Category: Claims handling · Reviewed by Chrissie Anderson, Client Executive · Last reviewed 2026-06-11
Common-account losses are losses on policies where the cedant and the reinsurer participate together on a common-account basis — meaning the reinsurance attaches to the cedant’s net retained line after other reinsurance, and the cedant and reinsurer share the net result.
Common-account reinsurance is a specific structural arrangement in which the reinsurer’s cover attaches not to the gross loss but to the cedant’s net retained line after other ceded reinsurance. The reinsurer is therefore exposed in proportion to the cedant’s true net position, aligning interests between cedant and reinsurer.
The arrangement is found in some specialty business — large commercial property, energy, marine — where the cedant wants reinsurance that aligns with its true retention rather than its gross underwriting position.
The framework includes:
The common-account structure is less common than standard XL or quota share but appears in specialty markets where alignment of interests is particularly valued.
A common-account arrangement runs as follows:
The cedant writes the underlying policy at the gross level. The cedant cedes part of the gross exposure under other reinsurance (proportional, XL, facultative) to other reinsurers. The cedant’s net retained position is the gross minus the ceded.
The common-account reinsurance then attaches to the net retained position. The reinsurer’s cover responds in proportion to the cedant’s net loss, not the cedant’s gross loss.
When a claim occurs, the recovery follows the chain:
The arrangement is intricate accounting but produces alignment. The reinsurer is invested in the cedant’s true position, not the gross underwriting picture. If the cedant pays out more on its net than expected, the reinsurer pays out more under common-account.
For cedants, common-account reinsurance is most useful where:
For reinsurers, common-account business produces tighter risk-aligned exposure but operational complexity. The reinsurer must understand and rely on the cedant’s other reinsurance to calculate its own exposure accurately.
“Net common account” — pure attachment to the cedant’s net.
“Gross common account” — hybrid where reinsurer participates in gross but with adjustments.
“Layer common account” — common-account attachment within a specific layer of a tower.
“Treaty common account” — common-account structure within a broader treaty arrangement.
A specialty energy insurer writes a $200m offshore production platform risk. The cedant cedes:
A platform incident produces $145m of claims. Recovery flow:
The common-account reinsurer’s exposure is therefore $21.75m on this claim. Standard reinsurance treaty would have produced different mechanics depending on its specific terms.
The arrangement produces alignment: both cedant and common-account reinsurer have a real stake in the claim outcome, supporting collaborative handling and recovery efforts.
By Matt Bartlett, Director, on 2026-06-11. Next review: 2026-12-11.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-11. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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