REINSURANCE: A form of reinsurance that considers the time value of money and has loss containment provisions transacted primarily to achieve financial goals, such as capital management, tax planning, or the financing of acquisitions. Also see Finite Reinsurance.
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A form of reinsurance that considers the time value of money and has loss containment provisions. One of its objectives is the enhancement of the cedant’s financial statements or operating ratios, e.g., the combined ratio loss portfolio transfers and financial quota shares.
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UK: There is no clearly accepted definition but financial reinsurance is more concerned with the time value of money and financial goals than risk transfer. The intention is to stabilise the cedant’s balance sheet and provide capital support. The cedant pays a premium to cover defined losses on a multi-year basis up to an agreed maximum. A profit share element converts a conventional treaty into financial reinsurance. The cedant benefits from credit enhancement by improving key ratios such as the combined ratio. Specific financial reinsurance products include: time and distance policies; loss portfolio transfers; spread loss treaty; adverse development cover; blended cover.
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REINSURANCE: This is a form of reinsurance involving less underwriting risk transfer and more investment or timing risk transfer from the cedant. These contacts are often on a multi-line, multi-year basis. They typically absorb at least the cost associated with claims differing from expected claims experience, and often carry excess of loss terms and multiple options Premiums usually reflect the time value of money to a large extent than traditional excess of loss contracts.