Reinsurance Brokerage Calculation: Bases, Rates and Checks

Reinsurance Brokerage Calculation: Getting Deductions Right Across Every Treaty and Reinsurer

Last reviewed: November 2026

Brokerage looks like the simplest line on a treaty account: a rate times a premium. Yet one wrong word in the base, such as gross instead of net, changes every reinsurer's balance on every account.

Short answer: Reinsurance brokerage calculation multiplies the agreed rate by the premium base named in the contract and by each reinsurer's signed share. Most errors come from the wrong base, the wrong share or double-charged adjustments.

Key Takeaways

• The base decides the answer. Gross premium, net premium and contract premium give different brokerage at the same rate.
• Use signed shares. Written lines overstate brokerage whenever a placement was signed down.
• Do not charge the deposit twice. Brokerage on an adjusted premium applies to the adjustment, not the full final premium again.
• Rates can differ by premium type and market. Reinstatement brokerage often follows its own rule.

What Is Reinsurance Brokerage?

Reinsurance brokerage is the broker's remuneration for placing and servicing a reinsurance contract. It is usually a percentage of premium, deducted before premium reaches the reinsurer.

For the reinsurer, brokerage is a cost of acquiring the business. That makes accurate deduction a margin issue, not just an accounting detail.

What Are Typical Reinsurance Brokerage Rates?

Typical rates are higher on excess of loss than on proportional business, because premium per placement is smaller. Brokers publish their standard rates in compensation disclosures.

These are published norms, not contract terms. Always calculate from the brokerage clause in the treaty itself.

How Is Reinsurance Brokerage Calculated?

Reinsurance brokerage is calculated as rate × premium base × reinsurer's signed share. Each of the three inputs must come from the final contract.

Which premium base applies?

The premium base is whatever the brokerage clause names. Common bases are gross ceded premium, premium net of ceding commission, contract premium, adjustment premium and reinstatement premium.

Which share applies?

The share is the reinsurer's signed line, not its written line. If a placement was oversubscribed and signed down, written lines will overstate every deduction.

When is brokerage calculated?

Brokerage is calculated each time premium is accounted, including deposits, instalments, adjustments and reinstatements. Each premium type can carry its own rate or exemption.

What Does a Proportional Example Look Like?

This illustrative quota share shows why the base matters. Gross ceded premium at 100% is 10,000,000, ceding commission is 30%, and brokerage is 2%.

For a reinsurer with a 25% signed share, brokerage is 50,000 on the gross basis and 35,000 on the net basis. The 15,000 gap repeats every account if the base is misread.

What Does an Excess of Loss Example Look Like?

This illustrative excess of loss layer shows how brokerage works on deposit and adjustment premium. The deposit premium at 100% is 2,000,000, brokerage is 10%, and the reinsurer's signed share is 20%.

Total brokerage equals 10% of the reinsurer's share of the final premium. Charging 10% on the deposit and again on the full 480,000 would deduct 88,000 instead.

The courts have addressed this. In Absalom v TCRU, the Court of Appeal held that a broker could not take brokerage on the deposit premium twice.

How Do Reinstatement and Return Premiums Change the Calculation?

Reinstatement and return premiums often follow different brokerage rules from the main premium. Treat each as its own premium type with its own rate.

Aon's disclosure shows why. It generally charges 5% on reinstatement premium for reinsurers other than Lloyd's, and in general no brokerage is paid on Lloyd's reinstatement premium.

That means one layer can carry different reinstatement brokerage for different panel members. A single panel-wide rate would misstate some balances.

Return premiums need a check too. Confirm whether the contract reverses brokerage when premium is returned, and apply that rule consistently.

How Should Brokerage Appear on the Statement of Account?

Brokerage should appear as its own line on each account, separate from ceding commission and taxes. Netting it into one deduction hides which rule produced the number.

Show the base and rate beside the amount where possible. A reviewer can then recalculate the line in seconds instead of rebuilding the account.

Which currency should brokerage use?

Brokerage should normally follow the currency of the premium it is calculated on. Converting premium first and calculating brokerage afterwards can create small differences that never reconcile.

How should rounding be handled?

Agree one rounding rule for the treaty and apply it at the same step every time. Calculating at 100% and allocating by share is usually easier to reconcile than summing separately rounded reinsurer figures.

Which Brokerage Errors Cost Reinsurers Most?

The costliest brokerage errors are those that repeat on every account. Use this table to decide what to check first.

The last row is easy to miss. Some profit commission formulas deduct brokerage as an expense, so the wording must be read rather than assumed.

How Do You Check Brokerage Step by Step?

You check brokerage by confirming the rule, recalculating independently and comparing it with the account. The process has five steps.

1. Confirm the rule. Record the rate, base and exemptions for each premium type from the brokerage clause.
2. Confirm the shares. Use each reinsurer's signed line for the right section or layer.
3. Recalculate at 100%, then by share. Calculate brokerage for the treaty, then allocate it, and agree any rounding difference.
4. Compare with the account. Match your figure with the brokerage line on the statement for each reinsurer.
5. Resolve and record. Query any difference with the broker, and log the agreed rule for future accounts.

Step three prevents silent rounding drift. Calculating each reinsurer separately can produce totals that differ from the treaty figure by small amounts.

Step five matters most at renewal. A brokerage rule agreed in a query email should be written into the next contract, not rediscovered on the next account.

Brokerage is one part of treaty billing. Our guide to billing the treaty correctly covers the wider calculation chain.

Where Does Automation Help?

Automation helps by applying one agreed rule set to every account and every reinsurer. It does not decide what an ambiguous brokerage clause means.

Reinsurance treaty management software holds participation shares, commission formulas, premium calculation and settlement calculation rules as structured, versioned configuration. With those rules defined once, each reinsurer's deductions can be checked against the treaty, not a spreadsheet.

The bordereaux calculation and reconciliation platform adds reinsurer-wise premium share and net amount calculation, with variance identification. Finance teams still decide the cause of each variance and agree corrections with the broker.

How Does Brokerage Connect to Broker Selection?

Brokerage terms are set when the broker is appointed and the treaty is placed. Clear rules at that stage prevent disputes in accounting later.

For how cedents assess broker value and remuneration, see reinsurance broker selection criteria. Loss-sensitive premiums add more adjustments, as our guide to swing-rated reinsurance premiums shows.

What Should Heads of Reinsurance Accounting Do Next?

Heads of reinsurance accounting should document the brokerage rule for each treaty and test it against recent accounts. Start with the largest excess of loss programmes.

• Record rate, base and exemptions for every premium type on each treaty.
• Recalculate brokerage on the last two accounts for your top treaties.
• Check every adjustment for brokerage charged twice on deposit premium.
• Confirm reinstatement brokerage by reinsurer and market.

Key Terms

• Brokerage: The broker's remuneration, usually a percentage of premium deducted before payment to the reinsurer.
• Premium base: The premium amount the brokerage rate is applied to, as named in the contract.
• Minimum and deposit premium: A premium paid in advance and adjusted later, subject to a minimum.
• Adjustment premium: The difference between the final premium and the deposit already paid.
• Reinstatement premium: Premium paid to restore an excess of loss limit after a loss.
• Signed line: A reinsurer's final share after signing down, used for every allocation.

Sources

• Lockton Re: Compensation Disclosure
• Aon: Reinsurance Solutions Brokerage Disclosure
• The National Archives: Absalom v TCRU Ltd [2005] EWCA Civ 1586 (19 December 2005)
• Insurnest: Reinsurance Treaty Management