Glossary of Reinsurance Terms

Earned Premium

Premium in respect of that part of the insurance where the risk has attached and terminated, and during which the insurer was on risk. Where time is of the essence, the premium is "earned" pro‑rata to the time on risk. If the policy pays a total loss, the whole premium is deemed to have been earned.

Embedded Value

The discounted value of those present and future surpluses that are expected to be generated in respect of business in force within the long term business fund of a life insurance company and to be transferable (after allowing for all relevant taxes) to the profit and loss account.

Ex Gratia Payment

Latin for “by favour”.  A voluntary payment made by the reinsurer in response to a loss for which it is not technically liable under the terms of its contract. 

Excess

The first part of the cost of a claim that is not covered by the insurance policy, but which may be borne by the original insured or by another party. See also Deductible.

Excess of Loss Reinsurance

A generic term describing reinsurance which, subject to a specified limit, indemnifies the reinsured company against all or a portion of the amount of loss in excess of the reinsured's specified loss retention. The term is generic in deserving various types of excess of loss reinsurance, such as per risk (or per policy), per occurrence (property catastrophe or casualty clash), and annual aggregate. The loss retention in excess of loss reinsurance should not be confused with the policy retention in surplus share re-insurance, which always refers to a proportional form of reinsurance in which, once a cession of insurance is made, the reinsured and reinsurer share insurance liability, premium and losses, beginning with the first dollar of loss. Also known as Non-proportional Reinsurance.