A form on which a direct insurer sets out closing details and which he sends the broker in order that the broker may close the reinsurance with the reinsurers.

Term used on a broker’s slip when the broken has an order to place a risk but does not know whether it will be a direct insurance of a reinsurance.

A standard form for us by brokers in the placing of a reinsurance treaty.

There are two basic approaches for pricing of reinsurance contracts : exposure rating and experience rating. Both methods can be used as separate rating approaches or may be weighted together to calculate the expected loss for a contract that is then used as the basis for pricing the reinsurance.- Experience Rating (also known as Loss Rating)An approach by which the expected loss is determined based on the ceding company’s historical loss experience, actual and reconstructed (e.g., trended, developed – brought to current levels).

– Exposure Rating
An approach by which the expected loss is determined based on analysis of the exposure (e.g., limits, classes, etc) inherent in the business being covered by the contract based on industry experience for the same type of business (rather than on the actual historical loss experience of the company).

– Flat Rate
1) A fixed insurance premium rate not subject to any subsequent adjustment. 2) A reinsurance premium rate applicable to the entire premium income derived by the ceding company from the business ceded to the reinsurer as distinguished from a rate applicable to excess limits.

– Funded Cover
A type of excess of loss reinsurance agreement under which the reinsured company pays an agreed upon premium to build a fund (which is held by the insurer or reinsurer pursuant to the terms of the agreement) from which to pay covered losses. Since that fund reduces the reinsurer’s risk that losses will exceed the fund, the Reinsurer agrees to accept a reduced reinsurance margin. Any excess monies in the fund will be returned to the appropriate party pursuant to the terms of the contract. Funded covers that do not transfer sufficient insurance risk to the reinsurer must be accounted for as deposits.

– Funds Withheld
A provision in a reinsurance treaty under which the premium due the reinsurer is withheld and not paid by the ceding company to enable the ceding company to reduce its liability for unauthorized reinsurance with respect to credit for reinsurance in its statutory statement. Funds withheld may also be used to reduce the ceding company’s exposure to credit risk from a reinsurer. The reinsurer’s asset, in lieu of cash, is “funds held by or deposited with reinsured companies.”

– Prospective Rating (also known as Flat Rating)
A formula for calculation of reinsurance premium for a specified period where a fixed rate is promulgated and the premium for the current period is calculated by multiplying the fixed rate by the current period subject premium.

– Retrospective Rating (also known as Self Rating, Swing Rating, and Loss Rating)
A formula for calculation of reinsurance premium for a specified period where a provisional rate is promulgated which is adjusted (subject to minimum and maximum) based on the current period actual loss experience. Premium for the current period is then calculated by multiplying the adjusted rate by the by the current period subject premiums.

Loss Loaded Rating (also known as Expense Loaded)
A type of retrospective rate adjustment using the same period losses multiplied by a loss load and/or expense load.

Margin Plus Rating
A type of retrospective rate adjustment using the same period losses expressed as a ratio of earned premium for the same period plus a fixed margin.

– Cessions Basis (also known as Cessions Made, Cessions Schedule)
A reinsurance pricing mechanism used on casualty reinsurance contracts where a premium for each reinsured policy is ceded to Reinsurer individually based on the exposure of the policy limits to the reinsurance limits (usually based on Increased Limit Factors).

Current surplus measured to RBC. Company or regulatory action may be required at various levels.

The company that purchases reinsurance
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See: Cedent, Ceding Company, Reinsured.

The action of a ceding company taking back from a reinsurer insurance previously ceded.
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The process by which the cedant recovers the liabilities transferred to a reinsurer.

Measures a company’s dependence upon its reinsurers and the potential exposures to adjustments on such reinsurance. Its determined from the total coded reinsurance recoverable due for paid losses, unpaid losses, losses incurred by not reported (IBNR), unearned premiums and commissions less funds held from reinsurers expressed as a percent of policyholder surplus.

A provision in a reinsurance contract stating that, when the amount of reinsurance coverage provided under a contract is reduced by the payment of loss as the result of one occurrence, the reinsurance coverage amount is automatically reinstated for the next occurrence, sometimes subject to the payment of a specified reinstatement premium. Reinsurance contracts may provide for an unlimited number of reinstatements or for a specific number of reinstatements. See Reinstatement Premium.
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When the amount of reinsurance coverage provided under a treaty is reduced by the payment of a reinsurance loss as the result of one catastrophe, the reinsurance cover is automatically reinstated usually by the payment of a reinstatement premium.

A type of reinsurance that provides a ceding company all or a portion of the ceding company’s contract or program limits that were eroded under a reinstatement clause in the original reinsurance agreement. The reinstatement cover is normally a separate agreement and the term usually incepts immediately after the date of the last loss, running through the end of the original coverage period. Customarily, the reinstatement cover provides only a single limit and is not likely to include a reinstatement provision. For example, after the major windstorms of 2004 and 2005, ceding companies that sustained losses reinsured under their reinsurance contracts may have lacked sufficient reinsurance protection for the remainder of the year. In such an instance, those insurers might attempt to secure reinsurance to replace that no longer available under the original contracts.