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Package Policy

A single insurance policy that combines several coverages previously sold separately. Examples include homeowners insurance and commercial multiple Peril insurance.

Partially Modified Coinsurance (Part-co)

A combination of coinsurance and modified coinsurance. In most situations a portion of the initial reserves equal to the initial allowance are held on a mod-co basis, while the remaining reserves are held on a coinsurance basis, eliminating any initial cash transfer. Also known as Co/Mod-co.

Participating Reinsurance

See Pro Rata Reinsurance.

Participation Limit

A limit placed on the absolute amount of coverage that may be inforce and applied for on an individual life for reinsurance purposes. If the insurance exceeds the limit, the reinsurer will decline to assume any of the risk. This is most commonly applied to supplementary benefits such as accidental death coverage.

Participating or Pro Rata Reinsurance

Includes Quota Share, First Surplus, Second Surplus, and all other sharing forms of reinsurance whereunder the reinsurer participates pro rata in all losses and in all premiums.


A system proposed in the 1990s in which auto insurance premiums would be paid to state governments through a per-gallon surcharge on gasoline.


  1. A method of rating under which the underwriter sets the price based upon his view of how frequently the loss event might occur over a period of time. Thus, if the underwriter felt that the loss would occur only once in five Years, the price would be set (without regard to expenses and profit margins) to be equal to the limit divided by five and the contract would thus be said to have a "five Year payback." See also Rate on Line.
  2. Can also refer to premium charged in addition to the cost of an ongoing program for prior losses and, thus "payback" reinsurers.

Pending Reserve

See Case Reserve.

Pension Benefit Guaranty Corporation

An independent federal government agency that administers the Pension Plan Termination Insurance program to ensure that vested benefits of employees whose pension plans are being terminated are paid when they come due. Only defined benefit plans are covered. Benefits are paid up to certain limits.


Programs to provide employees with retirement income after they meet minimum age and service requirements. Life insurers hold some of these funds. Since the 1970s responsibility for funding retirement has increasingly shifted from employers (defined benefit plans that promise workers a specific retirement income) to employees (defined contribution plans financed by employees that may or may not be matched by employer contributions). (See Defined benefit plan; Defined contribution plan)

Per Risk Excess Reinsurance

Retention and amount of reinsurance apply “per risk” rather than on a per accident or event or aggregate basis.


  1. A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-Peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.
  2. This term refers to the causes of possible loss in the property field - for instance: Fire, Windstorm, Collision, Hail, etc. In the casualty field the term “Hazard” is more frequently used.

Persistency Bonus

An amount paid to the Ceding Company by the reinsurer if the reinsurance ceded in a given period meets certain persistency standards. Persistency bonuses are used to encourage the writing of persistent business.

Personal Articles Floater

A policy or an addition to a policy used to cover personal valuables, like jewelry or furs.

Personal injury

Assault, battery, false arrest, detention, imprisonment, wrongful entry, eviction or other invasion of private occupancy or abusive litigation (criminal or civil), abuse of process, libel, slander, defamation and violations of the right of privacy.

Personal Injury Protection Coverage (PIP)

Portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder’s car.

Personal Lines

Property/Casualty Insurance products that are designed for and bought by individuals, including homeowners and automobile policies. (See Commercial lines)

Placement Ratio

The ratio of paid facultative cessions to number of facultative submissions. The placement ratio can be used to determine the effectiveness of the reinsurer's facultative underwriting and the cost per cession.

Placement Slip

A temporary record of reinsurance arrangements for which coverage has been effected, pending replacement by a formal reinsurance contract. Also known as a Slip. See Binder.

Point-in-Scale YRT

A term used in conjunction with a select and ultimate YRT scale. It refers to the premium rate appropriate for the insured's original issue age and current duration.

Point-Of-Service Plan

Health insurance policy that allows the employee to choose between in-network and out-of-network care each time medical treatment is needed.


A written contract for insurance between an insurance company and policyholder stating details of coverage.

Policy Year Experience (Also Underwriting Year Experience)

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. See also Accident Year Experience and Calendar Year Experience.

Policyholders' Surplus

The amount of money remaining after an insurer’s liabilities are subtracted from its assets. It acts as a financial cushion above and beyond reserves, protecting policyholders against an unexpected or catastrophic situation.

