Transfer of incurred losses (loss portfolio) from an insurer to a reinsurer who receives a premium based on the net present value of losses, loaded for profit, expenses and timing. The reinsurer invests the premium over the time taken to settle the claims. Transfers allow an insurer to improve financial ratios or exit a line business. It is a finite risk solution. See LOSS PORTFOLIO ENTRY.
Insurance Encyclopedia
Loss portfolio withdrawal
At the end of a reinsurance period, or at the cancellation of a reinsurance contract, the reinsurer can be relieved of responsibility for claims outstanding at that time by paying the cedant a proportion (e.g. 90 per cent) of the outstanding claims.
Loss Prevention
Activities undertaken to prevent losses from occurring.
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Refers to engineering or inspection activities carried out to prevent losses in the workplace.
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UK: The measures taken to reduce the probability of the occurrence of a loss. Compare with POST-LOSS MINIMISATION.
Loss Prevention Association of India
Way back in the 1970s, there was a growing concern in the general insurance industry about the magnitude of fires, road mishaps, industrial accidents, damage to cargo-resulting in loss of life and property, most of which was avoidable. It was this concern for preventing such losses and containing their consequences that prompted the general insurance industry to promote the Loss Prevention Association of India Ltd. or LPA as it popularly came to be known. Loss Prevention Association of India was set up in January 1978 as a company limited by guarantee, engaged in promotion of safety and loss control through education, training and consultancy. It has emerged as a premier safety organization with multifaceted expertise, having offices at Delhi, Calcutta, Chennai. Hyderabad and Kochi. However, w.e.f. 27th April 2016 it has been amalgamated with GIC Re.
Loss prevention engineer (Liability Insurance)
The person on the insurer’s staff charged with loss prevention through reduction of possible future claims.
Loss Prevention Service
Engineering and inspection work done by Insurance companies or independent organization for the purpose of changing or removing conditions which would be likely to cause loss.
Loss prevention service (Liability Insurance/Property Insurance)
The elimination or reduction of hazardous conditions with the goal of preventing losses. This is done through inspections and engineering efforts by the insurer or an outside organization.
Loss rating
See: Experience Rating.
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REINSURANCE,REFERENCE: See: Rating
Loss ratio
MEDICAL,USA: 1. The proportion between the cost to deliver health care and the amount of money taken in by the managed care plan. 2. The relative amount of insurance claims incurred to insurance premium monies received. An indicator used by insurance companies to measure the amount of benefits returned to policyholders. The formula for obtaining the ratio is incurred claims plus expenses divided by premiums. Low loss ratio indicates that the premiums collected were more than necessary to fund the actual claims. High loss ratio shows that claims exceeded the premiums for the given time period. Also known as incurred claims loss ratio, medical loss ratio (MLR), medical cost ratio , or paid claims loss ratio .
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A ratio determined by dividing the losses by the premiums paid. The losses can be either losses incurred or losses paid, and the premiums can be earned premiums or written premiums.
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Fraction calculated by dividing the amount of insured losses by the amount of Insurance premium, expressed as a percentage of the premiums. Various bases are used in calculating the loss ratio, which may apply to an Insurer’s entire operations, a particular type of Insurance, or a particular insured’s losses.
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REINSURANCE: Losses incurred expressed as a percentage of earned premiums.
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REINSURANCE: Proportionate relationship of incurred losses to earned premiums expressed as a percentage.
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US: Proportionate relationship of incurred losses to earned premiums expressed as a percentage. If, for example, a firm pays $100,000 of premium for workers compensation insurance in a given year, and its insurer pays and reserves $50,000 in claims, the firm’s loss ratio is 50 percent ($50,000 incurred losses/$100,000 earned premiums).
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US: The percent which losses bear to premiums for a given period. The ratio of claims to premiums. It may be calculated in several different ways, using paid premiums or earned premiums, and using paid claims with or without changes in claim reserves and with or without changes in active life reserves.
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UK: the proportion of claims paid or payable to the premiums earned or written.
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The ratio of incurred losses including loss adjustment expenses to earned premiums. Loss ratios can be calculated on an accident year, calendar year, or underwriting year basis.
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UK: The ratio of losses paid and outstanding to premiums. The lower the loss ratio the more satisfactory the outcome and the greater the amount available for commissions, administration costs and profit.
Loss ratio coverage
—A form of stop loss reinsurance under which the reinsurer pays a portion of the claims represented by a loss ratio in excess of a specified loss ratio. For example, “20 percent in excess of 110 percent” will result in claims between 110 percent and 130 percent of premium being paid by the reinsurer.