Realigning Treaty Design With Current Portfolio Composition Before Renewal

Fixing treaty structures that no longer match the portfolio requires an operating model that runs a structured remediation process ahead of the renewal cycle, not a set of ad hoc adjustments negotiated under renewal deadline pressure. The difference between a treaty that is structurally remediated at renewal and one that is renewed with incremental pricing adjustments is the difference between a process that starts with a gap analysis ninety days before renewal and one that starts with the broker's terms sixty days before. For ceded reinsurance and treaty-management teams, the operating controls that make structural remediation systematic, a defined timeline, assigned roles, standardised gap-analysis methodology, decision-rights clarity, and post-renewal validation, are the difference between fixing the structure and perpetuating the drift.

Why does treaty-structure remediation need a defined operating model rather than a renewal add-on?

Treaty-structure remediation needs a defined operating model because the renewal process is designed for placement, not for structural redesign, and the incentives, timelines, and expertise that support placement are different from those that support structural diagnosis and remediation. The placement team is incentivised to place the programme on time and on budget. The structural remediation process is incentivised to align the treaty with the portfolio, even if that requires restructuring the placement or, in extreme cases, changing the panel.

The reinsurance market cycle creates a further complication. In a hard market, the pressure to secure capacity can override structural considerations: the placement team prioritises getting the line signed, and structural changes that might complicate the signing are deferred. In a soft market, the pressure to reduce cost can similarly override structure: the focus is on rate reduction, and the structural question is whether the cheaper structure is still protective. In both market conditions, the operating model must create a structural-review process that runs independently of market conditions and feeds its conclusions into the placement mandate before the placement team begins its work.

The third reason is the analytical workload. A proper gap analysis requires exposure data, loss-distribution data, treaty-structure data, and capital-model data to be assembled, validated, and overlaid. This analysis cannot be conducted in the two weeks between receiving the broker's renewal terms and the placement decision. It requires a dedicated process that starts early, engages the right analytical resources, and produces conclusions that are robust enough to withstand the commercial negotiation. The AI tools that automate treaty-data extraction and exposure-to-structure comparison are making this analysis faster, but the process discipline must exist to use them on the right timeline. Without the operating model, the analysis is not done, or it is done too late to influence the renewal, or it is done in a spreadsheet that cannot be audited or repeated.

What goes wrong when treaty-structure remediation is attempted within the renewal process?

When treaty-structure remediation is attempted within the renewal process, five failures emerge: the analysis starts too late to influence the placement, the placement team receives no clear structural mandate, the gap between required and negotiated change is not measured, remediation priorities are not set because the severity of gaps is not quantified, and there is no post-renewal validation to confirm the structure was actually fixed.

1. Why does the analysis start too late when it is embedded in the renewal process?

The analysis starts too late because the renewal process has a natural starting point: the receipt of the broker's indicative terms, typically sixty days before renewal. By that point, the market has begun to form a view on pricing and capacity, and the placement team's focus is on securing the best available terms within the existing structure. If the gap analysis has not been completed before the indicative terms arrive, it will not be completed before the placement decision.

The sixty-day starting point leaves insufficient time for data assembly, validation, analysis, option development, executive decision, and placement-instruction drafting. The result is that the analysis is either truncated, producing conclusions that are superficial, or it is completed after the renewal is placed, producing recommendations that apply to the next renewal but not this one. The treaty is renewed with its structure unchanged, and the remediation process has documented what should have been done but was not.

2. What happens when the placement team has no clear structural mandate?

When the placement team has no clear structural mandate, it defaults to its standard mandate: place the programme, secure capacity, negotiate the best achievable terms, and close. Structural remediation is not part of this mandate unless explicitly included, and without a written instruction specifying the structural changes required, the acceptable range of variation, and the red lines, the placement team will not introduce structural changes that could complicate or delay the placement.

The commercial dynamic reinforces this. The broker presents the renewal on an as-was basis with pricing adjustments. The placement team, receiving no contrary instruction, negotiates within that framework. The reinsurers, presented with a programme that appears structurally unchanged, quote on the same basis. The renewal closes with the structure intact, and the remediation mandate that the executive team intended was never communicated to the people who could execute it.

3. How does the absence of a measured gap between required and negotiated change undermine remediation?

The absence of a measured gap undermines remediation because the placement team negotiates structural changes as commercial adjustments, measuring success by whether the reinsurer accepted the changes, not by whether the changes closed the structural gap. A reinsurer may accept a five-million increase in the catastrophe limit while the gap analysis required a fifteen-million increase. The placement team reports the increase as a success, and the executive team believes the gap has been addressed. It has been reduced, not closed.

