An endorsement to a reinsurance agreement that requires that, in the event of the cedant’s insolvency, any loss covered under the reinsurance agreement be paid by the reinsurer directly to the insured (or a third party beneficiary). Also called assumption endorsement or assumption of liability endorsement (ALE).
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Cut-Off Clause
The termination provision of a reinsurance contract stipulating that the reinsurer shall not be liable for loss as a result of occurrences taking place after the date of termination. The remaining unearned premiums are returned to the ceding company.
Cut-off/run-off cancellation
When a continuous contract is terminated under the cancelling clause, the existing risks under the treaty may run-off or simply become cut-off. Run-off means that the reinsurer’s liability under policies current at the cancellation date continues until each policy expires. Cut-off means that the reinsurer will not be liable for losses occurring on or after termination. The insurer usually returns the unearned premium portfolio unless the treaty is written on an earned premium basis. See CLEAN CUT BASIS.
Cut-Through Clause
The clause provides that in the event of the reinsured’s insolvency any part of a loss covered by reinsurance be paid directly to the original insured by the reinsurer. This is an exception to the legality of privity of contract.
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UK: A reinsurance clause providing that, in the event of insolvency of the cedant, the reinsurer will be liable to the insured for his share of the loss and not to the cedant’s liquidator.
Cut-Through Endorsement
REINSURANCE: An endorsement to an insurance policy or reinsurance contract which provides that, in the event of the insolvency of the insurance company, the amount of any loss which would have been recovered from the reinsurer by the insurance company (or its statutory receiver) will be paid instead directly to the policyholder, claimant, or other payee, as specified in the endorsement, by the reinsurer. The term is distinguished from an assumption. See Assumption of Liability Endorsement.
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REINSURANCE: Guarantee of coverage by a Reinsurer to a third party who is not a party to the Reinsurance contract
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This is also known as an “assumption endorsement.” Basically, it is an endorsement to a reinsurance contract that states that if the ceding company becomes insolvent, the reinsurer will pay any covered loss directly to the insured. The endorsement provides an extra layer of security if the company that issues the policy to the insured is not admitted in the state (and, thus, does not come under the state’s guaranty fund) or is financially weak and the reinsurer is financially more secure. (See Guaranty Fund; Reinsurance).
Cutback
Reduction in the amount or type of insurance for an individual who attains a certain age (i.e., 65 or 70) or condition (i.e., retirement).
Cutting Clause
Warranted that the damaged portion should be cut of and the balance being considered as sound and liability of the insurer shall be only for the length of portion which has been lost by being broken off or cut off. In addition the insurer shall also pay the cost of cutting. This is used in policies covering pipes, cables, sheets or tiles or similar items of length i.e., the cargo which come in different lengths, diameters and dimensions and where a portion of it is damaged, the rest can be used in many cases after cutting off the damaged portion. The object is to limit underwriter’s liability to the insured value of the damaged part cut off and the cost of cutting.
CY
Abbreviation for calendar year.
Cyber and privacy insurance
A type of insurance designed to cover consumers of technology services or products. More specifically, the policies are intended to cover a variety of both liability and property losses that may result when a business engages in various electronic activities, such as selling on the Internet or collecting data within its internal electronic network. Most notably, but not exclusively, cyber and privacy policies cover a business’ liability for a data breach in which the firm’s customers’ personal information, such as Social Security or credit card numbers, is exposed or stolen by a hacker or other criminal who has gained access to the firm’s electronic network. The policies cover a variety of expenses associated with data breaches, including notification costs, credit monitoring, costs to defend claims by state regulators, fines and penalties, and loss resulting from identity theft. In addition, the policies cover liability arising from website media content, as well as property exposures from (a) business interruption, (b) data loss/destruction, (c) computer fraud, (d) funds transfer loss, and (e) cyber extortion. Cyber and privacy insurance is often confused with technology errors and omissions (tech E&
Cyber-liability insurance
Insurance that covers losses due to network security breaches, media liability—for example, advertising injury resulting from online activities, privacy liability, and errors and omissions in the performance of the insured’s services.