Accident Year Experience - Reinsurance experience calculated
by matching the total value of all losses occurring during a given twelve-month period
(i.e., the dates of loss fall within the period) with the premiums earned for the same
period. See also Calendar Year Experience and Policy Year Experience.
Acquisition Costs - All expenses directly
related to acquiring insurance or reinsurance accounts, i.e., commissions paid to agents,
brokerage fees paid to brokers, and expenses associated with marketing, underwriting,
contract insurance and premium collection.
Admitted (Authorized) Reinsurance -
Reinsurance for which credit is given in the ceding company's Annual Statement because the
reinsurer is licensed or otherwise authorized to transact business in the jurisdiction in
question.
Aggregate Excess of Loss Reinsurance - A
form of excess of loss reinsurance which indemnifies the ceding company against the amount
by which all of the ceding company's losses incurred during a specific period (usually 12
months) exceed either (1) a predetermined dollar amount or (2) a percentage of the
company's subject premiums (loss ratio) for the specific period. This type of contract is
also commonly referred to as "stop loss" reinsurance or "excess of loss
ratio" reinsurance.
Alien - An insurer domiciled outside the
United States.
Annual Statement (Also Statutory Annual Statement and
Convention Blank) - The annual report format prescribed by the NAIC and the
states.
Arbitration Clause - A provision found in
many reinsurance contracts whereby the parties agree to submit their disputes to an
unofficial tribunal of their own choosing rather than a court of law, generally subject to
selection criteria and procedures set out in the clause, which produces an opinion
ultimately enforceable by a court of law.
Assume - To accept all or part of a ceding
company's insurance or reinsurance on a risk or exposure.
Assumption - A procedure under which one
insurance company takes over or assumes the direct policy liabilities of another insurer.
Assumption of Liability Endorsement - A
statement of coverage by the reinsurer under which payment is guaranteed to a party not in
privity with the reinsurance contract.
Automatic Facultative Binder (AFB) or Automatic Facultative Treaty -
See Facultative Treaty.
-B-
Base Premium - See Subject Premium.
Binder - A record of reinsurance coverage
pending replacement by a formal reinsurance contract, usually a facultative certificate.
Bordereau - A report provided periodically
by the reinsured detailing the reinsurance premiums and/or reinsurance losses with respect
to specific risks ceded under the reinsurance agreement.
Broker - An intermediary who negotiates
reinsurance contracts between the ceding company and the reinsurer(s). The broker
generally represents the ceding company and receives a commission, almost always from the
reinsurer(s), for placing the business and performing other necessary services.
Broker Market - The collective reference to
those reinsurance companies which accept business mainly from reinsurance brokers. See
Direct Writing Reinsurer.
Bulk Reinsurance - A transaction sometimes
defined by statute as any quota share, surplus aid or portfolio reinsurance agreement
through which, of itself or in combination with other similar agreements, an insurer
assumes all or a substantial portion of the liability of the reinsured company.
Burning Cost - See Pure Loss Cost.
-C-
Calendar Year Experience - Reinsurance
experience calculated by matching the total value of all losses incurred during a given
twelve-month period ( regardless of the dates of loss) with the premiums earned for the
same period. As the name implies, Calendar Year Experience is usually calculated for a
twelve-month period beginning January 1st. Accident Year Experience and Policy Year
Experience are related but not synonymous terms.
Capacity - The largest amount of insurance
or reinsurance available from a company or the market in general. Also used to refer to
the maximum amount of business (premium volume) which a company or the total market could
write based on financial strength.
Catastrophe Reinsurance - A form of excess
of loss reinsurance which, subject to a specific limit, indemnifies the ceding company in
excess of a specified retention with respect to an accumulation of losses resulting from a
catastrophic event or series of events arising from one occurrence. Catastrophe contracts
can also be written on an aggregate basis under which protection is afforded for losses
over a certain amount for each loss in excess of a second amount in the aggregate for all
losses in all catastrophes occurring during a period of time (usually one year).
Cede - To transfer to a reinsurer all or
part of the insurance or reinsurance risk written by a ceding company.
Ceding Commission - In calculating a
reinsurance premium, an amount allowed by the reinsurer for part or all of a ceding
company's acquisition and other overhead costs, including premium taxes. It may also
include a profit factor. See Overriding Commission.
