our-mena-underwriters) [View all articles](https://blog.arundore.com/en) **Arundo Re** 6 RUE FAVART 75002 PARIS - FRANCE [Contact us](https://www.arundore.com/en/contact) [Job opportunities](https://www.welcometothejungle.com/en/companies/arundo-re) [![Arundo_Logo_RVB-1](https://blog.arundore.com/hs-fs/hubfs/Arundo_Logo_RVB-1.png?width=202&height=133&name=Arundo_Logo_RVB-1.png)](https://www.arundore.com/en/)   [Terms of use & legal notice](https://www.arundore.com/en/legal-notice) I[Personal data protection](https://www.arundore.com/en/gdpr) I © - Arundo Re 2026 All rights reserved ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Patrick Delalleau", "url" : "https://blog.arundore.com/en/author/patrick-delalleau" }, "dateModified" : "2020-10-06T06:00:00.521Z", "datePublished" : "2020-10-06T06:00:00.000Z", "headline" : "✅ What is a reinsurance tool? | Reinsurance tutorials #4 • The Basics", "image" : [ "https://blog.arundore.com/hubfs/Vignette%20Reinsurance%20Tool%20LN.jpg" ], "mainEntityOfPage" : { "@id" : "https://blog.arundore.com/en/what-is-a-reinsurance-tool", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://blog.arundore.com/hubfs/Arundo_Logo_RVB-2.png" }, "name" : "Arundo Re" } } ```