Compensation scheme for private customers of financial services firms that have gone out of business. If possible, FCSC transfers UK policyholders to new insurers but otherwise compensates them for their unexpired premiums. Compensation also covers unpaid claims. Compulsory third party motor insurance and employers’ liability is compensated in full; in non-compulsory insurance (e.g. household or general) the first £2,000 is fully compensated with 90 per cent of the remainder. Under long term business, the first £2,000 is fully protected plus 90 per cent of the value of the policy in liquidation. The scheme is funded by an industry levy.

Proportional multiyear reinsurance differing from a conventional quota share. The insurer cedes an agreed percentage of unearned premium but the reinsurer’s liability is finite, i.e. capped by an aggregate amount. The reinsurance is structured to assist the cedant’s solvency position by paying a large amount of commission in the early stages and smaller amounts at the end.

general business contracts which include both underwriting risk and elements of financial insurance/reinsurance.

Similar to financial reinsurance but has more risk transfer. It is a retrospectively rated rein surance in which the reinsurer’s liability is finite, i.e. capped. The multi-year contract enables the reinsurer to smooth the cedant’s losses over time by providing funds for paying losses that are eventually restored to the reinsurer under an adjustable clause. The cedant gets credit enhancement by an improvement in key ratios. Investment income is an underwriting component. Finite products include: finite quota share; loss portfolio transfers; time and distance; adverse development cover; spread loss cover; financial quota share.
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A form of retrospectively rated reinsurance in which the reinsurer’s ultimate liability over the term of the contract is typically limited to no more than 300 percent of the premium ceded. Its primary objectives are to stabilize earnings and reduce reinsurance costs.