Latin phrase meaning 'from the beginning'
The calendar or accounting year in which the accident or loss occurred.
All expenses incurred by an insurance or reinsurance company which are directly related to acquiring insurance accounts (insured, or reinsured) for the company.
A valuation by an actuary of the present value of future liabilities using probability tables and other statistical techniques to evaluate the long-term business liabilities.
The conscious and deliberate submission by a reinsured company to a reinsurer of those risks, segments of risks, or coverages that appear less attractive for retention by the reinsured.
A form of reinsurance providing excess of loss cover for losses arising from any one event (or vessel) in excess of the reinsured's retention up to an agreed limit, but only when the aggregate of claims otherwise recoverable under the excess of loss treaty exceeds a stated amount.
A term used to describe the recalculation of prior years of loss experience to demonstrate what the underwriting results of a particular program would have been if the proposed program had been in force during that period.
An agreement between reinsured and reinsurer (usually for pro rata reinsurance, and usually for one year or longer), whereby the ceding company is obligated to cede certain risks as provided in the agreement and the reinsurer is obligated to accept. See also Obligatory Treaty.
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.
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)
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.
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.
An insurance company set up by a (non-insurance) commercial/industrial company primarily to write the parent company's own insurances and obtain direct access to the reinsurance market.
Loss reserves established in relation to specific, individual reported claims.
A reinsurance contract provision, common in proportional contracts, which allows a ceding company to make claim and receive immediate payment for a large loss without waiting for the usual periodic payment procedures to occur.
A form of excess of loss reinsurance that, subject to a specified limit, indemnifies the ceding company for the amount of loss in excess of a specified retention with respect to an accumulation of losses resulting from a ”catastrophe”.
In proportional reinsurance, to pass on to another insurer (the reinsurer) all or part of the financial interests of insurance policies written by an insurer (the ceding company) with the object of reducing the company's possible liability by sharing with the reinsurer the insurance liability, premiums, and losses from the reinsured business. See also Cession.
- The unit of insurance passed (or ceded) to a proportional reinsurer by a ceding company or cedant that issued a policy to the original insured. A cession may accordingly be the whole or a portion of single risks, defined policies, or defined divisions of business, all as agreed in the reinsurance contract.
- The act of ceding where such act is necessary to invoke the proportional reinsurance protection.
An agreement between the ceding insurer and the reinsurer that provides for the valuation, payment and complete discharge of some or all current and future obligations between the parties under particular reinsurance contract(s).
A reinsurance contract that does not terminate automatically but continues indefinitely unless one of the parties delivers notice of intent to terminate.
In direct insurance, the first part of an insurance loss paid by the original insured and thus not the insurer. See also Excess.
A clause in a reinsurance or other agreement, which specifies that deficits shall be carried forward and offset in arriving at the profit commission.
The amount of premium (usually for an excess of loss reinsurance contract) that the ceding company pays to the reinsurer on a periodic basis during the term of the contract. This amount is generally determined as a percentage of the estimated amount of premium that the contract will produce based on the rate and estimated subject premium. It is often the same as the minimum premium but may be higher or lower. The deposit premium will be adjusted to the higher of the actual developed premium or the minimum premium after the actual subject premium has been determined.
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.
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.
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.
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.
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.
A reinsurance contract under which the ceding company has the option to cede and the reinsurer is obliged to accept cessions of risks of a defined class, provided the risks fall within the contract guidelines.
In proportional reinsurance, it is the reinsurance of part or all of the insurance provided by a single policy, with separate negotiation for each policy cession of insurance - for sharing liability, premium, and loss.
In excess of loss reinsurance, it is the reinsurance of each policy, with separate negotiation for each - for indemnity of loss in excess of the reinsured's loss retention.
The word "facultative" connotes that both the primary insurer and the reinsurer usually have the "faculty" or option of accepting or rejecting the individual submission (as distinguished from the obligation to cede and accept, to which the parties agree in most treaty reinsurance).
A common form of proportional reinsurance treaty under which the amount of each cession is defined as the amount of gross (policy) liability that exceeds, or is "surplus" to, an agreed net liability retention, up to the limit of (reinsurance) liability. Often, a maximum net retention is specified in the treaty, with the ceding company having the option to choose a lesser retention on individual risks. The amount of first surplus reinsurance provided will be limited to a fixed multiple of the selected retention in each case. Higher surplus treaties, termed "second", "third", and so on, can be arranged to provide the ceding company with additional reinsurance capacity beyond that provided by the prior surplus treaty plus its true net retention.
An arrangement whereby a licensed insurer, for a specified fee or premium, issues its policies to cover certain risks underwritten or otherwise managed by another insurer or reinsurer with the intent of passing all, or substantially all, of the liabilities thereunder to such insurers by means of reinsurance. Such an arrangement may be illegal if the purpose is to frustrate regulatory requirements.
A method of reporting the financial results of an insurer more in accordance with the going-concern basis used by other businesses. GAAP assigns income and disbursements to their proper period, as distinguished from the more conservative requirements of statutory accounting, by which insurers are regulated.
