A reinsurance treaty is a long-term contract between a primary insurer and a reinsurer that defines how specific types of risks will be shared across a portfolio of policies. The treaty sets eligibility criteria, retention limits, cession percentages, premium sharing formulas, underwriting requirements, claims procedures, and reporting obligations. Treaties can be quota share, where a fixed percentage of each policy is ceded, or surplus and excess-of-loss arrangements that apply only above certain retention thresholds. In life insurance, treaties underpin automatic reinsurance, allowing carriers to issue coverage within agreed limits without obtaining individual facultative approvals on every case.

Within carriers, reinsurance treaty terms shape underwriting guidelines, maximum issue limits, and product design. When a carrier changes treaties or reinsurers, it can affect how future cases are handled and what internal retention looks like. Advisors may indirectly experience treaty changes when they see updates to jumbo limits, preferred guidelines, or capacity for older-age or impaired-risk cases. During claims, treaty language governs how and when reinsurers pay their share of benefits. While advisors do not negotiate treaties themselves, appreciating their existence explains why carriers sometimes cite "treaty restrictions" when declining or limiting certain risks, even when the advisor believes a case is otherwise sound.