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C-Share Variable Annuities

A form of variable Annuity contract where the contract holder pays no sales up front or surrender charges. Owners can claim full liquidity at any time.

Calendar Year of Experience

Underwriting results allocated back to a given calendar Year accounting period where the losses occurred. The results are allocated back to the time frame when loss occurred regardless of when the losses are actually reported, booked, or paid. Compare with Accident Year of Experience and Underwriting Year of Experience.


(a) Run-off basis means that the liability of the reinsurer under policies, which became effective under the treaty prior to the cancellation date of such treaty, shall continue until the expiration date of each policy; (b) Cut-off basis means that the liability of the reinsurer under policies, which became effective under the treaty prior to the cancellation date of such treaty, shall cease with respect to losses resulting from accidents taking place on and after said cancellation date. Usually the reinsurer will return to the company the unearned premium portfolio, unless the treaty is written on an earned premium basis.


  1. The supply of insurance available to meet demand. Capacity depends on the industry’s financial ability to accept risk. For an individual insurer, the maximum amount of risk it can underwrite based on its financial condition. The adequacy of an insurer’s capital relative to its exposure to loss is an important measure of solvency. A property/casualty insurer must maintain a certain level of capital and policyholder surplus to underwrite risks. This capital is known as Capacity. When the industry is hit by high losses, such as after the World Trade Center terrorist attack, Capacity is diminished. It can be restored by increases in net income, favorable investment returns, reinsuring more risk and or raising additional capital. When there is excess Capacity, usually because of a high return on investments, premiums tend to decline as insurers compete for market share. As premiums decline, underwriting losses are likely to grow, reducing Capacity and causing insurers to raise rates and tighten conditions and limits in an effort to increase profitability. Policyholder surplus is sometimes used as a measure of Capacity.
  2. The percentage of surplus or the dollar amount of exposure that an insurer or reinsurer is willing to place at risk. Capacity may apply to a single risk, a program, a line of business, or an entire book of business.


  1. Shareholder’s equity (for publicly-traded insurance companies) and retained earnings (for mutual insurance companies). There is no general measure of capital adequacy for property/casualty insurers. Capital adequacy is linked to the riskiness of an insurer’s business. A company underwriting medical device manufacturers needs a larger cushion of capital than a company writing Main Street business, for example. (See Risk-based capital; Surplus; Solvency)
  2. Amount of invested Capital on a company's regulatory balance sheet.  May use estimated amounts for composite companies.

Capital Markets

The markets in which equities and debt are traded. (See Securitization of insurance risk)


Company formed to insure the risk of its parent corporation. A captive may be formed for a variety of reasons, including tax benefits, improved investment returns, or the lack of other insurance Alternatives.

Captive Agent

A person who represents only one insurance company and is restricted by agreement from submitting business to any other company, unless it is first rejected by the agent’s captive company. (See Exclusive agent)


Insurers that are created and wholly-owned by one or more non-insurers, to provide owners with coverage. A form of self-insurance.

Car Year

Equal to 365 days of insured coverage for a single vehicle. It is the standard measurement for automobile insurance.

Carry Over Provisions

A method by which gains or losses from the current period may be applied to results of a previous period (loss carry back) or a future period (loss carry forward).

Case Management

A system of coordinating medical services to treat a patient, improve care, and reduce cost. A case manager coordinates health care delivery for patients.

Case Reserve

Also known as outstanding loss reserve or pending reserve. These are estimates of outstanding, unpaid liabilities associated with specific reported claims. These reserves may include loss adjustment expenses as well. Case Reserves are established by a Ceding Company; however, if the reinsurer believes a Case Reserve is inadequate, it may establish an additional amount known as an additional Case Reserve.

Cat Cover

See Catastrophe.


Term used for statistical recording purposes to refer to a single incident or a series of closely related incidents causing severe insured property losses totaling more than a given amount, currently $25 million.


A form of nonproportional reinsurance that provides coverage for losses resulting from an accident or natural disaster involving more than one insured. These losses typically must exceed a specified amount and number of insureds and/or locations. Sometimes called Cat Cover.