Ceding Company (Also Cedent, Reinsured, Reassured) - The insurer
which cedes all or part of the insurance or reinsurance risk
it has written to another insurer/reinsurer.
Cession - The amount of insurance risk transferred to
the reinsurer by the ceding company.
Claims-Made Coverage - Any form of insurance
under which the trigger of coverage is the presentation (or "making") of a claim
against the insured rather than the date on which the loss occurred. A claims-made policy
can provide for varying limitations as to the length of time prior to the policy period
during which the loss event could have occurred (the "retroactive period") and
the length of time after the policy has terminated during which the claim must be
presented (the "tail" or "extended reporting period").
Clash Cover (or Contingency Cover) - An
excess of loss reinsurance agreement with a retention level equal to or higher than the
maximum limits written for any one reinsured policy or contract. Usually applicable to
casualty lines of business, the clash cover is intended to protect the ceding company
against accumulations of loss arising from multiple insureds and/or multiple lines of
business for one insured involved in one loss occurrence.
Combination Plan Reinsurance - A reinsurance
agreement which combines the excess of loss and the quota share forms of coverage within
one contract, with the reinsurance premium established as a fixed percentage of the ceding
company's subject premium. After deducting the excess recovery on any one loss for one
risk, the reinsurer indemnifies the ceding company based on a fixed quota share
percentage. If a loss does not exceed the excess of loss retention level, only the quota
share coverage applies.
Commutation Agreement - An agreement between
the ceding insurer and the reinsurer that provides for the valuation, payment and complete
discharge of all obligations between the parties under particular reinsurance contract(s).
Although more common where the ceding insurer or reinsurer has concerns about the other
party's financial condition, commutation agreements can be used whenever the parties wish
to settle and discharge all future obligations.
Commutation Clause - The clause in a
reinsurance agreement which provides for the valuation, payment, and complete discharge of
all obligations between the ceding company and the reinsurer, including future obligations
for reinsurance losses incurred. The clause is most often found in workers compensation
reinsurance contracts where future payments are of a continuous and generally known value.
Contingent Commission (Also Profit Commission) -
A commission feature whereby the cedent is allowed a commission based on the reinsurer's
profitability under the reinsurance contract.
Continuous Contract - A form of reinsurance
contract for accepting new business which does not terminate automatically but rather is
intended to continue from year to year unless one of the parties delivers notice of intent
to discontinue or termination is mutually agreed to in accordance with the termination
provisions of the contract.
Cover Note - A statement indicating that the
coverage has been effected.
Credit for Reinsurance - A statutory
accounting procedure permitting a ceding company to treat amounts due from reinsurers as
assets or reductions from liability based on the status of the reinsurer.
Cut-Off (Also Clean-cut) - The termination
provision of a reinsurance contract stipulating that the reinsurer shall not be liable for
loss as a result of occurrences taking place after the date of termination.
Cut-Through Endorsement - An endorsement
added to an insurance policy to provide that, in the event of the insolvency of the
insurance company, the amount of any loss which would have been recovered from the
reinsurer by the insurance company will be paid instead directly to the policyholder by
the reinsurer. Also referred to as an Assumption of Liability Endorsement (ALE). See
Guarantee Endorsement.
-D-
Deposit Premium - The amount of premium
(usually for an excess of loss reinsurance contract) which 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 which 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.
Direct Writing Reinsurer - A reinsurance
company which develops its business by using its own personnel and does not (ordinarily)
accept business from a broker or intermediary.
Drop-Down - See Second Event Retention.
-E-
Earned Reinsurance Premium - (1) That part
of the reinsurance premium applicable to the expired portion of the policies reinsured, or
(2) that portion of the reinsurance premium which is deemed earned under the reinsurance
contract.
Evergreen Clause - See Letter of Credit.
Excess of Loss Ratio Reinsurance - See
Aggregate Excess of Loss Reinsurance.
Excess of Loss Reinsurance - A form of
reinsurance which, subject to a specified limit, indemnifies the ceding company against
the amount of loss in excess of a specified retention. It includes various types of a
reinsurance, such as catastrophe reinsurance, per risk reinsurance, per occurrence
reinsurance and aggregate excess of loss reinsurance. See also Non-Proportional
Reinsurance.
Excess Per Risk Reinsurance - A form of
excess of loss reinsurance which, subject to a specified limit, indemnifies the ceding
company against the amount of loss in excess of a specified retention for each risk
involved in each occurrence.
