Attritional (non-cat) versus large versus cat losses 3. Also GUARANTEE ENDORSEMENT. A form of EXCESS OF LOSS REINSURANCE which, subject to a specific limit, indemnifies the CEDING COMPANY in excess of a specified RETENTION with respect to an accumulation of losses resulting from a catastrophic event or series of events arising from one occurrence. A factor applied to the anticipated losses (or loss cost) of an EXCESS OF LOSS REINSURANCE agreement in order to develop the REINSURANCE PREMIUM (or rate.) The amount of loss sustained by an insurer after deducting all applicable REINSURANCE, salvage, and subrogation recoveries. (Compare FOREIGN INSURER.). The purpose of which is not to be defeated by a strict or narrow interpretation of the language thereof. The procedure sometimes incorporated into an EXCESS OF LOSS REINSURANCE treaty to adjust the RETENTION and limit according to the value of a specified public economic index (for example: wage, price, or cost-of-living). 18th December 2020 - Author: Matt Sheehan. The insurer that CEDEs all or part of the insurance or REINSURANCE risk it has written to another insurer/REINSURER. The clause in a reinsurance contract which stipulates that in the event of inadvertent error or omission, the REINSURED shall not be prejudiced in the fulfillment of the agreement, provided that any error or omission shall be corrected as soon as discovered. Also FINITE RISK REINSURANCE, NON-TRADITIONAL REINSURANCE, FINANCIAL REINSURANCE. loss other than MAJOR LOSS. Also FACULTATIVE OBLIGATORY TREATY and SEMI-AUTOMATIC TREATY. A method of rating, usually applied to EXCESS OF LOSS REINSURANCE, under which the rate is determined based on an analysis of the exposure inherent in the business to be covered and not on the loss experience the business has demonstrated in the past. In reinsurance, the ratio of losses incurred to net earned reinsurance premiums. Also CLAIMS-MADE COVERAGE and CLAIMS-MADE INSURANCE. The total limit of liability accepted by an insurer on an individual line of business. Sometimes referred to as the “Yellow Book”. General term applied to reserves relating to insurance or reinsurance activity. Type of WORKING COVER, usually subject to an aggregate limit, designed to protect the CEDING COMPANY’s liability on an individual risk. Also AUTOMATIC FACULTATIVE BINDER, FACULTATIVE TREATY. This $198 million Q4 net loss, with a 117.3% Combined Ratio (CR), compares to the $38 million net loss and 100.7% CR reported in 2017 for the same time period. A variation of STOP LOSS REINSURANCE designed to prevent the CEDING COMPANY’s loss from exceeding a specific predetermined limit during a certain period. This is a wider application of the ordinary STOP LOSS REINSURANCE treaty in that it applies to the entire portfolio of one branch of the REINSURED’s activities. Compare OVERRIDING COMMISSION. Also PLACEMENT SLIP, PLACING SLIP. 2. GROSS ORIGINAL PREMIUM after deduction of returns of premium and premiums paid for reinsurances, recoveries which would inure to the benefit of the REINSURERs. Usually applicable to casualty lines business, the clash cover is intended to protect the CEDING COMPANY against accumulations of loss arising from multiple insureds and/or multiple lines of business for one insured involved in one loss occurrence. Reinsurance experience calculated by matching the total value of all losses incurred during a given twelve-month period (regardless of the dates of loss) with the premiums earned for the same period. 2019 saw only a small improvement in the attritional loss ratio but the major losses equated to just 7.0% in 2019, some 4.6 percentage points lower than in 2018 and 3.2 points lower than the five year average. Also CLEAN-CUT. For the same period, underlying attritional loss ratios have improved. A contract formalizing a reinsurance CESSION on a specific risk. A rubbing away or wearing down by friction. Compare COMMON ACCOUNT and COMMON ACCOUNT EXCESS CONTRACT. Compare SEVERE INFLATION CLAUSE. Also SECOND EVENT RETENTION. 1) In treaty reinsurance, a CEDENT’s RETENTION. (NET LINE plus all reinsurance ceded.). A REINSURANCE contract under which business must be ceded in accordance with contract terms and must be accepted by the REINSURER Also OBLIGATORY TREATY. Also BASE PREMIUM, PREMIUM BASE, UNDERLYING PREMIUM. Also ADMITTED REINSURANCE. Reinsurance experience calculated with all applicable premiums and losses assigned to the particular period (usually a 12-month period) in which each reinsured policy becomes effective. A key advantage of this might be simplified modelling where the … The insurer that CEDEs all or part of the insurance or REINSURANCE risk it has written to another insurer/REINSURER. Top Global Insurance & Reinsurance Brokers, Lower cats, but elevated attritional losses to hit P&C re/insurers in Q1: Analysts. Furthermore, underwriting results on an ultimate basis are equal to the sum of gross written premiums and PREMIUMS