Reinsurance Glossary

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Partially Modified Coinsurance (Part-co)

A combination of coinsurance and modified coinsurance. In most situations a portion of the initial reserves equal to the initial allowance are held on a mod-co basis, while the remaining reserves are held on a coinsurance basis, eliminating any initial cash transfer. Also known as Co/Mod-co.
Participation Limit: A limit placed on the absolute amount of coverage that may be inforce and applied for on an individual life for reinsurance purposes. If the insurance exceeds the limit, the reinsurer will decline to assume any of the risk. This is most commonly applied to supplementary benefits such as accidental death coverage.
Pending Reserve: See Case Reserve.
Persistency Bonus: An amount paid to the ceding company by the reinsurer if the reinsurance ceded in a given period meets certain persistency standards. Persistency bonuses are used to encourage the writing of persistent business.
Placement Ratio: The ratio of paid facultative cessions to number of facultative submissions. The placement ratio can be used to determine the effectiveness of the reinsurer's facultative underwriting and the cost per cession.
Point-in-Scale YRT: A term used in conjunction with a select and ultimate YRT scale. It refers to the premium rate appropriate for the insured's original issue age and current duration.
Pool; Pool Reinsurance: A method of allocating reinsurance among several reinsurers. Using this method, each reinsurer receives a specified percentage of each risk ceded to the pool. Percentages may vary by reinsurer, risk classification, etc. Contrast with Reinsurance Wheel. See also Layering and Reinsurance Facility.
Premium (Written/Unearned/Earned): Written premium is paid premium registered on the books of an insurer or reinsurer at the time a policy is issued. Premium received for a future exposure period is said to be unearned premium. For an individual policy, written premium minus unearned premium equals earned premium. Earned premium is recognized as income for the accounting period while unearned premium will be recognized as income in a future accounting period.
Producer-Owned Reinsurer: A captive reinsurance company that provides reinsurance for a producer group's business. Producer-owned reinsurers typically have very low retention limits and retrocede most of the risk they assume.
Production Bonus: An amount paid to the ceding company by the reinsurer if the amount of reinsurance ceded in a given period exceeds a specified amount. Production bonuses are used to encourage a ceding company to place reinsurance with a certain reinsurer.
Professional Reinsurers: Reinsurers that offer reinsurance to other than affiliate companies.
Profit Commission: A provision found in some reinsurance agreements which provides for profit sharing. Parties agree to a formula for calculating profit, an allowance for the reinsurer's expenses, and the ceding company's share of such profit after expenses. See Risk Charge and Experience Refund.
Proportional: A form of reinsurance where the amount ceded is defined at the point the risk is transferred, not at the point of claim. The amount of risk may vary with time by formula.
Pro Rata: See Quota Share.
Punitive Damages: A term that, when used in reinsurance agreements, refers to damages awarded by a court against an insurer in addition to compensatory damages. Punitive damages are intended to punish the insurer for willful and wanton misconduct and to serve as a deterrent. When the award is against an insurer, it is usually related to the insurer's conduct in the handling of a claim. See Extra Contractual Obligations and Losses in Excess of Policy Limits.