The measurement gap is eliminated by defining the required structural change as a numeric target, the negotiated change as the actual outcome, and the residual gap as the difference between the two. The residual gap is reported to the executive committee as an outstanding risk, and a decision is made whether to accept it, remediate it through alternative means, or address it at the next renewal. Without the measurement, the residual gap is invisible, and the remediation process claims success while the structure continues to under-protect the portfolio.

4. Why are remediation priorities not set when gaps are not quantified?

Remediation priorities are not set when gaps are not quantified because the executive team has no basis for distinguishing a treaty whose structure is mildly misaligned from one whose structure represents a material earnings risk. Every treaty gets attention during renewal, but the attention is uniform rather than risk-based, and the treaties with the largest structural gaps may receive no more remediation focus than those with no gaps at all.

The quantification converts a qualitative concern, "this treaty may not match the portfolio," into a financial metric: the earnings-at-risk and capital-at-risk of the structural gap. The executive team can then prioritise remediation by financial impact, directing analytical resources, negotiation effort, and management attention to the treaties where the gap is largest and the cost of inaction is highest. This is the resource-allocation discipline that turns treaty-structure remediation from a general aspiration into a managed process.

5. What is the consequence of no post-renewal validation that the structure was fixed?

The consequence of no post-renewal validation is that the organisation assumes the remediation was successful because the renewal was placed, and the first evidence that the structure is still misaligned is the next loss that the treaty fails to cover as expected. The assumption replaces verification, and the cycle of structural drift continues.

Post-renewal validation compares the renewed treaty's parameters against the remediation plan's specifications and certifies that the structure now matches the portfolio. Where gaps remain, they are documented as accepted residual risk or scheduled for the next remediation cycle. The validation closes the remediation loop and provides the executive committee with assurance that the decision it made was executed. Without it, the committee has a record of a decision but no evidence that the decision produced the intended outcome.

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What do reinsurance operating leaders actually need from a treaty-structure remediation process?

Reinsurance operating leaders need a defined remediation timeline that starts before the renewal calendar, standardised gap-analysis methodology, a clear handoff from analysis to placement, decision-rights clarity between the remediation team and the placement team, measurement of the gap between required and negotiated change, post-renewal validation, and a governance cycle that learns from each remediation to improve the next.

Priya is the head of ceded reinsurance operations at a multi-line carrier with a complex treaty architecture. Her team was responsible for renewal preparation, data provision, and post-placement administration, but not for treaty-structure analysis. That analysis was owned by the actuarial function, which produced it at renewal as part of the pricing pack, and by the time it reached Priya's team, the placement was already underway. Structural gaps identified in the actuarial analysis were noted but rarely acted upon because the placement process had no mechanism for receiving and executing structural-change instructions.

Priya proposed and led the design of a treaty-structure remediation operating model that separated the analysis phase from the placement phase. The analysis phase, led by her team with actuarial support, begins one hundred and twenty days before renewal and produces a gap-analysis report for every material treaty. The report is reviewed by the CUO and CRO, who make remediation decisions and issue a placement mandate to the placement team. The placement team executes the mandate within the standard renewal timeline, and Priya's team validates the outcome post-renewal. The model has been operational for two cycles, and every material treaty has been structurally assessed before renewal with remediation decisions acted upon by placement.

That is what every reinsurance operating leader should be asking: does our process create the time, the information, and the decision-rights clarity to fix treaty structures before the renewal clock runs out?

A standardised remediation timeline with phase gates and decision points. "Show me the ninety-day sequence that takes us from gap identification to placement mandate." Without a timeline, the process is a concept. With a timeline, it is an operating plan.
Gap-analysis methodology that is repeatable across treaties and cycles. "Show me the template, the data inputs, the calculations, and the output format." Standardisation ensures every treaty is assessed on the same basis and the results are comparable.
A placement mandate document that specifies the structural changes required. "Give the placement team a written instruction, not a conversation." A written mandate is auditable. A conversation is deniable.
Decision-rights clarity on who approves structural changes before they go to market. "Define who must sign off on the remediation plan and the placement mandate." The remediation team analyses. The executive decides. The placement team executes.
Measurement of the gap between required change and negotiated outcome. "Show me what we needed, what we got, and what remains outstanding." The residual gap is the enterprise risk the renewal left on the table.
Post-renewal structural validation that certifies the treaty now matches the portfolio. "Verify that the renewed treaty's parameters address the gap the analysis identified." Validation converts the renewal from an event into a controlled process.
A remediation tracker that monitors progress across the treaty portfolio. "Show me which treaties have been analysed, which have mandates, which are in negotiation, and which are validated." The tracker is the operating dashboard for the remediation cycle.
Exception-handling process for treaties where the mandate cannot be executed. "Define what happens when the market will not accept the structural change we require." The remediation plan must include fallback options.
Lessons-learned cycle that improves the process from one renewal to the next. "After each cycle, review what worked and what did not, and update the operating model." A process that does not learn is a process that will eventually fail.
Integration with the broader enterprise risk and capital-planning calendar. "Align the remediation timeline with the strategic-planning, capital-planning, and risk-appetite-review cycles." Treaty-structure remediation is an enterprise process, not a reinsurance silo.

