Transfer of incurred losses (loss portfolio) from an insurer to a reinsurer who receives a premium based on the net present value of losses, loaded for profit, expenses and timing. The reinsurer invests the premium over the time taken to settle the claims. Transfers allow an insurer to improve financial ratios or exit a line business. It is a finite risk solution. See LOSS PORTFOLIO ENTRY.

At the end of a reinsurance period, or at the cancellation of a reinsurance contract, the reinsurer can be relieved of responsibility for claims outstanding at that time by paying the cedant a proportion (e.g. 90 per cent) of the outstanding claims.

1. An amount set aside to provide for outstanding claims, reported and not reported. 2. A reserve deposited by a reinsurer with the reinsured to cover outstanding claims. It is often done by way of irrevocable letter of credit in connection with US treaties and contracts.
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The company’s best estimate of what it will pay for claims, which is periodically readjusted. They represent a liability on the insurer’s balance sheet.

Requires the ceding company to retain a proportion of the loss to the reinsurers once an agreed loss ratio has been exceeded.

a basis that applies to most liability insurance, in which the trigger for liability is a loss occurring in the policy period, regardless of the time of negligence or the date of claim (contrast claims made).

Covers losses occurring during the period of the treaty regardless of the date of the claim. The reinsurer’s liability is triggered by an occurrence within the treaty period even though the underlying policy may have been incepted before the treaty commenced as in long-tail claims. Compare with claims-made reinsurance and risks attaching.