Reinsurance
= Reinsurance
Reinsurance transfers part of an insurer’s claim liability to another insurer. If aggregate claims are $S$, a retained payout $g(S)$ with $0\leq g(S)\leq S$ leaves the reinsurer with $S-g(S)$. <Quota share reinsurance> retains a fixed fraction, whereas <aggregate stop loss reinsurance> retains losses only up to a fixed aggregate threshold.