Catastrophe Bonds

Risk-based securities that pay high interest rates and provide insurance companies with a form of reinsurance to pay losses from a catastrophe such as those caused by a major hurricane. They allow insurance risk to be sold to institutional investors in the form of bonds, thus spreading the risk. (See Securitization of insurance risk)

Catastrophe Deductible

A percentage or dollar amount that a homeowner must pay before the insurance policy kicks in when a major natural disaster occurs. These large deductibles limit an insurer’s potential losses in such cases, allowing it to insure more property. A property insurer may not be able to buy reinsurance to protect its own bottom line unless it keeps its potential maximum losses under a certain level.

Catastrophe Factor

Probability of catastrophic loss, based on the total number of catastrophes in a state over a 40-Year period.

Catastrophe Model

Using computers, a method to mesh long-term disaster information with current demographic, building and other data to determine the potential cost of natural disasters and other catastrophic losses for a given geographic area.

Catastrophe Reinsurance

  1. Reinsurance (insurance for insurers) for catastrophic losses. The insurance industry is able to absorb the multibillion dollar losses caused by natural and man-made disasters such as hurricanes, earthquakes and terrorist attacks because losses are spread among thousands of companies including catastrophe reinsurers who operate on a global basis. Insurers’ ability and willingness to sell insurance fluctuates with the availability and cost of catastrophe reinsurance.

    After major disasters, such as Hurricane Andrew and the World Trade Center terrorist attack, the availability of catastrophe reinsurance becomes extremely limited. Claims deplete reinsurers’ capital and, as a result, companies are more selective in the type and amount of risks they assume. In addition, with available supply limited, prices for reinsurance rise. This contributes to an overall increase in prices for property insurance.

  2. A form of reinsurance that indemnifies the Ceding Company for the accumulation of losses in excess of a stipulated sum arising from a catastrophic event such as conflagration, earthquake or windstorm. Catastrophe loss generally refers to the total loss of an insurance company arising out of a single catastrophic event.


See Ceding Company


When a company reinsures its liability with another, it “cedes” business.


Alternative spelling of Cedant. see Ceding Company.

Ceding Commission

The cedant’s acquisition costs and overhead expenses, taxes, licenses and fees, plus a fee representing a share of expected profits - sometimes expressed as a percentage of the gross reinsurance premium.

Ceding Company

  1. The original or primary insurer; the insurance company which purchases reinsurance.
  2. The company that transfers its risk to a reinsurer. Also called the Cedant.

Cell Phone Insurance

Separate insurance provided to cover cell phones for damage or theft. Policies are often sold with the cell phones themselves.


  1. The individual risk being reinsured.
  2. The amount of insurance risk transferred to the reinsurer by the Ceding Company.

Channel conflict

Channel conflict can occur when a business attempts to sell the same product or service to its customer base through conflicting distribution channels. An example of channel conflict may be the traditional use of agents rather than a proposed channel of internet distribution. The existing channel - the agents - may feel threatened. The conflict is not a legal or regulatory issue but possibly an in-house, morale buster. In serious cases it can affect the bottom line when traditional distribution channels feel threatened enough to take action against the new distribution means.

Charge Back

The portion of the Ceding Commission which is returned in the event of an early lapse.

Chartered Financial Consultant / ChFC

A professional designation given by The American College to financial services professionals who complete courses in financial planning.

Chartered Life Underwriter / CLU

A professional designation by The American College for those who pass business examinations on insurance, investments, and taxation, and have life insurance planning experience.

Chartered Property/Casualty Underwriter / CPCU

A professional designation given by the American Institute for Property and Liability Underwriters. National examinations and three Years of work experience are required.

Claim Reserve

The present values of know claims as of the valuation date. From period to period, this amount will be increased by incurred claims and interest, and decreased by claim payments. See Case Reserve.