Experience Rating (Loss Rating, Merit Rating)
- A method of rating under which the reinsurance rate is based upon the reinsured's own
experience, actual or reconstructed, rather than upon the exposure inherent in the
business. See also Retrospective Rating and Prospective Rating.
Exposure Rating - A method of rating,
usually applied to excess of loss reinsurance, under which the rate is determined based on
an analysis of the exposure inherent in the business to be covered and not on the loss
experience the business has demonstrated in the past. Both exposure rating and loss rating
can be used by the reinsurance underwriter to determine the price which is quoted.
Extra-Contractual Obligations (ECO) Clause -
A clause in a reinsurance treaty which protects the ceding company against all or part of
its liability arising from claim settlement activities and falling outside of strict
policy provisions.
-F-
Facultative Certificate of Reinsurance - A
contract formalizing a reinsurance cession on a specific risk.
Facultative Obligatory Treaty (Also Semi-obligatory
Treaty) - A reinsurance contact under which the ceding company may cede exposures
or risks of a defined class that the reinsurer must accept if ceded.
Facultative Reinsurance - Reinsurance of
individual risks by offer and acceptance wherein the reinsurer retains the
"faculty" to accept or reject each risk offered by the ceding company.
Facultative Treaty - A reinsurance contract
under which the ceding company has the option to cede and the reinsurer has the option to
accept or decline classified risks of a specific business line. The contract merely
reflects how individual facultative reinsurance shall be handled.
Finite Reinsurance (Nontraditional Reinsurance,
Limited Risk Reinsurance, and Financial Reinsurance) - A term used to describe a
broad spectrum of treaty reinsurance arrangements which provide reinsurance coverage at
lower margins than traditional reinsurance, in return for a lower probability of loss to
the reinsurer. This reinsurance is often multi-year and financially oriented, and can
provide a means of financial management beyond that usually provided by traditional
reinsurance.
Flat Rate - (1) A fixed rate not subject to any subsequent adjustment;
(2) A reinsurance premium rate applicable to the entire premium
income derived by the ceding company from the business ceded
to the reinsurer as distinguished from a rate applicable to
excess limits.
Following Reinsurer - A reinsurer which
accepts the business ceded based on the terms of a contract primarily negotiated by
another reinsurer, known as the lead reinsurer. (See Lead Reinsurer).
Foreign - A U.S. domiciled insurer which is
domiciled in a state other than the jurisdiction in question.
Fronting - Arrangements by which an
authorized insurer, for a specified fee or premium, issues its policies to cover certain
risks underwritten or otherwise managed by unauthorized insurers and then transfers all,
or substantially all, of its liability to such unauthorized insurers by means of
reinsurance.
Funds Withheld - A provision in a
reinsurance treaty under which the premium due the reinsurer, usually an unauthorized
reinsurer, is not paid but rather is withheld by the ceding company to enable the ceding
company to reduce the provision for unauthorized reinsurance in its statutory statement.
The reinsurer's asset, in lieu of cash, is "Funds held by or deposited with reinsured
companies."
-G-
Gross Line - The total limit of liability
accepted by an insurer on an individual risk (net line plus all reinsurance ceded).
Ground Up (From the) - A phrase referring to
reinsurance losses subject to the contract under consideration before the application of
the retention, but after reduction because of any other reinsurance which inures to the
benefit of the coverage being considered. Also sometimes used to describe losses before
reduction for inuring reinsurance.
Guarantee Endorsement - An endorsement added
to an insurance policy covering the policyholder's mortgaged property to provide that, in
the event of the insolvency of the insurance company, the reinsurer shall pay directly to
the mortgagee and/or the policyholder the amount of loss which would have been recovered
from the reinsurer by the insurance company. The endorsement may provide that the
reinsurer will pay the full loss amount in accordance with the insurance protection
afforded by the insurance company. The Guarantee Endorsement is also known as the
Mortgagee Endorsement, and is similar in concept to the Cut-Through Endorsement.
-I-
Incurred But Not Reported (IBNR) - The loss
reserve value established by insurance and reinsurance companies in recognition of their
liability for future payments on losses which have occurred but which have not yet been
reported to them. This definition is often erroneously expanded to include adverse loss
development on reported claims; the term Incurred But Not Enough Reported (IBNER) is
coming into increased usage to more accurately reflect the adverse development on
inadequately reserved reported claims.
