Marshmallow quota share concentration risk

Marshmallow is using reinsurance as a balance sheet multiplier, not just as a safety net. By ceding a large share of each policy to quota share partners, it can write more motor insurance with less locked up capital, while still keeping part of the underwriting upside when claims run better than expected. That helps explain how the carrier could scale to profitability while staying within Solvency II capital limits.1 2 3 4

• The concrete tradeoff is simple. Marshmallow writes the policy, collects premium, then passes an agreed share of premium and claims to reinsurers. That shrinks net written premium and net liabilities, which directly reduces the capital an insurer must hold against those risks.1 3
• The model still leaves Marshmallow exposed to reinsurance terms. Its 2025 solvency report stress tested a lower quota share cession rate, higher excess of loss pricing, and a reinsurer downgrade. The Gibraltar regulator also kept a capital add on tied to sliding scale commissions on the quota share structure.1
• This is the same broad playbook used by scaled motor insurers like Admiral, which uses proportional risk sharing to keep a significant share of profit while leaning on Munich Re capacity. The difference is that Marshmallow is much smaller, so changes in reinsurance pricing or partner appetite can matter more to growth.5 6 2

The next step is likely gradual balance sheet retention as Marshmallow gets bigger and its loss data deepens. If underwriting stays profitable, more risk can be kept in house over time, which would raise capital needs but also let more of each premium pound fall through to earnings.1 2 4