Claims-Made Basis

A form of reinsurance under which the date of the claim report is deemed to be the date of the loss event. Claims reported during the term of the reinsurance agreement are therefore covered, regardless of when they occurred. A claims made agreement is said to “cut off the tail” on liability business by not covering claims reported after the term of the reinsurance agreement - unless extended by special agreement. See Occurrence Basis.

Claims-Made Coverage

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. 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") and the length of time after the policy has terminated during which the claim must be presented (the "tail" or "extended reporting period").

Claims-Made Policy

A form of insurance that pays claims presented to the insurer during the term of the policy or within a specific term after its expiration. It limits liability insurers’ exposure to unknown future liabilities. (See Occurrence policy)

Claim In Course of Settlement Reserve

ICOS is the estimated benefits for claims in some form of settlement process, e.g., litigation, disability settlement, or other benefit determination.

Claims In Course Of Payment (CICOP)

CICOP is the present value of claims that are known and ready for payment.

Clash Cover (or Contingency Cover)

Reinsurance covering a Ceding Company's exposure to a larger single loss than intended in the same loss occurrence. A clash cover absorbs the Ceding Company's loss due to unknown accumulations which exceed the Ceding Company's retention. Sometimes referred to as Unknown Accumulation Cover.

Clean Cut Portfolio

The practice of transferring premium and loss portfolios from one year to another. See Premium Portfolio and Loss Portfolio.


Short for Consolidated Omnibus Budget Reconciliation Act. A federal law under which group health plans sponsored by employers with 20 or more employees must offer continuation of coverage to employees who leave their jobs and their dependents. The employee must pay the entire premium. Coverage can be extended up to 18 months. Surviving dependents can receive longer coverage.


  1. In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20 percent health insurance coinsurance Clause, the policyholder pays for the deductible plus 20 percent of his covered losses. After paying 80 percent of losses up to a specified ceiling, the insurer starts paying 100 percent of losses.
  2. A method of reinsurance under which the assuming company receives a proportionate share of all of the risks and cash flows of the policy. (One typical exception may be the policy fee, which remains with the Ceding Company.) The reinsurer receives its share of the premiums and benefits, and sets up its share of the reserves. Typically, the reinsurer pays an allowance to the Ceding Company to represent the reinsurer's share of the acquisition and maintenance expenses.

Coinsurance With Funds Withheld

See Funds Withheld.


Property that is offered to secure a loan or other Credit and that becomes subject to seizure on default. (Also called security.)

Collateral Source Rule

Bars the introduction of information that indicates a person has been compensated or reimbursed by a source other than the defendant in civil actions related to negligence or other liability.

Collision Coverage

Portion of an auto insurance policy that covers the damage to the policyholder’s car from a collision.

Combination Plan Reinsurance

A reinsurance agreement which combines the excess of loss and the Quota Share forms of coverage within one contract, with the reinsurance premium established as a fixed percentage of the Ceding Company's Subject Premium. After deducting the excess recovery on any one loss for one risk, the reinsurer indemnifies the Ceding Company based on a fixed Quota Share percentage. If a loss does not exceed the excess of loss retention level, only the Quota Share coverage applies.

Combined Ratio

  1. Percentage of each premium dollar a property/casualty insurer spends on claims and expenses. A decrease in the Combined Ratio means financial results are improving; an increase means they are deteriorating.
  2. A sum of two ratios, one calculated by dividing incurred losses plus loss adjustment expenses by earned premiums, and the other calculated by dividing all other expenses by written premiums. When applied to a company's overall results, the Combined Ratio is also known as the composite, statutory, or trade ratio. In both insurance and reinsurance, a Combined Ratio below 100% indicates an underwriting profit.

Commercial General Liability Insurance / CGL

A broad commercial policy that covers all liability exposures of a business that are not specifically excluded. Coverage includes product liability, completed operations, premises and operations, and independent contractors.

