automatic treaty

  • Usually a pro rata treaty whereby the reinsurer is automatically under a liability, simultaneously with the ceding company, to accept a fixed share of each risk. Each party has a fixed obligation. The direct company is obligated to cede, and the reinsurer is obligated to accept.

    Internal Revenue Service 1

1Internal Revenue Service, Internal Revenue Manual 4.42.6 Glossary, http://­­irm/­part4/­irm_04-042-006.html (last accessed Dec. 22, 2009).