An arrangement between insurance companies, where one company (the ceding company) cedes a portion of a risk (policy, premium, and losses) to the other insurance company (the assuming company or reinsurer). Thus the risk of loss is spread and a disproportionately large loss under a single policy does not fall on one company. Reinsurers can be other insurance companies or companies specializing in reinsurance only. There are two types of reinsurance: (1) Facultative - reinsurance of one particular risk (policy) where the reinsurer retains the right (faculty) to accept or reject each risk offered by the ceding company. (2) Treaty - reinsurance (usually written on an annual basis) of an entire class of business consisting of many policies, where the ceding company agrees to cede and the reinsurer agrees to assume all of the risks (policies) of a particular class of business. When a ceding company places either facultative or treaty reinsurance, the reinsurance is usually placed on one of the following bases: (a) Pro Rata or Quota Share - reinsurance in which the reinsurer shares a pro rata portion of the premium and losses of the ceding company on a fixed percentage basis; e.g. 25%, 30%, or some other percentage; (b) Excess of Loss - Reinsurance in Which The Reinsurer (Subject To A Specified Limit) Pays 100% of The Losses of The Ceding Company in Excess of A Certain Agreed Limit (E.G. $1,000,000. Retention) Either on A Per Risk Basis or in Excess of A Certain Aggregate of All Losses of A Particular Type (E.G. $10,000,000 for Windstorm Losses). It Includes Various Kinds of Reinsurance: Catastrophe, Per Risk, Per Occurrence, and Aggregate Excess of Loss