Premiums received by or due to an insurer, without deduction of the cost of any reinsurance. but adjusted to take account of the differences between the unexpired risk reserves at the beginning and end respectively of the period concerned.
Premiums received by or due to an insurer without deduction of the cost of any reinsurance or any adjustment for the fact that some of the income has to be reserved for the unexpired element of the policy.
A term, commonly used in Marine insurance, whereby the insured’s interest remains covered in the event of a circumstance arising which would, without prior agreement, cancel coverage.
The colloquial term for a clause that limits the time period during which claims arising from a given occurrence may be included as part of the loss under a catastrophe excess of loss treaty. The time period is usually measured in consecutive hours (usually 72 or 168 hours) and most often applies to property loss occurrences, e.g., a windstorm, conflagration, or earthquake, and less frequently in occupational disease and other casualty loss occurrences.
A provision in a reinsurance agreement designed to allocate loss from a single occurrence between two or more reinsurance agreements. The provision is intended to be used when the company purchases its excess of loss reinsurance on an “underwriting year” or “risks attaching” basis. The provision allows the reinsured to apportion its retention across two or more reinsurance agreement periods, i.e., when one loss affects policies assigned to different reinsurance periods, so that the company will have one retention and one recovery for the loss involving the two reinsurance periods.
Reinsurance cover that is purchased by a ceding company to protect both itself and its reinsurers (usually in a quota share) and which applies to net and treaty losses combined. This may also be referred to as Common Account Excess of Loss Reinsurance.
A legal principle that permits the injured party in a tort action to recover the entire amount of compensation due for injuries from any tort feasor who is able to pay, regardless of the degree of that party's negligence.
An agreement between motor insurers that provides that, in the event of an accident involving their respective policy holders, neither party shall seek to recover the insured cost of repairing the damage caused to the vehicle it insured from the other insurer, regardless of which party's insured is to blame for the accident.
- 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.
- A class or type of insurance (fire, marine, or casualty, among others), as in Line of Business.
- 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.
The general classification of business as utilised in the insurance industry, i.e., fire, allied lines, homeowners, etc.
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.
Losses incurred expressed as a percentage of earned premiums.
A form of alternative dispute resolution in which the parties agree to submit any dispute to a neutral mediator, whose purpose and goal is to achieve a mutually acceptable settlement and compromise of the dispute, rather than issue a formal ruling and decision on the merits as occurs in arbitration. Depending upon the parties' agreement, the results of mediation can be binding, or non-binding.
An amount of premium that will be charged (usually for an excess of loss reinsurance contract), notwithstanding that the actual premium developed by applying the rate to the subject premium could produce a lower figure. See also Deposit Premium.
An acronym referring to nuclear, biological, chemical and radiological exposures, which may be defined in the reinsurance agreement, for purposes of excluding, limiting or providing reinsurance coverage.
The amount of loss sustained by an insurer after making deductions for all recoveries, salvage, and all claims upon reinsurers with specifics of the definition derived from the reinsurance agreement. Such net loss may or may not include claim expenses. As provided in the reinsurance agreement, net loss can be confined to the amount paid by the reinsured within applicable policy limits, or it can also include amounts paid by the reinsured for compensatory damages in excess of applicable policy limits because of failure of the reinsured to settle within applicable policy limits.
The amount of insurance that a ceding company keeps for its own account and does not reinsure in any way (except in some instances for catastrophe reinsurance).
Reinsurance placed with a reinsurer that does not have authorised or equivalent status in the jurisdiction in question.
A reinsurance contract (usually proportional) under which the subject matter business must be ceded by the ceding company in accordance with the contract terms and must be accepted by the reinsurer. Also referred to as Automatic Treaty.
A frequently used term in reinsurance referring to an incident, happening or event that triggers coverage under an occurrence-based agreement. The definition of an occurrence will vary, depending upon the intent and interests of the parties.
A provision in most property per risk reinsurance contracts that limits the reinsurer’s liability for all risks involved in one occurrence.
A method of reinsurance rating under which the price is based on how frequently a total loss might occur over a period of time based on historical or projection indications. Thus, if the indicated or projected loss would occur only once in five years, the price would be set (without regard to expenses and profit margins) to be equal to the limit divided by five and the contract would thus be said to have a "five-year payback." Inverse calculation with Rate-on-Line.
A form of proportional reinsurance in which the reinsurer assumes an agreed percentage of each insurance being reinsured and shares all premiums and losses accordingly with the reinsured. Quota share reinsurance is usually arranged to apply to the insurer's net retained account (i.e., after deducting all other reinsurance except perhaps excess of loss catastrophe reinsurance), but practice varies. A quota share reinsurer may be asked to assume a quota share of a gross account, paying its share of premium for other reinsurance protecting that gross account.
The percentage or factor applied to the ceding company's subject premium to determine the reinsurance premium, or the percentage applied to the reinsurer's premium to determine the commission payable to the ceding company (or, if applicable, the reinsurance intermediary).
A percentage derived by dividing reinsurance premium by the reinsurance limit; the inverse is known as the payback or amortisation period. For example, a $10 million catastrophe cover with a premium of $2 million is said to have a rate on line of 20 percent and a payback period of 5 years.