How can reinsurers build a treaty-structure remediation operating model?

Reinsurers can build a treaty-structure remediation operating model by defining the process timeline and phase gates, establishing roles and responsibilities, standardising the gap-analysis methodology, creating the placement-mandate mechanism, embedding measurement and validation, and instituting governance that learns.

1. What does the ideal remediation timeline look like?

The ideal remediation timeline starts one hundred and twenty days before renewal with data assembly and validation. By ninety days, the gap analysis for each material treaty is complete. By sixty days, remediation options are developed and the CUO and CRO have made their decisions. By forty-five days, the placement mandate is drafted, reviewed, and issued to the placement team. By forty days, the placement team has reviewed the mandate, raised any market-feasibility concerns, and commenced the negotiation. The renewal itself proceeds on the standard timeline, with the placement team executing the mandate.

The timeline must be adjusted for treaties with different renewal dates, different complexity, and different market dynamics. A simple proportional treaty may require sixty days. A complex multi-line, multi-territory programme may require one hundred and eighty. The operating model accommodates this variation by applying the same phase-gate logic with flexible start dates.

2. How are roles and responsibilities defined across the process?

Roles and responsibilities are defined by assigning clear ownership for each phase. The ceded reinsurance operations or treaty-performance function owns the data assembly and gap-analysis phases. The actuarial function provides the loss-distribution data and validates the gap calculations. The CUO and CRO own the remediation decision. The placement function owns the execution of the mandate at renewal. The ceded operations function owns the post-renewal validation.

The role definitions should be documented in a RACI matrix that forms part of the reinsurance operating policy. Every person involved in the process should know what they are responsible for, what they are accountable for, whom they consult, and whom they inform. The clarity prevents the remediation process from becoming a negotiation about who should do what, which is a common failure mode in organisations where treaty management is distributed across multiple functions.

3. What does a standardised gap-analysis methodology contain?

A standardised gap-analysis methodology contains the data inputs required, the calculations performed, the output format, and the materiality thresholds that determine which gaps are reported. The methodology should be treaty-type-specific because the drivers of structural drift differ by treaty type: proportional treaties require cession-effectiveness analysis, excess-of-loss treaties require attachment and limit analysis, and catastrophe treaties require event-definition and hours-clause analysis.

The methodology should be documented in a procedure manual that any trained analyst can follow, and the calculations should be automated where possible to reduce cycle time and eliminate manual error. The output should be a one-page gap-analysis summary per treaty that the CUO can review in five minutes and make a decision on.

4. How does the placement-mandate mechanism work?

The placement-mandate mechanism works by converting the remediation decision into a written instruction that specifies the structural changes required, the acceptable range of variation for each parameter, the red lines that cannot be crossed, and the fallback options if the market will not accept the required changes. The mandate is signed by the CUO and issued to the head of placement before the placement process begins.

The mandate is not a suggestion. It is an instruction. The placement team's performance is measured partly by how much of the mandate it executes, not just by whether the programme was placed. This realigns the placement team's incentive from "place the programme" to "place the programme with the structure the portfolio needs," which is the outcome the enterprise requires.

5. How are measurement and validation embedded?

Measurement and validation are embedded by defining the metrics that will be tracked at each phase: the number of treaties analysed, the number with material gaps, the aggregate earnings-at-risk from those gaps, the number of remediation mandates issued, the proportion of each mandate executed at renewal, the residual gap after renewal, and the post-renewal validation status. The metrics are reported to the executive committee at each phase gate.

The post-renewal validation is a formal comparison of the renewed treaty's structural parameters against the mandate's specifications, with deviations documented and approved or escalated. A treaty that was renewed with a structural change that differs from the mandate is not validated until the deviation is approved by the executive who signed the mandate. This closes the governance loop and ensures the remediation process has integrity.

6. How does the governance cycle learn from each remediation?

The governance cycle learns from each remediation by conducting a post-cycle review that examines what worked, what did not, why, and what should change for the next cycle. The review covers the process timeline, the data quality, the analysis methodology, the decision-making quality, the mandate execution, and the validation outcomes. Its output is an action plan that updates the operating model before the next cycle begins.

The learning mechanism is what distinguishes a mature remediation operating model from a one-off project. A model that learns becomes more efficient and more effective with each cycle. A project that does not learn starts from scratch each time and repeats the same errors. In a market where treaty complexity is increasing and the forces driving change are accelerating, the learning capability is a structural advantage.

