REINSURANCE: A plan or method which permits adjustment of the final reinsurance ceding commission or premium on the basis of the actual loss experience under the subject reinsurance treaty – subject to minimum and maximum limits
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A rating arrangement in which the final premium for insurance coverage is not determined until all claims are closed. The final premium is determined by the insured’s actual loss experience during the policy period. Such adjustments include additional premiums, experience refunds, and for multiple year contracts, early termination penalties, or changes to coverage in subsequent years.
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UK: A system when the rate to be charged for the (re)insurance is determined at the expiry of the policy taking account of the experience during the policy period subject to a maximum and minimum premium.
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A type of plan sometimes used when the insured is a large entity. Under this type of plan, the final premium of a policy is not calculated until close to the end of the coverage period. The final premium is calculated, within a certain maximum and minimum, based on the insured’s actual loss experience for the period that just passed.