Glossary of Reinsurance Terms

Binding Authority

An authority issued by an insurer to another party to accept insurances on its behalf, subject to the terms and conditions agreed between the parties.

Bordereau

A detailed listing of premiums and/or loss transactions, usually prepared monthly or quarterly, and rendered to interested parties. Frequently rendered by ceding companies to reinsurers and by general agents and coverholders (plural: bordereaux)

Broker

One who negotiates contracts of insurance or reinsurance, receiving a commission for placement and other services rendered, between (i) a policyholder and a primary insurer, on behalf of the insured party, (ii) a primary insurer and reinsurers on behalf of the primary insurer, or (iii) a reinsurer and a retrocessionaire, on behalf of the reinsurers.

Brokerage

The remuneration payable to a broker. This is normally agreed by the insurer and paid as a deduction from the premium.

Burning Cost

A method of calculating the premium for reinsurance whereby within certain limits, the reinsurance premium paid by a cedant is related to the claims made under the policy. The adjustment factor works to the advantage of the reinsurer until the maximum level of reinsurance premium is reached. There are minimum and maximum levels of premium payable usually expressed as a percentage of the cedant's underlying premiums. Within these limits, if the cedant makes a claim the reinsurer will collect an additional premium calculated in accordance with a formula contained in the policy. When the maximum premium has been paid, the reinsurer has full liability for further claims with no recourse.