Indexing - A procedure sometimes
incorporated into an excess of loss reinsurance treaty to adjust the retention and limit
according to the value of a specified public economic index (for example: wage, price, or
cost-of-living.)
Insolvency Clause - A contractual provision,
generally required by statute or regulation as a prerequisite to receiving credit for
reinsurance, under which the reinsurer agrees, in the event of the ceding insurer's
insolvency, to pay its reinsurance obligations under the contract whether or not the
insurer has paid its obligations.
Insurance Regulatory Information System (IRIS) -
The mechanism developed by the NAIC to assist states in overseeing the financial condition
of insurance companies.
Intermediary Clause - A contractual
provision, generally required by statute or regulation as a prerequisite to receiving
credit for reinsurance, in which the parties agree to effect all transactions through an
intermediary and the credit risk of the intermediary, as distinct from other risks, is
imposed on the reinsurer.
-L-
Lead Reinsurer - The reinsurer on a contract
recognized as having the major role in negotiating the reinsurance coverage terms of that
contract.
Letter of Credit (LOC) - Within the context
of reinsurance, a banking instrument established on a "standby" basis to secure
recoverables from non-admitted reinsurers to enable the ceding company to reduce the
provision for unauthorized reinsurance in its statutory statement.
Line of Business - The general
classification of business as utilized in the insurance industry, i.e., fire, allied
lines, homeowners, etc.
Line Sheet (Also Line Guide) - A schedule
showing the limits of liability to be written by a ceding company for different classes of
risk and (usually) also showing the lines which can be ceded to proportional reinsurance
treaties.
Loss Adjustment Expense (LAE) - The expense
incurred by the ceding insurer in the defense and settlement of claims under its policies
but not the insurer's overhead expenses. The definition of LAE depends on the terms of the
reinsurance contract.
Loss Development - The difference between
the estimated amount of loss(es) as initially reported to the reinsurer and the amount of
an evaluation of the same loss(es) at a later date or the amount paid in final
settlement(s).
Loss Loading or "Multiplier" (Also Loss
Conversion Factor) - A factor is applied to the anticipated losses (or loss cost)
for an excess of loss reinsurance agreement in order to develop the reinsurance premium
(or rate.) This factor provides for the reinsurer's loss adjustment expense, overhead
expense, and profit margin.
Loss Rating - A method of rating, usually
applying to excess of loss reinsurance, under which the rate is determined based on the
ceding insurer's historical loss experience, actual or reconstructed, rather than on the
exposure inherent in the business. Both loss rating and exposure rating can be used as
different rating approaches by the reinsurance underwriter to calculate the price which is
quoted.
-M-
Minimum Premium - An amount of premium which
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 have
produced a lower figure. See Deposit Premium.
-N-
National Association of Insurance Commissioners
(NAIC) - An association of the chief insurance regulatory officials of the 50
states, the District of Columbia, American Samoa, Guam, Puerto Rico and the Virgin
Islands.
Net Retained Liability - The amount of
insurance which a ceding company keeps for its own account and does not reinsure in any
way (except in some instances for Catastrophe Reinsurance).
Net Loss - The amount of loss sustained by
an insurer after deducting all applicable reinsurance, salvage, and subrogation
recoveries.
Ninety Day Rule - The Annual Statement
requirement which provides that an insurer must establish a provision for certain balances
when it has reinsurance recoverables over ninety days past due.
No Claims Bonus - A form of profit
commission under which the ceding company receives a stated percentage of the premium
ceded in the event no claims are presented under the reinsurance treaty for a stipulated
period of time. The no claims bonus differs from an ordinary profit commission in that no
distribution occurs if any claims are made even if the treaty may have produced a profit.
Non-Admitted Reinsurance - Reinsurance for
which no credit is given in the ceding company's statutory statement because the reinsurer
is not licensed or authorized in the jurisdiction in question.
Non-Proportional Reinsurance - See Excess of
Loss Reinsurance.
-O-
Obligatory Treaty - A reinsurance contract
under which business must be ceded in accordance with contract terms and must be accepted
by the reinsurer.
Occurrence Coverage - A description of
coverage for an event that "occurred" within the time specified in the insurance
agreement, regardless of the date the claim is actually submitted.
Offset (Setoff) - The reduction of the
amount owed by one party to a second party by crediting the first party with amounts owed
it by the second party. The existence and scope of offset rights may be determined by
contract language as well as statutory, regulatory and judicial law.