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What does a treaty-structure remediation operating model deliver in practice?

A treaty-structure remediation operating model delivers a systematic process that identifies structural gaps before renewal, converts them into remediation mandates, executes those mandates through the placement process, measures the outcome against the requirement, and learns from each cycle to improve the next. The executive team has visibility of every treaty's structural status and confidence that gaps are being methodically closed.

Return to Priya. Two cycles into the new operating model, her team has analysed twenty-eight treaties, identified structural gaps in eleven, issued remediation mandates for all eleven, and achieved full or partial remediation in nine. The two treaties where full remediation was not achievable were escalated to the CUO, who approved the residual gap as accepted risk with a plan to address it at the next renewal. The post-cycle review identified three process improvements that have been implemented for the upcoming cycle. The capital relief the portfolio now receives is measurably closer to the modelled expectation, and the board's risk committee has noted the improvement in the reinsurance programme's structural integrity.

The broader reflection is that operating models are the mechanism that converts strategic intent into consistent execution. A CEO's decision to fix treaty structures is an intent. The remediation operating model, with its timeline, roles, methodology, mandate mechanism, measurement, and governance, is the execution. In a discipline as complex as treaty and facultative reinsurance, intent without execution is a statement. Execution without an operating model is a hope. The operating model is the bridge between what the enterprise intends and what it achieves.

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Conclusion

For ceded reinsurance and treaty-operations leaders, fixing treaty structures that no longer match the portfolio is not a one-time analytical exercise but a recurring operational discipline. The operating model that makes it systematic, a defined timeline, assigned roles, standardised analysis, written mandates, measured outcomes, and a learning governance cycle, is what separates firms that remediate their treaty structures from those that renew the drift.

The renewal deadline is fixed. The market will open, the broker will present terms, and the placement team will need to act. The question is whether, before that moment arrives, the enterprise has completed the analysis, made the decisions, and issued the mandates that turn the renewal from a continuation of the existing structure into a deliberate alignment of the treaty with the portfolio. The operating model is the answer.

Frequently asked questions

What is the ideal timeline for fixing treaty structures before renewal?

The structural review should begin at least ninety days before renewal, with the gap analysis complete by sixty days out, remediation options scoped by forty-five days, executive decisions made by thirty days, and the placement team instructed on the structural changes by day twenty-one. This leaves sufficient time for negotiation within the renewal window.

Who should lead the treaty-structure remediation process?

A dedicated treaty-performance function or the ceded reinsurance analytics team, reporting to the CUO but operating independently of the placement team. The separation ensures the remediation recommendations are not influenced by placement-relationship considerations.

What data is required to conduct a treaty-structure gap analysis?

Current exposure data at line-of-business, territory, and peril level; twelve-quarter rolling loss distribution; treaty structural parameters extracted into machine-readable format; capital-model risk-transfer assumptions; and historical treaty performance data including ceded loss ratios by layer.

How should structural remediation options be prioritised?

By earnings-at-risk and capital-at-risk, not by premium volume. A small treaty with a large earnings impact should be remediated before a large treaty with a minor gap. The prioritisation should also consider the renewal timeline: treaties renewing sooner should be reviewed earlier.

What does a treaty-structure remediation plan contain?

A description of the structural gap, its quantified margin and capital impact, the proposed structural changes, the expected cost and benefit of remediation, the renewal negotiation strategy, the fallback options if negotiation fails, and the accountable executive for execution.

How does the placement team execute a structural-change mandate at renewal?

The placement team receives a written instruction specifying the structural changes required, the acceptable range of variation, and the negotiation red lines. The team negotiates within those parameters and escalates any proposal that falls outside them to the CUO for decision.

What post-renewal validation confirms the remediation was successful?

A comparison of the renewed treaty's structural parameters against the remediation plan's specifications, a forward-looking margin projection using the new structure and current exposure data, and a scheduled six-month review to confirm the new structure is performing as intended.

How can the remediation process be made repeatable across renewal cycles?

By embedding it in a standard operating procedure that defines timelines, roles, data requirements, analytical methods, decision thresholds, and governance reporting. A repeatable process ensures every treaty is assessed on the same basis every cycle.

About the author

Hitul Mistry is the Founder of Insurnest, an InsurTech company that engineers end-to-end technology exclusively for the insurance industry serving carriers, TPAs, MGAs, brokers, and reinsurers across India, the UAE, and the US. With more than a decade of insurance domain experience, he has built systems spanning underwriting automation, AI-powered underwriting intelligence, claims management, rating and quoting, broking and agency platforms, and reinsurance automation across Health/GMC, Group Life, Motor, P&C, and Reinsurance. Insurnest doesn't adapt generic software to insurance; it builds from the workflow up.

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Fixing Treaty Structures That No Longer Match the Portfolio Before the Next Renewal