Final answer:
Proportional reinsurance is the type of contract where two companies share risk exposure and premiums according to a fixed percentage. It is distinct from excess of loss reinsurance, facultative reinsurance, and retrocession reinsurance.
Step-by-step explanation:
The type of reinsurance contract that involves two companies automatically sharing their risk exposure is proportional reinsurance. In a proportional reinsurance agreement, the primary insurer and reinsurer agree to share the premiums and losses according to a fixed percentage. This differs from other types of reinsurance contracts like excess of loss reinsurance, which only provides coverage when losses exceed a certain amount; facultative reinsurance, which is negotiated separately for each insurance policy; and retrocession reinsurance, where a reinsurer cedes parts of their risks to other reinsurers.