Is Quota Share Right for Your Insurance Organization?

September 15, 2015

Insurance carriers today face a bevy of challenges to the financial health of their organizations. Such challenges have always been a part of the business of insurance, but today the complexities of healthcare reform, managed care, disease management, and other initiatives have changed traditional products and portfolios, requiring insurers to continually review their sources of capital and the demands on them.

Insurers are seeking creative ways to bolster and protect capital. Entities such as midsize insurance companies, HMOs, captives, health plans, and other risk retention groups may already partner with outside providers for administration of their plans. For protection of their capital, they look to reinsurance as a resource.

Stop-loss reinsurance versus Quota Share

For many midsize insurers, reinsurance simply means stop-loss coverage. When costs for a claim reach a predetermined deductible, the reinsurer takes over, reducing claim loss for the insurer. However, another option is quota share, a form of reinsurance in which the insurer transfers (or “cedes”) to the reinsurer a given percentage of every risk in a defined category.

Although quota share programs are not as common as other types of reinsurance programs, interest in them is growing as carriers seek a balanced way to mitigate their costs from the first dollar of claims. The monetary savings benefit for quota sharing versus a traditional stop-loss program will vary depending upon the size of claims.  For example, compare a 100% stop-loss program with a deductible of $50,000 to a quota share program where the reinsurer assumes 80% of the risk (80%/20%).

For a claim of $400,000:

100% Stop Loss80% Quota Share
Plan pays $50,000Plan pays $80,000
Reinsurer pays $350,000Reinsurer pays $320,000

However, for a claim of $1 million:

100% Stop Loss80% Quota Share
Plan pays $50,000Plan pays $200,000
Reinsurer pays $950,000Reinsurer pays $800,000

A quota share plan offers insurers additional benefits:

  • Reduces the amount of capital a plan must maintain as it grows
  • Reduces the company’s financial exposure to fluctuations in catastrophic claims
  • Provides access to the reinsurer’s expertise for assistance in claims management
  • Provides access to the reinsurer’s administration and other services

PartnerRe’s Quota Share Program

PartnerRe offers quota share reinsurance as an option. Using our extensive industry knowledge and unique combination of analysis and innovation, we design risk programs tailored to each client‘s exposure and risk tolerance. Our comprehensive approach focuses on providing the best risk protection through our experience in  employing best practices from healthcare reform, managed care, disease management, and consumer-driven healthcare models.

By partnering with us,  our clients gain access to additional value-added services including:

  • Underwriting
  • Actuarial analysis
  • Program management
  • Claims and care management

Insurers looking for experienced  care and claims management to control risk will benefit from the reinsurance program options and additional services provided by PartnerRe.

Lea more about how PartnerRe can create a customized program to help your clients manage risk. Contact the experts at PartnerRe for more information.

Recent Articles

View More
Find a Contact