Reinsurance term indicating that the reinsurer will pay without questioning the insurer’s liability under the original insurance.

Livestock policy under which the insurer pays the insured a given percentage of any compensation received from the government as compensation for the compulsory slaughter of their animals to prevent the spread of a disease, e.g. foot-and-mouth.
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A policy on livestock under which insurers agree to pay a supplement of a give percentage of compensation paid for slaughter of stock by the Department of Agriculture when slaughter is ordered to prevent the possible spread of a disease.

Method whereby pension scheme payments are made out of current income as they fall due rather than by previous funding. The state pension schemes operate in this way.

1. Rating method. The underwriter bases his price on expected loss frequency over a period of time. If a loss is forecast every five years, the risk premium, ignoring expenses and profit margins, is the limit of cover divided by five, giving a five-year pay back. When quoted as a percentage of the limit, the rate is termed ‘rate on the line, the inverse of pay back, so 20 per cent means five-year pay back. 2. Pay back to reinsurer following a major loss or losses. The renewal premium is increased for a period during which time the contract is in ‘pay back’.

Liability insurance (e.g. directors’ and officers’) indicating that the insurer will pay defence costs on behalf of the insured. Where the insurer’s promise is to ‘indemnify’, the obligation is to reimburse the insured’s outlay instead of paying ‘up front’.