TO BE WRITTEN. A WORKING COVER which is subject to a prospective rating plan, designed to arrive at the RATE and REINSURANCE PREMIUM for a specified period by basing it in whole or in part on the loss experience of a prior period. The CEDING COMPANY’s premiums (written or earned) to which the reinsurance premium rate is applied to produce the REINSURANCE PREMIUM. Usually no credit is given in the CEDING COMPANY’s ANNUAL STATEMENT for reinsurance provided by a non-admitted reinsurer. This reinsurance is often multi-year and financially oriented, and can provide a means of financial management beyond that usually provided by traditional reinsurance. Amount of REINSURANCE required after having declared the maximum LINE on a treaty or cover. The contract merely reflects how individual FACULTATIVE REINSURANCE shall be handled Also AUTOMATIC FACULTATIVE BINDER, AUTOMATIC FACULTATIVE TREATY. Also MORTGAGE GUARANTOR ENDORSEMENT. A reinsurance contract under which the CEDING COMPANY has the option to CEDE and the REINSURER has the option to accept or decline classified risks of a specific business line. A clause used in an EXCESS OF LOSS REINSURANCE treaty contract and designed to maintain the monetary value of the RETENTION or/and the indemnity of the treaty as at an agreed base date by using a specified index figure. Within these totals, attritional loss ratios have improved," he said. Change ). Any form of insurance under which the trigger of coverage is the presentation or making of a claim against the insured rather than the date on which the loss occurred. An ENDORSEMENT added to an insurance policy covering the policyholder’s mortgaged property to provide that, in the event of the insolvency of the insurance company, the REINSURER shall pay directly to the mortgage guarantor and/or the policyholder the amount of loss which would have been recovered from the reinsurer by the insurance company. This factor provides for the REINSURER ‘s LOSS ADJUSTMENT EXPENSE, overhead expense, and profit margin. The theory is that the CEDING COMPANY can afford to retain a given retention level on one loss, but for additional loss or losses needs protection over the lower RETENTION. Although more common where the ceding company or reinsurer has concerns about the other party’s financial condition, commutation agreements can be used whenever the parties wish to settle and discharge all future obligations. 2) In SURPLUS REINSURANCE, the divisions of a treaty that, as a whole, describe the capacity of that treaty. Compare COMMON ACCOUNT EXCESS CONTRACT and COMMON ACCOUNT PROTECTION. All expenses directly related to acquiring insurance or reinsurance accounts, i.e., commissions paid to agents, brokerage fees paid to brokers, and expenses associated with marketing, underwriting, contract issuance and premium collection. In American ceding companies, a REINSURER is “admitted” when it has been licensed or recognized by an insurance authority or statutory body of a state or country and, as such, must submit itself to or conform to statutory regulations. REINSURANCE for which no credit is given in the CEDING COMPANY’s ANNUAL STATEMENT because the REINSURER is not licensed or authorized to transact business in the jurisdiction in question. Excluding the catastrophe and Covid-19 Pandemic (“Pandemic”) losses, the Company reported an attritional combined ratio of 85.8%, as compared to 87.1% in the same period during 2019. Also LOSS RATING, MERIT RATING. This ratio is calculated by dividing INCURRED LOSSES by the earned premium. In many contracts this clause replaced the TARGET RISK CLAUSE. The specific agreement by the REINSURER to include under a reinsurance contract a risk not included within the terms of the contract. Excess of loss reinsurance A form of reinsurance in which, in return for a premium, the reinsurer accepts liability for claims settled by the original insurer in excess of an agreed amount, generally subject to an upper limit. Also SETOFF. Reinsurance facility used by insurance companies for certain types of undesirable insurance business. As the name implies, CALENDAR YEAR EXPERIENCE is usually calculated for a twelve-month period beginning January 1st. A claims-made policy can provide for varying limitations as to the length of time prior to the policy period during which the loss event could have occurred (the “retroactive period”) or the length of time after the policy has terminated during which the claim must be presented (the “tail” or “extended reporting period”). A report provided periodically by a REINSURED detailing the reinsurance premiums and/or reinsurance losses with respect to specific risks ceded under the reinsurance agreement. The guarantee endorsement is similar in concept to the CUT-THROUGH ENDORSEMENT. Compare POLICIES ATTACHING BASIS. A method of rating, usually applying to EXCESS OF LOSS REINSURANCE, under which the rate is determined based on the ceding insurer’s historical