Spread Loss

A form of reinsurance in which the Ceding Company pays premiums to the reinsurer and, if the Ceding Company experiences total losses in a given Year which are greater than a certain limit, the reinsurer remits the amount of the excess loss to the Ceding Company in a lump sum.

The Ceding Company pays back such losses to the reinsurer over a period of Years, usually by means of increased reinsurance premiums. Thus, the Ceding Company’s losses for a certain Year are “spread” over a period of Years.

This type of reinsurance is seen more frequently in group insurance than in individual insurance.