Political Risk Insurance

Coverage for businesses operating abroad against loss due to political upheaval such as war, revolution, or confiscation of property.

Pollution Insurance

Policies that cover property loss and liability arising from pollution-related damages, for sites that have been inspected and found uncontaminated. It is usually written on a claims-made basis so policies pay only claims presented during the term of the policy or within a specified time frame after the policy expires. (See Claims-made policy)


See Insurance Pool


Combination of all coverage units issued by the company to the named insured and listed in the declarations, these general terms and conditions, and all applications for insurance submitted by the named insured with all supplements.

Policy Reserves

See Benefit Reserves

Policy Year

The Year commencing with the effective date of the policy or with an anniversary of that date.

Policy-year experience

Experience developed by charging all premiums and losses to the year in which the policy inception date falls, regardless of when the transaction takes place.

Portfolio Reinsurance

In transactions of reinsurance, it refers to all the risks of the reinsurance transaction. For example, if one company reinsures all of another’s outstanding Automobile business, the reinsuring company is said to assume the “portfolio” of Automobile business and it is paid the total of the unearned premium on all the risks so reinsured (less some agreed commission).

Portfolio Return

Reassumption by a Ceding Company of a portfolio.

Portfolio Run-off

The opposite of Return of Portfolio - permitting premiums and losses in respect of in-force business to run to their normal expiration upon termination of a reinsurance treaty.


Legal entity to whose financial assets and liabilities the firm listed as the named insured in the declarations. It is the majority successor in interest.

Preferred Provider Organization

Network of medical providers which charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.


The particular location of the property or a portion of it as designated in an insurance policy.


The price of an insurance policy, typically charged annually or semiannually.

Premium (Written/Unearned/Earned)

Written premium is premium registered on the books of an insurer or reinsurer at the time a policy is issued and paid for. Premium for a future exposure period is said to be unearned premium for an individual policy, written premium minus unearned premium equals earned premium. Earned premium is income for the accounting period, while unearned premium will be income in a future accounting period.

Premium Base

See Subject Premium.

Premium, Deposit

When the terms of a policy provide that the final earned premium be determined at some time after the policy itself has been written, companies may require tentative or “deposit” premiums at the beginning which are readjusted when the actual earned charge has been later determined.

Premium Portfolio

A method of transferring unexpired liability from one year to another. Thus, if one reinsurer is to be relieved of its liability under a treaty at the end of the treaty year, it will be debited with an amount representing the Unearned Premium in the last account of the year. The new reinsurer who takes over the business for the subsequent year is credited with the premium which has thus been withdrawn from the previous reinsurer. The effect of this transaction is to release the previous reinsurer from any liability in respect of the unexpired portion of the risks which were accepted in the preceding year and the new reinsurer accepts this liability. Thus the new reinsurer assumes liability for all claims which might arise in the current year on the running off of the old risks.

Premium, Pure

The portion of the premium calculated to enable the insurer to pay losses and, in some cases, allocated claim expenses or the premium arrived at by dividing losses by exposure and in which no loading has been added for commission, taxes, and expenses.

Premium Reserve Deposit

See Unearned Premium Reserve.

Premium Tax

A state tax on premiums paid by its residents and businesses and collected by insurers.

Premiums In Force

The sum of the face amounts, plus dividend additions, of life insurance policies outstanding at a given time.

Premiums, Written

The total premiums on all policies written by an insurer during a specified period of time, regardless of what portions have been earned. Net premiums written are premiums written after reinsurance transactions.

Present Value of Future Profits (PVFP) / Value of Business Acquired (VOBA)

In association with an acquisition of a company or block of business the asset set up on the books to account for the value of business. The assets are amortized in relationship to premium or profits depending on the underlying product characteristics.


In reinsurance this term is applied to the nouns: insurer, insured, policy and insurance and means respectively: (1) the insurance company which initially originates the business, i.e., the Ceding Company; (2) the policyholder insured by the primary insurer; (3) the initial policy issued by the primary insurer to the primary insured; (4) the insurance covered under the primary policy issued by the primary insurer to the primary insured (sometimes called "underlying insurance").

Primary Company

In a reinsurance transaction, the insurance company that is reinsured.

Primary Market

Market for new issue securities where the proceeds go directly to the issuer.

