The reinsured’s premiums (written or earned, depending on the contract) to which the reinsurance premium rate is applied to produce the reinsurance premium in non-proportional contracts. The term is also called subject premium, premium base or underlying premium.
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An insurance company’s premium upon which the reinsurance premium is based.

The value of property at the inception of a valuation-linked insurance.
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In a valuation linked property insurance the value at the outset of a period of insurance is termed the base value.

The given value, e.g. 18 degrees C (i.e. the reference temperature), from which a deviation is measured in a weather derivative. See COOLING DEGREE DAYS; HEATING DEGREE DAYS.

Flat rate state pension unrelated to earnings. It is unfunded; current taxpayers pay for the retirement income of an earlier generation. Membership is compulsory for all employed and self-employed with earnings above the lower earnings limit. Pension entitlement is built up through national insurance contributions. The state pension age for women is 60 (progressively increasing to 65 between 2010 and 2020) and 65 for men. BSP is increased annually for married couples and single persons in line with prices.

The price differential between a financial position held and the benchmark instrument used to hedge or price that position. The basis may reflect different time periods, product forms, qualities or locations. See BASIS RISK.

A clause at the foot of a proposal form making the proposal form and declaration the whole basis of the contract. It converts representations into warranties so that any inaccuracy in the form will entitle the insurer to avoid the contract regardless of materiality. The insured’s answers may be subject to his ‘best knowledge and belief.

A clause in an open cover which sets out a basis for the valuation of cargo which has been declared and added to the policy and is the subject of a loss.

The risk that actual losses exceed the payout as measured by the hedge instrument benchmarking the risk. For example, a weather derivative payout based on movements in an index recorded at London Heathrow may fall short because of adverse deviations occurring in the real location. Under indemnity contracts there is no basis risk as payments are based on actual losses.

Two or more reference stations that are used in determining the specific of a transaction as in a weather derivative.