loss experience, actual or reconstructed, rather than on the exposure inherent in the business. A schedule showing the limits of liability to be written by a CEDING COMPANY for different classes of risk and (usually) also showing the lines which can be ceded to PROPORTIONAL REINSURANCE treaties. A statutory accounting procedure permitting a CEDING COMPANY to treat amounts due from REINSURERs as assets or reductions from liability based on the status of the REINSURER. For high-quality copies or electronic reprints for distribution to colleagues or customers, please call UK support +44 (0)20 3377 3996 / … An association of the chief insurance regulatory officials of the 50 states, the District of Columbia, American Samoa, Guam, Puerto Rico and the Virgin Islands. A form of reinsurance contract for accepting new business which does not terminate automatically but rather is intended to continue from year to year unless 1) one of the parties delivers notice of intent to discontinue or 2) termination is mutually agreed upon in accordance with the termination provisions of the contract. A form of PRO RATA REINSURANCE under which the CEDING COMPANY CEDES that portion of its liability on a given risk which is greater than its NET LINE. Also OFFSET. The expense incurred by the CEDING INSURER in the defense and settlement of claims under its policies but not the insurer’s overhead expenses. A term used in marine reinsurance synonymous with SURPLUS REINSURANCE and SURPLUS SHARE REINSURANCE used in non-marine reinsurance. Also ANNUAL STATEMENT, CONVENTION BLANK. The term attritional loss ratio is defined as the ratio of ATTRITIONAL LOSSes to net earned premiums where the term attritional losses is taken to mean losses other than MAJOR LOSSES. A clause in a reinsurance contract which provides for the carry-forward of debit or loss under a treaty from one accounting period to another. Total loss only reinsurance clause in hull reinsurance under which claims are payable only in respect of total, compromised, or constructive total loss. Compare AGGREGATE EXCESS OF LOSS REINSURANCE. The endorsement may provide that the reinsurer will pay the full loss amount in accordance with the insurance protection afforded by the insurance company. The intermediary generally represents the ceding company and receives a commission, almost always from the reinsurer(s), for placing the business and performing other necessary services. Want to read this article? At the time of the settlement, the proportion recoverable from the REINSURER is then collected and the amount set up in the reserve for that particular claim is released to the reinsurer’s credit. The reinsurer’s asset, in lieu of cash, is “Funds held by or deposited with reinsured companies.”. In PricewaterhouseCoopers1 (PwC) biennial 2006 Bermuda Compare GUARANTEE ENDORSEMENT. ( Log Out /  Also EXPERIENCE RATING, LOSS RATING. Also INTERMEDIARY. An agreement between the CEDING COMPANY and the REINSURER that provides for the valuation, payment and complete discharge of all obligations between the parties under a particular reinsurance contract or contracts. The loss reserve value established by insurance and reinsurance companies in recognition of their liability for future payments on losses which have occurred but which have not yet been reported to them. An approach to establishing the retention level in EXCESS OF LOSS REINSURANCE (usually CATASTROPHE REINSURANCE) under which the amount of the RETENTION is reduced for the second (or subsequent) loss occurrence. Also MANDATORY COMMUTATION CLAUSE. Attritional (non-cat) versus cat loss ratio 2. The clause is most often found in workers’ compensation reinsurance contracts where future payments are of a continuous and generally known value. The amount of premium (usually for an EXCESS OF LOSS REINSURANCE contract) that the CEDING COMPANY pays to the REINSURER on a periodic basis during the term of the contract. 2. A fixed rate premium not subject to any subsequent adjustment. Technical reserves chiefly comprise CLAIMS RESERVES, reserves for claims expenses, IBNR reserves, the reserve for liquidity risk, equalization reserves and, where applicable, FUTURE POLICY BENEFITS AND OTHER POLICY LIABILITIES. Compare BINDER. One of the oldest forms of PROPORTIONAL REINSURANCE treaty under which the PRIMARY INSURER cedes all amounts in excess of the agreed RETENTION to the REINSURER, who accepts them up to the limit of the reinsurance any one LINE. A term referring to reinsurance losses subject to the contract under consideration before the application of any RETENTION, but after reduction because of any other reinsurance which inures to the benefit of the coverage being considered. A form of REINSURANCE TREATY required by companies engaged in business requiring large policies, providing for the lines which are too large to be embraced in a FIRST SURPLUS TREATY. 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