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Reinsurance Glossary

Home | A B C D E F G H I J K L M N O P Q R S T U V W X Y Z | Index

 

Calendar Year of Experience
Underwriting results allocated back to a given calendar year accounting period where the losses occurred.  The results are allocated back to the time frame when loss occurred regardless of when the losses are actually reported, booked, or paid.  Compare with Accident Year of Experience and Underwriting Year of Experience.

Calendar Year YRT
A premium which is due and payable annually on January 1st of each calendar year.

Capacity
The largest amount of insurance an insurer or a reinsurer is willing and able to underwrite, including the amount they retain and the amounts for which they can automatically bind their reinsurers.

Captive
Company formed to insure the risk of its parent corporation.  A captive may be formed for a variety of reasons, including tax benefits, improved investment returns, or the lack of other insurance alternatives.

Carry Over Provisions
A method by which gains or losses from the current period may be applied to results of a previous period (loss carry back) or a future period (loss carry forward).

Case Reserve
Also known as outstanding loss reserve or pending reserve.  These are estimates of outstanding, unpaid liabilities associated with specific reported claims.  These reserves may include loss adjustment expenses as well.  Case reserves are established by a ceding company; however, if the reinsurer believes a case reserve is inadequate, it may establish an additional amount known as an additional case reserve.

Catastrophe
A form of nonproportional reinsurance that provides coverage for losses resulting from an accident or natural disaster involving more than one insured.  These losses typically must exceed a specified amount and number of insureds and/or locations.  Sometimes called Cat Cover.

Cat Cover
See Catastrophe.

Cedant
See Ceding Company.

Cede
To transfer risk to another company.

Ceding Commission
An amount paid by a reinsurer to the ceding company to cover the ceding company's acquisition and other expenses.  Usually a ceding commission also provides profit to the ceding company and is called a ceding allowance.  See Expense Allowance.

Ceding Company
The company that transfers its risk to a reinsurer.  Also called the Cedant.

Cession
The individual risk being reinsured.

Charge Back
The portion of the ceding commission which is returned in the event of an early lapse.

Claims Made Basis
Reinsurance under which the date the claim is reported to the original insurer is deemed to be the date of the loss event.  Claims reported during the term of the reinsurance agreement are covered, regardless of when they occurred.  Likewise, the reinsurance agreement does not cover claims reported after the term of the agreement.  Compare to Occurrence Basis.

Clash Cover
Reinsurance covering a ceding company's exposure to a larger single loss than intended in the same loss occurrence.  A clash cover absorbs the ceding company's loss due to unknown accumulations which exceed the ceding company's retention.  Sometimes referred to as Unknown Accumulation Cover.

Coinsurance
A method of reinsurance under which the assuming company receives a proportionate share of all of the risks and cash flows of the policy.  (One typical exception may be the policy fee, which remains with the ceding company.)  The reinsurer receives its share of the premiums and benefits, and sets up its share of the reserves.  Typically, the reinsurer pays an allowance to the ceding company to represent the reinsurer's share of the acquisition and maintenance expenses.

Coinsurance With Funds Withheld
See Funds Withheld.

Combined Ratio
A sum of two ratios, one calculated by dividing incurred losses plus loss adjustment expenses by earned premiums, and the other calculated by dividing all other expenses by written premiums.  When applied to a company's overall results, the combined ratio is also known as the composite, statutory, or trade ratio.  In both insurance and reinsurance, a combined ratio below 100% indicates an underwriting profit.

Commutation
The termination of all obligations between the parties to a reinsurance agreement, accompanied by a final cash settlement.  Commutation may be required by the reinsurance agreement or may be effected by mutual agreement.

Co/Mod-co
See Partially Modified Coinsurance.

Composite Ratio
See Combined Ratio.

Conditional Automatic
A reinsurance arrangement where the reinsurer underwrites all cessions.  Conditional automatic reinsurance is generally used only if the ceding company does not have underwriters or MIB membership.

Conditional Receipt
A receipt given to create an insurance contract on a temporary basis while the insurer underwrites the application.  If the company rejects the application per its normal underwriting rules the temporary contract is null and void.

Conditional Receipt Reinsurance
Coverage provided by the reinsurer for the ceding company's liability under a conditional receipt.  A reinsurance treaty should contain a provision specifically describing the parties' intent regarding this coverage as it has been a frequent source of misunderstanding.

Continuation
Inforce coverage whose provisions have been significantly modified without evidence of insurability.  These modifications may include internal replacements, policy exchanges, term conversions, re-entries, and contractually permitted increases.  Reinsurance on these policies stays with the original reinsurer unless otherwise agreed.

Corridor
An amount over the expected claim amount that losses must exceed before losses are payable by the reinsurer.  Typically used with stop loss reinsurance.  See Stop Loss.

Cover Note
Confirmation to the ceding company of terms and conditions and percentage placed with each reinsurer.  See Slip.

Cut Through Endorsement
An endorsement to a reinsurance agreement that requires the reinsurer, in the event of the ceding company's insolvency, to pay any loss covered under the reinsurance agreement directly to the insured or third-party beneficiary.

  

  


  Glossary of Reinsurance Terms compiled by
the American Council of Life Insurers (ACLI) Reinsurance Committee
and presented by Central Security Life Insurance Company (CSLIC).

 

This text, or any part thereof, may not be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, storage in an information retrieval system, or otherwise, without the prior written permission of the publisher.

While a great deal of care has been taken to provide accurate, current, and authoritative information in regard to the subject matter covered in this reinsurance glossary, the ideas suggestions, general principles, conclusions, and any other information presented here are for educational purposes only. This reinsurance glossary is provided  with the understanding that it is neither designed nor intended to provide the reader with legal, accounting, investment, marketing, or other types of professional business management advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

 

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