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Treaty reinsurance is an obligatory contract signed between direct insurance company which usually refer to as ceding company and reinsurance company or companies which refer to as reinsurers .the contract period is usually one year subject to renewal , the contract also provide automatic cover to the ceding company , in other words the treaty covers all the business that written in the ceding company department during the period of the treaty and the reinsureres are obliged to accept all these businesses without prior contact or negotiations , such negotiations is only necessary upon renewal .
The treaty account regarding premium and claims usually submitted by the ceding company to reinsurers on quarter or half year basis except for cash claims which exceeding the cash loss limit that already stated in the treaty terms.
The treaty or the contract cover notes are usually followed by treaty wording for more details and explanation to the treaty terms and conditions.
the important fact to be mentioned in this respect is that the treaty is depend on the utmost good faith and complete trust between the direct insurance companies and reinsurers .
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