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  • A document specifying agreed amendments to an insurance (or re-insurance) contract.
    Adjustment premium payable after expiration of an insurance contract, constituting – together with a deposit premium – the premium required under the contract.
    A detailed list of premiums and claims which is prepared for reinsurers to inform them of claims made or risks covered. Bordereaux are usually produced on a monthly or quarterly basis.
    Also known as “broker’s commission”. The commission which is payable to a broker for placing an insurance or reinsurance contract with an insurer or a reinsurer.
    |A method of calculating premiums for non-proportional reinsurance (excess-of-loss). It is based on the ratio of claims incurred to the ceding company’s net premium. The average annual percentage is multiplied by a fraction, e.g. 100/80 to arrive at the premium for reinsurers. The burning cost method requires many years’ statistics of losses.
    Termination of an insurance contract before it is due to expire. The contract may have a cancellation clause which stipulates the conditions for cancellation which is effected by sending a cancellation notice.
    The total underwriting capacity of an insurance company or reinsurance company.
    A company formed to insure the risk of its parent corporation. A captive may be formed when a large corporation is not satisfied with insurers’ prices, services etc.
    A provision in a reinsurance contract pursuant to which large losses are paid by a reinsurer in advance of the normal account date.
    A provision in a reinsurance contract pursuant to which the ceding company (insurer) may not pay for a loss without the consent of the reinsurer.
    A clause which binds a ceding company to notify the reinsurer of all the claims which can be paid under the contract. Upon the reinsurer’s request, the reinsurer may co-operate in handling the settlement of such claims.
    An arrangement whereby two or more insurers (co-insurers) underwrite the same risk. Each of the co-insurers has a contractual relationship with the insured.
    A clause providing that the reinsurer is authorized to pay compensation directly to the insured, thus “cutting through” the usual route of payment to the reinsured (the ceding company).
    A clause providing for the carry-forward or transfer of losses under a reinsurance contract from one accounting period to another and for their being set off against the next period’s profit.
    A premium that is payable at the inception of a reinsurance contract and in respect of which an adjustment premium is due at an agreed later date. Minimum deposit premium is a minimum premium paid under excess-of-loss reinsurance contracts.
    Amounts due to reinsurers under a reinsurance contract, but retained by a cedant to secure payments by reinsurers.
    Amount of premium to be collected for a period estimated by cedant.
    A clause providing that the reinsurer may terminate the contract due to some specified (sometimes very particular) reasons.
    A form of non-proportional reinsurance in which an insurer’s participation in covering losses for a specified risk or risks is limited to stated amounts.
    Reinsurance of individual risks on terms and conditions agreed with the reinsurer.
    A clause in a reinsurance contract providing that the reinsurer follows the reinsured’s results arising under insurance policies/
    A practice of following the lead of the leading underwriter: if the leader accepts alterations to the contract, the other reinsurers do the same.
    A form of reinsurance in which an insurer issues a policy on a risk in its own name, and then passes the entire risk by way of reinsurance to another insurer or reinsurer. Such an arrangement is made due to political or legal reasons or out of concern for the insured’s interest.
    Premium being the rating basis of non-proportional treaty, but after deduction of cession to the treaties inuring to the benefit of the non-proportional treaty.
    Gross premium written before the deduction of various policy expenses and fees (e.g. brokerage). After the deductions it is a net premium.
    Acceptance by a reinsurer of some risks ceded by another insurer (ceding company).
    An insurer or reinsurer specialising in a particular type of insurance, who sets the terms and conditions of the insurance or reinsurance cover and who is the first to participate in the given insurance (or reinsurance). The terms and conditions set by the leader are binding for other underwriters of the contract.
    The maximum sum that an insurer or reinsurer will pay under a policy or for a given event or occurrence.
    The proportion of a risk accepted by a reinsurer as the reinsurer’s maximum participation in such risk. The term is used in surplus treaties.
