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
Year of Experience and Underwriting
Year of Experience.
- Calendar Year YRT
- A premium which is due and payable annually on January 1st of each
- 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.
- 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
- Carry Over
- 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.
- 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
- Cat Cover
- See Catastrophe.
- See Ceding Company.
- 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.
- 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
- 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
- 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.
With Funds Withheld
- See Funds
- 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.
- 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.
- See Partially
- Composite Ratio
- See Combined Ratio.
- A reinsurance arrangement where the reinsurer underwrites all
automatic reinsurance is generally used only if the ceding company
does not have underwriters or MIB membership.
- 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.
- 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.
- 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.
- An amount over the expected claim amount that losses must exceed
before losses are payable by the reinsurer.
Typically used with stop loss reinsurance.
- Cover Note
- Confirmation to the ceding company of terms and conditions and
percentage placed with each reinsurer.
- Cut Through
- 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
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