Definitions

An approach to establishing the retention level in Excess of Loss Reinsurance (usually catastrophe) under which the amount of the retention is reduced for the second (or subsequent) loss occurrence. The theory is that the Ceding Company can afford to retain a given retention level on one loss, but for additional loss(es) needs protection over the lower retention.

Money returned to policyholders from an insurance company’s earnings. Considered a partial premium refund rather than a taxable distribution, reflecting the difference between the premium charged and actual losses. Many life insurance policies and some property/casualty policies pay dividends to their owners. Life insurance policies that pay dividends are called participating policies.

For an insurance company, a claim reserve liability that is the present value of all amounts that are predicted to become payable while an insured is disabled. May include the IBNR.

Method of selling insurance directly to the insured through an insurance company’s own employees, through the mail, or via the Internet. This is in lieu of using captive or exclusive agents.

An insurer’s premium income calculated before reflecting reinsurance assumed or ceded .

Contracts that derive their value from an underlying financial asset, such as publicly-traded securities and foreign currencies. Often used as a hedge against changes in value.

In insurance, reducing regulatory control over insurance rates and forms. Commercial insurance for businesses of a certain size has been deregulated in many states.

Financial institution that obtains its funds mainly through deposits from the public. Includes commercial banks, savings and loan associations, savings banks, and Credit unions.

Reserves for ceded liabilities held on the ceding company’s books, not on the reinsurer’s books.