UK: A commission based upon a pre-defined formula intended as an incentive and reward. Examples are: (a) the commission received by an underwriting agent from the syndicate members at Lloyds as a reward for profits; (b) the commission received by a cedant from a reinsurer as a reward for the ceding of profitable business.
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REINSURANCE: A commission feature whereby the cedent is allowed a commission based on the profitability of the reinsurance contract after an allowance for the reinsurer’s expense and profit margin.
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A provision found in some reinsurance agreements that provides for profit sharing. Parties agree to a formula for calculating profit, an allowance for the reinsurer’s expenses, and the cedant’s share of such profit after expenses. See Adjustable Features, Risk Charge, and Experience Refund.
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UK: at Lloyd’s, remuneration received by an underwriting agent based on the results of a year’s underwriting (but see also contingent commission).
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REINSURANCE: Commission paid by a reinsurer to a ceding office under a proportional reinsurance treaty that is dependent upon the profitability of the total business ceded during each accounting period. Also used, in other arrangements, as any commission contingent on the claims experience.