Definitions

A contract covering an amount of excess reinsurance in which loss frequency is anticipated.

A term that, when used in reinsurance agreements, refers to damages awarded by a court against an insurer in favor of the insured, due to the insurer’s having failed to settle a third party claim against the insured within the policy limits by reason of bad faith, fraud, or gross negligence. See Extra Contractual Obligations and Punitive Damages.

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.

Percentage of each premium dollar an insurer spends on claims. Proportionate relationship of incurred losses to earned premiums expressed as a percentage. Incurred losses (including applicable IBNR) divided by the earned premium for an accounting or treaty period. Loss ratios can be calculated on an accident Year, calendar Year, or underwriting Year basis. Target amount of ultimate claims … Read more

The amount of the outstanding losses at a particular date. Occasionally a treaty might provide for the loss portfolio to be withdrawn at termination of the treaty. In such event the reinsurer will pay the reinsured a negotiated percentage (generally in the range from 90% to 110%) of the outstanding losses to the treaty at … Read more

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. Both loss rating and exposure rating can be used as different rating approaches by the reinsurance underwriter to calculate … Read more

A provision in homeowners and renters insurance policies that reimburses policyholders for any extra living expenses due to having to live elsewhere while their home is being restored following a disaster.

A factor is applied to the anticipated losses (or loss cost) for an Excess of Loss Reinsurance agreement in order to develop the reinsurance premium (or rate.) This factor provides for the reinsurer’s loss adjustment expense, overhead expense, and profit margin.

The total losses to the Ceding Company or to the reinsurer resulting from a single cause such as a windstorm. Any trigger for a recovery under an insurance or reinsurance agreement. Examples include occurrence, claims made, death or disability.

The difference between the original loss as originally reported to the reinsurer and its subsequent evaluation at a later date or at the time of its final disposal. A serious problem to reinsurers who, being involved in the more serious cases, must frequently wait many Years for the final disposition of a loss.