a type of reinsurance whereby a reinsurer agrees to indemnify the cedant for all claims outstanding in a particular type or class of business, or the totality of the insurer’s business.

Transfer of loss portfolio in respect of claims on the cedant’s future business. The terms are adjustable according to the volume of business. The reinsurance recoveries follow the loss pattern of the cedant. The effect is to transfer liabilities to the balance sheet of the reinsurer in return for a premium reflecting the time value of money with the timing and investment risks being assumed by the reinsurer. The cedant replaces unknown liabilities with a known cost and this helps clean up the balance sheet especially if a merger or acquisition is involved. It is an alternative risk transfer product.

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).