[F060]

first surplus (reinsurance) treaty

As a reinsurance term, first surplus means the amount of liability assumed on a certain risk, which is in addition to the amount which the primary company cares to hold for its net account. A treaty or contract which reinsures this "surplus" on a pro rata basis is called a first surplus treaty. Since there usually is a limit on the amount which may be ceded, there may be second or third surplus treaties to permit the writing of larger direct lines.