    Maximum possible loss which would be incurred if the company’s fire alarm didn’t work and the fire were put out by a fire brigade.
    A form of reinsurance whereby the insurers and reinsurers do not share losses in pre-determined proportions and may not share certain losses at all. The insurer covers all losses which are comprised in the insurer’s retention.
    A reinsurance contract under which the ceding company undertakes to cede all risks included in the reinsured portfolio and the reinsurer undertakes to accept these risks.
    A reinsurance expression indicating that the terms underwritten by the reinsurer are on exactly the same basis as those of the ceding company in the original policy
    Situation created by a broker who obtained the reinsurers’ acceptance of participation which exceeds 100% of risk. To eliminate overplacement, participation of individual reinsurers must be reduced.
    An additional commission that is paid to a ceding company (insurer or reinsurer) to cover the overheads in administering the reinsurance.
    A joint underwriting operation of insurance and/or reinsurance in which the participants form a collective capacity to accept certain classes of risk, each participant assuming a pre-determined participation in premiums, payments of losses and possibly costs.
    The maximum loss which can be incurred in case of fire when the fire alarm system functions properly and a fire brigade participates in putting out the fire.
    An additional commission paid by the reinsurer to the cedant based on a predetermined percentage of the profit realized under the contract.
    A type of reinsurance in which the insurer and the reinsurer share the same proportion of a given risk, premium and losses.
    An obligatory pro rata reinsurance contract pursuant to which the insurer cedes and the reinsurer accepts a pre-determined proportion of portfolios or classes of risk specified in the contract.
    The mutual exchange of reinsurance from one reinsurer to another.
    Reinstatement of the original insurance cover by payment of a specified reinstatement premium. Used in non-proportional reinsurance.
    Scheme of various treaties (proportional, non-proportional) covering cedant’s given insurance portfolio (i.e. property portfolio can be covered by a quota share and surplus treaty, whereas the retention of quota share is subject to non-proportional per risk reinsurance; in the same time a per event non proportional treaty is arranged very often).
    Continuation of a reinsurance contract.
    Risks which the insurer keeps for its own account after a reinsurance cession is made.
    The transaction whereby a reinsurer reinsures all or part of the reinsurance it has previously assumed with other reinsurers (retrocessionaires)
    An annex to an obligatory reinsurance contract specifying detailed terms and conditions of the contract.
    Participation of reinsurers in a given contract, confirmed by a broker. Such participation may be lower than initially offered in the case of overplacing.
    Formula applied in proportional reinsurance under which the level of reinsurance commission paid in relation to the loss ratio (the lower the loss ratio, the bigger the commission and opposite), with the margin parameters applied (total of the loss ratio and commission paid).
    An offer or document confirming that a reinsurance contract has been entered into.
    Extension of treaty conditions by a risk, which normally is excluded from the treaty (i.e. due to scope of cover or sum insured).
    A reinsurance designed to protect insurers from excess losses resulting from an accumulation of smaller losses. Unlike an excess-of-loss reinsurance, which covers individual risks, stop loss covers a whole insurance portfolio of a particular type or the insurer’s business.
    A form of pro rata reinsurance in which an insurer does not cede participation in all risks to the reinsurer. The insurer sets maximum retention per risk and cedes the surplus to the reinsurer.
    The amount of a risk that a reinsurer is willing to accept, commonly expressed as a percentage of the sum insured. It can be reduced to the signed line. Notes Strike-Through Clause (Cut-Through Clause) Provision that holds a reinsurer liable for its share of losses even if the Ceding Company becomes insolvent before paying these losses. For example, XYZ Insurance Co. Writes a fire policy for Acme Manufacturing and then reinsures 80% of the risk with ABC Reinsurance. XYZ is declared insolvent. Then Acme Manufacturing burns to the ground. ABC Reinsurance would be responsible for the 80% of the risk it reinsured and would pay the claim directly to Acme. This includes a degree of obligation not implied in the glossary.
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