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  • UNI Consulting

Profit Participation Clause

A profit participation clause also called profit sharing or profit commission, is a provision that allows the primary insurer to participate in the profits of the reinsured business.

The profit sharing clause serves to balance the risk and reward between the ceding insurer and the reinsurer. It is a way for the primary insurance company to benefit if the reinsured portfolio performs well.

That is, if the reinsurer does not have to pay out many claims, leading to a profit, a portion of that profit is returned to the primary insurer.

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