Entering into a reinsurance treaty is a significant decision with several strategic implications for Andrietta, a South African insurer. Reinsurance involves transferring a portion of insurance risk to another insurer, known as a reinsurer, to diversify risk exposure and to manage capital requirements more effectively. By entering a reinsurance treaty, Andrietta can potentially mitigate large or catastrophic losses, enhance its financial stability and optimise its underwriting capacity. This would allow the company to take on larger risks while protecting its solvency and profitability. Key considerations for Andrietta include evaluating the financial strength and reputation of potential reinsurers, negotiating favourable terms and coverage limits that align with its risk appetite and regulatory requirements and ensuring compliance with local and international reinsurance regulations. Additionally, Andrietta should assess the impact of reinsurance costs on premiums and profitability, as well as the potential benefits of accessing reinsurers' expertise and market insights. Overall, entering a reinsurance treaty can strategically position Andrietta to manage risks more effectively and to pursue sustainable growth in the dynamic South African insurance market. What is the key difference between proportional and non-proportional reinsurance treaties?