Glossary of Reinsurance Terms

  1. Either the limit of insurance to be written that an insurance company has set for itself on a class of risk (line limit), or the actual amount that it has accepted on a single risk or other unit.
  2. A class or type of insurance (fire, marine, or casualty, among others), as in Line of Business.
  3. In Surplus Share Reinsurance, a line is used to describe the amount of the reinsured's retained insurance liability in a reinsured policy before loss, in comparison with the reinsurer's share of that polity's liability (which is surplus to the reinsured's liability) and which is usually expressed as a multiple of the reinsured's retained line. Thus, a "two-line" surplus share treaty provides reinsurance cover for twice the reinsured's retained liability enabling the reinsured to write three times as much insurance as was possible before reinsurance. For example, if the reinsured retained a maximum of $100,000 liability per policy in a given class of insurance, but wished to write policies for a maximum of $500,000 per policy, a 4-line surplus share treaty would accomplish the objective: provide $400,000 share reinsurance, with losses shared 1/5 by the reinsured and 4/5 by the reinsurer, beginning with the first dollar of loss.
Line of Business

The general classification of business as utilised in the insurance industry, i.e., fire, allied lines, homeowners, etc.

Line Slip

An arrangement entered into between underwriters and brokers whereby, for a given type of risk, the broker needs to approach only the leading and second underwriter who will accept or reject each risk on behalf of all the underwriters concerned in their agreed proportions. This is an administrative convenience where a broker is placing a large number of similar risks with the same group of underwriters.

Loss Ratio

Losses incurred expressed as a percentage of earned premiums.