UK: a reinsurance premium paid by the members of a closing syndicate, usually to the members of the same numbered syndicate for the following year of account, 36 months after the start of the year of account, to enable the profit or loss of the year of account to be reported; the amount of the premium covers all liabilities arising from the year of account including outstanding claims, IBNR and claims handing expenses.
***
A reinsurance which closes a year of account by transferring the responsibility for discharging all the liabilities that attach to that year of account (and any year of account closed into that year) plus the right to any income due to the closing year of account into an open year of account of the same or a different syndicate in return for a premium. Where a reinsurance to close is effected between members of the same syndicate the reserves of the closing year of account constitute the premium for a reinsurance to close. This premium must be equitable as between the members of the two years of account concerned which means that neither the reinsured nor the reinsuring members should expect to profit from the transaction at the time it is concluded. Where a reinsurance to close is effected between members of different syndicates the managing agent of the reinsuring members will want to make a profit from the transaction for those members and will set the reinsurance to close premium accordingly. This usually involves a loading on the reserves of the closing year of account.
***
REINSURANCE: The reinsurance premium, under the Lloyd’s system of three year accounting, payable to the following open syndicate year, to cover all outstanding claims liabilities closing the year of account. This reinsurance may also be provided by another syndicate or arrangement as with Equitas accepting the 1992 and prior liabilities of Lloyd’s syndicates in 1996.