A Treaty is a type of reinsurance agreement that is mandatory between a ceding company and a reinsurer. It contains the contractual terms and conditions that apply to the reinsurance of a particular class or classes of business. It is a general agreement that covers a broad range of risks, as opposed to a reinsurance agreement that covers an individual risk.
EXAMPLE:
An Insurance company that specializes in insuring homes enters in to a treaty with a reinsurer to cover all of the homes in its portfolio for a particular geographic region.