Commercial Lines

Products designed for and bought by businesses. Among the major coverages are boiler and machinery, business interruption, commercial auto, comprehensive general liability, directors and officers liability, fire and allied lines, inland marine, medical malpractice liability, product liability, Professional Liability, surety and fidelity, and Workers Compensation. Most of these commercial coverages can be purchased separately except business interruption which must be added to a Fire Insurance (property) policy. (See Commercial Multiple Peril policy)

Commercial Multiple Peril Policy

Package policy that includes property, boiler and machinery, crime, and general liability coverages.

Commercial Paper

Short-term, unsecured, and usually discounted promissory note issued by commercial firms and financial companies often to finance current business. Commercial paper, which is rated by debt rating agencies, is sold through dealers or directly placed with an investor.


  1. Fee paid to an agent or insurance salesperson as a percentage of the policy premium. The percentage varies widely depending on coverage, the insurer, and the marketing methods.
  2. In reinsurance, the primary insurance company usually pays the reinsurer its proportion of the gross premium it receives on a risk. The reinsurer then allows the company a ceding or direct commission allowance on such gross premium received, large enough to reimburse the company for the commission paid to its agents, plus taxes and its overhead. The amount of such allowance frequently determines profit or loss to the reinsurer.

Community Rating Laws

Enacted in several states on health insurance policies. Insurers are required to accept all applicants for coverage and charge all applicants the same premium for the same coverage regardless of age or health. Premiums are based on the rate determined by the geographic region’s health and demographic profile.


The termination of all obligations between the parties to a reinsurance agreement, accompanied by a final cash settlement. Commutation may be required by the reinsurance agreement or may be effected by mutual agreement

Commutation Agreement

An agreement between the ceding insurer and the reinsurer that provides for the valuation, payment and complete discharge of all obligations between the parties under particular reinsurance contract(s). Although more common where the ceding insurer 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.

Commutation Clause

A Clause in a reinsurance agreement, which provides for estimation, payment and complete discharge of all future obligations for reinsurance losses incurred regardless of the continuing nature of certain losses such as unlimited medical and lifetime benefits for Workers’ Compensation.


See Partially Modified Coinsurance.

Competitive Replacement Parts

See Crash parts; Generic auto parts

Competitive State Fund

A facility established by a state to sell Workers Compensation in competition with private insurers.

Compliant Ratio

A measure used by some state insurance departments to track consumer complaints against insurance companies. Generally, it is written as the number of complaints upheld against an insurance company, as a percentage of premiums written. In some states, complaints from medical providers over the promptness of payments may also be included.

Completed Opertaions Coverage

Pays for bodily injury or property damage caused by a completed project or job. Protects a business that sells a service against liability claims.

Composite Ratio

See Combined Ratio.

Comprehensive Coverage

Portion of an auto insurance policy that covers damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.

Compulsory Auto Insurance

The minimum amount of auto liability insurance that meets a state law. Financial responsibility laws in every state require all automobile drivers to show proof, after an accident, of their ability to pay damages up to the state minimum. In compulsory liability states this proof, which is usually in the form of an insurance policy, is required before you can legally drive a car.

Conditional Automatic

A reinsurance arrangement where the reinsurer underwrites all cessions. Conditional automatic reinsurance is generally used only if the Ceding Company does not have underwriters or MIB membership.

Conditional Receipt

A receipt given to create an insurance contract on a temporary basis while the insurer underwrites the application. If the company rejects the application per its normal underwriting rules the temporary contract is null and void.

Conditional Receipt Reinsurance

Coverage provided by the reinsurer for the Ceding Company's liability under a conditional receipt. A reinsurance treaty should contain a provision specifically describing the parties' intent regarding this coverage as it has been a frequent source of misunderstanding.

Constructive Total Loss

In marine Insurance a Constructive Total Loss occurs where the subject matter of Insurance is reasonably abandoned by the Insured on Account of its Actual Total Loss appearing unavoidable because it could not be preserved from Actual Total Loss without expenditure that would exceed its value after the expense had been incurred.

Contingency Cover

see Clash Cover

Contingent Commissions (or Profit Commission)

An allowance payable to the Ceding Company in addition to the normal Ceding Commission allowance. It is a pre-determined percentage of the reinsurer’s net profits after a charge for the reinsurer’s overhead, derived from the subject treaty.

