- A horizontal segment of the liability reinsured, e.g., the second
$100,000 of a $500,000 liability is the first layer if the ceding
company retains $100,000, but a higher layer if it retains a lesser
amount. See First Excess,
Layering, and Second
- A method of allocating automatic reinsurance among several
reinsurers. Using this method, reinsurance is ceded in
layers. The layers are defined in terms of amounts of
insurance. One reinsurer will receive all reinsurance up to
the limit of the first layer. A second reinsurer will receive
all reinsurance in excess of the first layer up to the limit of the
second layer, and so forth, depending on the number of layers.
See First Excess, Layer,
and Second Excess.
- Lead Reinsurer
- The reinsurer who negotiates the terms, conditions and premium
rates and first signs on to the agreements; reinsurers who
subsequently accept those terms and conditions are considered
following reinsurers. In some cases, the lead reinsurer may
have narrower responsibilities.
- Letter of
- A financial guaranty issued by a bank that permits the party to
which it is issued to draw funds from the bank in the event of a
valid unpaid claim against the other party; in reinsurance,
typically used to permit reserve credit to be taken with respect to
non-admitted reinsurance; an alternative to funds withheld and
modified coinsurance. Also referred to as an LOC.
- A competitive insurance market place--not an insurance
company--where individual underwriters accept risks on behalf of
syndicates of individual and corporate members whose resources
provide the security behind Lloyd's policies.
- Loss Event
- Any trigger for a recovery under an insurance or reinsurance
agreement. Examples include occurrence, claims made, death or
in Excess of Policy Limits
- A term that, when used in reinsurance agreements, refers to
damages awarded by a court against an insurer in favor of the
insured, due to the insurer's having failed to settle a third party
claim against the insured within the policy limits by reason of bad
faith, fraud, or gross negligence. See Extra
Contractual Obligations and Punitive
- Loss Ratio
- Incurred losses (including applicable IBNR) divided by the earned
premium for an accounting or treaty period. Loss ratios can be
calculated on an accident year, calendar year, or underwriting year
- Loss Ratio
- See Aggregate Coverage.
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
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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