Over-Line - The amount of insurance or
reinsurance exceeding the insurer's or reinsurer's normal capacity inclusive of automatic
reinsurance facilities.
Overriding Commission - An allowance paid to
the ceding company over and above the acquisition cost to allow for overhead expenses and
often including a margin for profit.
-P-
Participating Reinsurance - See Pro Rata
Reinsurance.
Payback - (1) A method of rating under which
the underwriter sets the price based upon his view of how frequently the loss event might
occur over a period of time. Thus, if the underwriter felt that the 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." See also Rate on Line. (2) Can also refer to premium
charged in addition to the cost of an ongoing program for prior losses and, thus
"payback" reinsurers.
Placement Slip - A temporary record of
reinsurance arrangements for which coverage has been effected, pending replacement by a
formal reinsurance contract. Also known as a slip. See Binder.
Policy Year Experience (Also Underwriting Year
Experience) - Reinsurance experience calculated with all applicable premiums and
losses assigned to the particular period (usually a 12 month period) in which each
reinsured policy becomes effective. See also Accident Year Experience and Calendar Year
Experience.
Pool (Also Association, Syndicate) - An
organization of insurers or reinsurers through which pool members underwrite particular
types of risks with premiums, losses, and expenses shared in agreed amounts.
Portfolio - The liability of an insurer for
the unexpired portion of the in-force policies or outstanding losses or both for a
described segment of the insurer's business.
Portfolio Reinsurance - The transfer of
portfolio via a cession of reinsurance. See also Assumption.
Portfolio Return - Reassumption by a ceding
company of a portfolio.
Portfolio Run-Off - Continuing the
reinsurance of a portfolio until all ceded premium is earned or all losses are settled or
both.
Premium Base - See Subject Premium.
Primary - In reinsurance this term is
applied to the nouns: insurer, insured, policy and insurance and means respectively: (1)
the insurance company which initially originates the business, i.e., the ceding company;
(2) the policyholder insured by the primary insurer; (3) the initial policy issued by the
primary insurer to the primary insured; (4) the insurance covered under the primary policy
issued by the primary insurer to the primary insured (sometimes called "underlying
insurance").
Priority - The term used in some foreign
reinsurance markets meaning retention.
Profit Commission - See Contingent
Commission.
Proportional Reinsurance - See Pro Rata
Reinsurance
Pro Rata Reinsurance (Also Quota Share, Proportional
and Participating Reinsurance) - A generic term describing all forms of quota
share and surplus reinsurance in which the reinsurer shares a pro rata portion of the
losses and premiums of the ceding company.
Prospective Rating (Also Self Rating) - A
type of Experience Rating used in arriving at the reinsurance rate and premium for a
specified period, based in whole or in part, on the loss experience of a prior period.
Provisional Rate, Premium, Or Commission -
Tentative amounts subject to subsequent adjustment.
Pure Loss Cost (Also Burning Cost) - The
ratio of the reinsurance losses incurred to the ceding company's subject premium.
-Q-
Quota Share Reinsurance - A form of pro rata
reinsurance indemnifying the ceding company for a fixed percent of loss on each risk
covered in the contract in consideration of the same percentage of the premium paid to the
ceding company.
-R-
Rate - The percentage or factor applied to the ceding company's
subject premium to produce the reinsurance premium or the percent
applied to the reinsurer's premium to produce the commission.
Rate On Line - Same as Payback except that
the price is quoted as a percentage of the limit. Thus, a 20 percent rate on line would be
equivalent to a five year payback.
Reassured - See Ceding Company
Reciprocity - A mutual exchange of
reinsurance between two or more companies.
Reinstatement - A provision in an excess of
loss reinsurance contract, particularly catastrophe and clash covers, that provides for
reinstatement of a limit which is reduced by the occurrence of a loss or losses. The
number of times that the limit can be reinstated varies, as does the cost of the
reinstatement.
Reinsurance - The transaction whereby the
assuming insurer, for a consideration, agrees to indemnify the ceding company against all,
or a part, of the loss which the latter may sustain under the policy or policies which it
has issued.
Reinsurance Premium - The consideration paid
by a ceding company to a reinsurer for the coverage provided by the reinsurer.
Reinsured - See Ceding Company.