Contingent Liability

Liability of individuals, corporations, or partnerships for accidents caused by people other than employees for whose acts or omissions the corporations or partnerships are responsible.


Inforce coverage whose provisions have been significantly modified without evidence of insurability. These modifications may include internal replacements, policy exchanges, term conversions, re-entries, and contractually permitted increases. Reinsurance on these policies stays with the original reinsurer unless otherwise agreed.

Continuous Contract

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 one of the parties delivers notice of intent to discontinue or termination is mutually agreed to in accordance with the termination provisions of the contract.

Contributing Excess

Where there is more than one reinsurer sharing a line of insurance on a risk in excess of a specified retention, each such reinsurer shall contribute towards any excess loss in proportion to his original participation in such risk. Example: Retention $100,000, Reinsurer A accepts one-half contributing share part of $1,000,000 in excess of said $100,000. Reinsurer B accepts remaining one-half contribution share part of $1,000,000.


An amount over the expected claim amount that losses must exceed before losses are payable by the reinsurer. Typically used with Stop Loss reinsurance. See Stop Loss.

Cover Note

Confirmation to the Ceding Company of terms and conditions and percentage placed with each reinsurer. See Slip.


Synonym for insurance.

Coverage unit

The terms, conditions, definitions and exclusions as stated in each attachment for each coverage the insured(s) selects and listed in the declarations, including endorsements. Each coverage unit is a separate and distinct coverage. Coverage units include Lawyers Professional Liability (LPL), Title Insurance Agency (TIA), Employment Practices Liability (EPL), Employee Dishonesty (EDC), Nonprofit Directors & Officers (NPD&O) and Public Official (PO) coverage units.

Crash Parts

Sheet metal parts that are most often damaged in a car crash. (See Generic auto parts)


The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.

Credit Derivatives

A contract that enables a user, such as a bank, to better manage its Credit risk. A way of transferring Credit risk to another party.

Credit Enhancement

A technique to lower the interest payments on a bond by raising the issue’s Credit rating, often through insurance in the form of a financial guarantee or with standby letters of Credit issued by a bank.

Credit for Reinsurance

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.

Credit Insurance

Commercial coverage against losses resulting from the failure of business debtors to pay their obligation to the insured, usually due to insolvency. The coverage is geared to manufacturers, wholesalers, and service providers who may be dependent on a few accounts and therefore could lose significant income in the event of an insolvency.

Credit Life Insurance

Life insurance coverage on a borrower designed to repay the balance of a loan in the event the borrower dies before the loan is repaid. It may also include disablement and can be offered as an option in connection with Credit cards and auto loans.

Credit Rating

See Bond Rating

Credit Score

The number produced by an analysis of an individual’s Credit history. The use of Credit information affects all consumers in many ways, from getting a job, finding a place to live, securing a loan, getting a telephone, and buying insurance. Credit history is routinely reviewed by insurers before issuing a commercial policy because businesses in poor financial condition tend to cut back on safety which can lead to more accidents and more claims. Auto and home insurers may use information in a Credit history to produce an insurance score. Insurance scores may be used in underwriting and rating insurance policies. (See Insurance score.)

Crime Insurance

Term referring to property coverages for the Perils of burglary, theft and robbery.

Crop-Hail Insurance

Protection against damage to growing crops from hail, fire, or lightning provided by the private market. By contrast, multiple Peril crop insurance covers a wider range of yield-reducing conditions, such as drought and insect infestation, and is subsidized by the federal government.

Cut-Off (Also Clean-cut)

The termination provision of a reinsurance contract stipulating that the reinsurer shall not be liable for loss as a result of occurrences taking place after the date of termination

Cut Through Endorsement

An Endorsement to a reinsurance agreement that requires the reinsurer, in the event of the Ceding Company's insolvency, to pay any loss covered under the reinsurance agreement directly to the insured or third-party beneficiary.