Proportional CoversApplied

Cash Call

An urgent request for funds

A cedent's contractual right to demand immediate cash from a reinsurer for a large claim, bypassing the normal periodic settlement cycle.

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Definition

A cash call clause lets a cedent demand immediate funding from a reinsurer for a large loss, rather than waiting for the treaty's normal quarterly or semi-annual settlement cycle to run its course. Most treaties settle premium and losses together on a periodic bordereaux basis, which works fine for ordinary claims but can leave a cedent funding a very large payment out of its own pocket for months. A cash call clause sets a trigger — usually a single loss above an agreed threshold — and a response deadline the reinsurer must meet once a valid call is made.

It is triggered by a single loss (or losses) crossing an agreed threshold, letting the cedent skip ahead of the normal quarterly settlement timetable for that specific payment.
It changes only the timing of payment, not the reinsurer's ultimate liability — the reinsurer owes the same amount either way, just sooner.
The clause specifies a response deadline, commonly 30 days, that the reinsurer must meet once the cedent makes a properly documented cash call.

Worked example

A quota share treaty settles quarterly by bordereaux, but its cash call clause lets the cedent demand immediate payment, within 30 days, for any single loss exceeding $500,000, rather than waiting for that loss to appear in the next quarterly statement.

Scenario · figures in USD

A large claim jumps the settlement queue

A cedent's quota share treaty normally settles quarterly. Its cash call clause triggers on any single loss above $1M, requiring payment within 30 days of a valid call.

Normal settlement cycle	Quarterly bordereaux
Cash call trigger threshold	$1M per loss
Size of the loss just paid to the insured	$3.5M
Reinsurer's share under the quota share	$2.1M
Without the cash call, cedent would wait until	Next quarterly settlement — up to 3 months away
With the cash call, reinsurer must pay within	30 days

So whatThe cash call does not change how much the reinsurer owes — it changes when the cedent gets it, protecting the cedent's cash flow on exactly the losses large enough to strain it.

Check your understanding

What does a cash call clause primarily protect?

The cedent's cash flow, by accelerating payment ahead of the normal settlement cycle. A cash call only changes timing — it lets the cedent get paid faster for a large loss, protecting its cash flow, without changing how much the reinsurer ultimately owes.

What typically triggers a cash call?

A single loss, or losses, crossing an agreed threshold set out in the treaty. Cash call clauses are triggered by a defined threshold — a loss large enough that waiting for the normal settlement cycle would meaningfully strain the cedent's cash flow.

Word problem

A treaty settles quarterly and has a cash call clause triggering on any single loss above $750,000, requiring reinsurer payment within 30 days. A $2.2M loss occurs on day 5 of a quarter, with the next scheduled quarterly settlement 85 days away. What is the practical effect of invoking the cash call here, and would it apply to a separate $400,000 loss occurring the same week?

Show a hint

Compare the cash call's 30-day deadline against how long the normal quarterly cycle would otherwise take, and check the second loss against the threshold.

Reveal the worked answer

The $2.2M loss exceeds the $750,000 threshold, so the cedent can validly invoke the cash call.
Without it, the cedent would wait up to 85 days for the next quarterly settlement.
With the cash call invoked, the reinsurer must instead pay within 30 days — roughly 55 days sooner.
The separate $400,000 loss falls below the $750,000 threshold, so it does not qualify for a cash call and simply waits for the normal quarterly settlement.

Invoking the cash call gets the cedent its $2.2M roughly 55 days sooner than the normal quarterly cycle would have. The $400,000 loss does not qualify, since it falls below the $750,000 trigger threshold — it settles through the ordinary quarterly bordereaux like any other claim.

Related terms

Part of the Treaty Reinsurance guide, where this term is explained alongside every other treaty metric.