Reinsurer - The insurer which assumes all or
a part of the insurance or reinsurance risk written by another insurer.
Reserve - An amount which is set aside to
provide for payment of a future obligation.
Retention - The amount of risk the ceding
company keeps for its own account or the account of others.
Retrocession - A reinsurance transaction
whereby a reinsurer (the retrocedant) cedes all or part of the reinsurance risk it has
assumed to another reinsurer (the retrocessionaire).
Retrospective Rating (Also Self Rating) - A
type of Experience Rating used in arriving at the reinsurance rate and premium for a
specified period based on the loss experience for that period.
Run-Off - A termination provision of a
reinsurance contract that stipulates the reinsurer remains liable for loss as a result of
occurrences taking place after the date of termination for reinsured policies-in-force at
the date of termination until their expiration or for a specified time period.
-S-
Schedule F - The Annual Statement schedule
which provides information on a company's reinsurance transactions.
Second Event Retention (Drop-Down) - An
approach to establishing the retention level in excess of loss reinsurance (usually
catastrophe) under which the amount of the retention is reduced for the second (or
subsequent) loss occurrence. The theory is that the ceding company can afford to retain a
given retention level on one loss, but for additional loss(es) needs protection over the
lower retention.
Self-Rating - See Prospective Rating and
Retrospective Rating.
Setoff(Offset) - The
reduction of the amount owed by one party to a second party by crediting the first party
with amounts owed it by the second party. The existence and scope of offset rights may be
determined by contract language as well as statutory, regulatory and judicial law.
Share Reinsurance - See Pro Rata
Reinsurance.
Sliding Scale Commission - A commission
adjustment on earned premiums whereby the actual commission varies inversely with the loss
ratio, subject to a maximum and minimum.
Special Acceptance - The specific agreement
by the reinsurer to include under a reinsurance contract a risk not included within the
terms of the contract.
Special Termination Clause (Also Sudden Death Clause)
- A clause sometimes found in reinsurance contracts allowing one or both parties to
terminate fully the contract and coverage for future occurrences upon the happening of
some specified condition or event, such as the insolvency or merger of the other party, by
providing shorter notice than is otherwise required to terminate the contract if such
condition or event had not happened.
Stop Loss Reinsurance - See Aggregate Excess
of Loss Reinsurance.
Subject Premium (Also Base Premium, Premium Base,
Underlying Premium) - The ceding company's premiums (written or earned) to which
the reinsurance premium rate is applied to produce the reinsurance premium. Sometimes also
called GNEPI or GNWPI (Gross net earned, or written, premium income) or SMPI (subject
matter premium income).
Surplus Reinsurance (Also Surplus Share Reinsurance) -
A form of pro rata reinsurance under which the ceding company cedes that portion of its
liability on a given risk which is greater than its net line. As consideration, the
reinsurer receives that portion of the total premium which the surplus bears to the total
liability.
-T-
Target Risk - (1) Certain high valued
bridges, tunnels and fine arts collections which are excluded from reinsurance contracts
and release the reinsurer of any potential high accumulation of liability on any one risk
from various sources; (2) a large hazardous risk on which insurance is difficult to place;
or (3) a large attractive risk which is considered a target for competing insurance
companies and producers. See also Total Insured Value.
Term Contract - A form of reinsurance
contract written for a stipulated term (usually one year). The contract automatically
expires at the end of the term and renewal must be negotiated. See also Continuous
Contract.
Total Insured Value (TIV) - A clause in a
reinsurance contract which stipulates that losses relating to risks which have a total
insured value in excess of a given amount will not be protected under the contract. In
many contracts this clause replaced the Target Risk Clause.
Treaty - A reinsurance contract under which
the reinsured company agrees to cede and the reinsurer agrees to assume risks of a
particular class or classes of business.
-U-
Ultimate Net Loss - The term applied to the
reinsurer's loss under a reinsurance contract, generally the gross loss less any
recoveries from other insurance which inure to the benefit of the contract in question.
Underlying - The amount of insurance or
reinsurance on a risk (or occurrence) which applies to a loss before the next higher
excess layer of insurance or reinsurance attaches.
Underlying Premium - See Subject Premium.
Unearned Reinsurance Premium - That part of
the reinsurance premium applicable to the unexpired portion of the policies reinsured.
-W-
Working Cover - A contract covering an
amount of excess reinsurance in which loss frequency is anticipated.
