REINSURANCE: (01) The working cover subject to a prospective rating plan. (02) A form of excess reinsurance wherein each year’s premium rate is determined by the amount of the ceding insurer’s excess losses for a specified number of preceding years. A form of experience rating.
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A form of reinsurance under which premiums are paid during good years to build up a fund from which losses are recovered in bad years. This reinsurance has the effect of stabilizing a cedant’s loss ratio over an extended period of time.
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UK: Aggregate excess of loss financial reinsurance under which premiums, under a multi-year contract, are paid during the good years to build up a fund from which losses are recovered in poor years. Premiums accumulate in an investment fund as well as additional premiums paid if losses exceed the fund balance. Cover is fixed on a per year basis, often stop loss. The key is to stabilise the cedant’s losses over time.