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Reinsurance Glossary

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Reinsurance of individual risks at the option of the reinsurer and the ceding company, whether under a treaty of reinsurance or by negotiation in respect of an individual risk.  The reinsurer is free to accept or reject the offerings of the ceding company.  The reinsurer may specify its own ratings or terms for the reinsurance.

Facultative Obligatory
A form of life reinsurance which is a hybrid between facultative and automatic.  The risk to be ceded is submitted to the reinsurer, which has limited rights to decline individual risks.

A reinsurance pool established for the Federal Employees Group Life Insurance program.

Financial Reinsurance
Reinsurance transacted primarily to achieve financial goals, such as capital management, tax planning, or the financing of acquisitions.

First Excess
In layering, the specified amount in excess of the ceding company's retention that is ceded to a particular reinsurer or group of reinsurers.  For example, the first $300,000 in excess of the ceding company's retention of $100,000.  See Layer, Layering, and Second Excess.

Follow the Fortunes
A phrase referring to a provision found in some reinsurance contracts stipulating that once a risk has been ceded, the reinsurer is bound by the same fate as the ceding company for that risk.

Foreign Reinsurer
A reinsurer writing business in a state in which it is not domiciled (chartered).

A situation where one insurer issues policies and reinsures all or substantially all of the risk to another insurer.  Fronting typically is used in jurisdictions where the reinsurer is not licensed to do business.

Fronting Company
In a fronting arrangement, the licensed insurer (ceding company) that obtains regulatory approval for an insurance product, sells the product, and cedes all or most of the risk to a company that is not licensed to do business in the jurisdiction.

Funds Withheld
Assets that would normally be paid over to a reinsurer but are withheld by the ceding company to permit statutory credit for non-admitted reinsurance, to reduce the potential credit risk, or to retain control over investments.  Under certain circumstances, the reinsurer may withhold funds from the ceding company.  See Modified Coinsurance.

Funds Withheld Mod-co
A form of modified coinsurance where the initial allowance which is normally paid to the ceding company is withheld by the reinsurer to reduce the reinsurer's exposure to risk.



  Glossary of Reinsurance Terms compiled by
the American Council of Life Insurers (ACLI) Reinsurance Committee
and presented by Findalink.net


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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 be sought.




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