A form of pro rata reinsurance under which the ceding company cedes that portion of its liability on a given risk which is greater than the portion of risk the cedent retains (i.e., net line), and the premiums and losses are shared in the same proportion as the ceded amount bears to the total limit insured on each risk.
Insurance Encyclopedia
Surplus reinsurance (Reinsurance)
Automatic type of reinsurance in which the ceding company sends the insurer the fraction of each risk that exceeds their retention limit.
Surplus relief
An increase in the cedant’s surplus through financial reinsurance. Cedants are able to use the increase in surplus to write more business while retaining reasonable operating ratios, e.g., the combined ratio and the ratio of written premium to surplus.
Surplus Share
A form of proportional reinsurance where the reinsurer assumes pro-rata responsibility for only that portion of any risk which exceeds the company’s established retentions.
Surplus Share Reinsurance
See: Surplus Reinsurance, Variable Quota Share Reinsurance.
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A type of pro rata or proportional reinsurance agreement under which the insurer and reinsurer agree to share a predetermined portion of all insurance, premium, and losses. The primary insurer’s retention in a surplus share agreement is stated as a dollar amount of the amount insured.
Surplus share treaty (SST)
Proportional treaty that allocates risk, losses and premium on a variable-percentage basis between the cedant and reinsurer. The cedant’s retention is a fixed monetary amount for each policy but the percentage reduces as the policy limit increases. Where the retention, called a line, is not exceeded, 100 per cent of the risk is retained by the cedant. The treaty capacity is expressed as a multiple of the cedant’s line; a retention of £3m plus a four line treaty (£12m) means that the cedant is able to accept up £15m without recourse to further reinsurance facultatively or by a second surplus treaty. See Figure 8.
Surplus Treaty
A reinsurance treaty whereby one or more reinsurers agree to accept amounts of Reinsurance, called lines, in a certain range of values over a specified amount (line) retained by the original insurer, the losses being shared proportionately by the original insurer and the reinsurer(s).
Surplus Treaty and Quota Share Combined
The Ceding Company agrees upon a quota share of every risk subject to a limit, so that it retains a part of the quota and cedes the balance to the Reinsurers. Any surplus over and above the quota share limit is ceded as a surplus, which again is subject to an agreed limit. Thus, the two covers are combined under the treaty.
Surplus Treaty, First Surplus
The Ceding Company decides the limit of liability which it wishes to retain on any one risk or class of risk and Reinsurers only those amounts surplus over and above its own net retention. It is generally handled on a pro-rata basis.
Surrender
UK: 1. The act of terminating an existing life insurance (whole life or endowment) and receiving the current surrender value in cash. 2. A pensions term to describe allocation (the giving up of part of a pension in return for a pension payable to the member’s spouse or dependants) or commutation.
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The giving up of an insurance policy by the insured to the insurer before the insurance has run its full course.
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To terminate or cancel a life insurance policy before the maturity date. In the case of a cash value policy, the policyholder may exercise one of the non-forfeiture options at the time of surrender.