Prime Rate

Interest rate that banks charge to their most Creditworthy customers. Banks set this rate according to their cost of funds and market forces.

Prior Approval States

States where insurance companies must file proposed rate changes with state regulators, and gain approval before they can go into effect.


The term used in some foreign reinsurance markets meaning retention.

Private Mortgage Insurance

See Mortgage guarantee insurance

Private Placement

Securities that are not registered with the Securities and Exchange Commission and are sold directly to investors.

Pro Rata

See Quota Share.

Probate Bond

see Fiduciary Bond

Producer-Owned Reinsurer

A captive reinsurance company that provides reinsurance for a producer group's business. Producer-owned reinsurers typically have very low retention limits and retrocede most of the risk they assume.

Product Liability

A section of tort law that determines who may sue and who may be sued for damages when a defective product injures someone. No uniform federal laws guide manufacturer’s liability, but under strict liability, the injured party can hold the manufacturer responsible for damages without the need to prove negligence or fault.

Product Liability Insurance

Protects manufacturers’ and distributors’ exposure to lawsuits by people who have sustained bodily injury or property damage through the use of the product.


Production Bonus

An amount paid to the Ceding Company by the reinsurer if the amount of reinsurance ceded in a given period exceeds a specified amount. Production bonuses are used to encourage a Ceding Company to place reinsurance with a certain reinsurer.

Professional Liability Insurance

Covers professionals for negligence and errors or omissions that injure their clients.

Professional Reinsurer

A term used to designate a company whose business is confined solely to reinsurance and the peripheral services offered by a reinsurer to its customers as opposed to primary insurers who exchange reinsurance or operate reinsurance departments as adjuncts to their basic business of primary insurance. The majority of professional reinsurers provide complete reinsurance and service at one source directly to the Ceding Company.

Profit Commission

A provision found in some reinsurance agreements which provides for profit sharing. Parties agree to a formula for calculating profit, an allowance for the reinsurer’s expenses, and the cedant’s share of such profit after expenses.

Profit Margin

Present value of pre-tax regulatory income (excluding investment income on Target Capital) divided by present value of premiums and deposits

Proof of Loss

Documents showing the insurance company that a loss occurred.

Property/Casualty Insurance

Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/Casualty Insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, Property/Casualty Insurance is referred to as nonlife or general insurance.

Property/Casualty Insurance Cycle

Industry business cycle with recurrent periods of hard and soft market conditions. In the 1950s and 1960s, cycles were regular with three Year periods each of hard and soft market conditions in almost all lines of Property/Casualty Insurance. Since then they have been less regular and less frequent.


A form of reinsurance where the amount ceded is defined at the point the risk is transferred, not at the point of claim. The amount of risk may vary with time by formula.

Proposition 103

A November 1988 California ballot initiative that called for a statewide auto insurance rate rollback and for rates to be based more on driving records and less on geographical location. The initiative changed many aspects of the state’s insurance system and was the subject of lawsuits for more than a decade.

Prospective Rating (Also Self Rating)

A type of Experience Rating used in arriving at the reinsurance rate and premium for a specified period, based in whole or in part, on the loss experience of a prior period.

Provision for Adverse Deviation (PAD)

An allowance to account for variability in the results to allow for conservatism, misestimation or deterioration to be put into reserves for profit stream. This will drive higher reserves over the pure best estimate reserves.

Provisional Rate, Premium, Or Commission

Tentative amounts subject to subsequent adjustment.

Proximate cause

Under tort law, one of the requirements a person must establish to get recovery in a civil action based on negligence. The plaintiff must show that an act or omission of the defendant was the proximate cause of the plaintiff's loss or injury. Proximate cause may be taken to mean the primary causes producing injury or damage

Punitive Damages

A term that, when used in reinsurance agreements, refers to damages awarded by a court against an insurer in addition to compensatory damages. Punitive damages are intended to punish the insurer for willful and wanton misconduct and to serve as a deterrent. When the award is against an insurer, it is usually related to the insurer's conduct in the handling of a claim. See Extra Contractual Obligations and Losses in Excess of Policy Limits.

Purchasing Group

An entity that offers insurance to groups of similar businesses with similar exposures to risk.

Pure Life Annuity

A form of Annuity that ends payments when the Annuitant dies. Payments may be fixed or variable.

Pure Loss Cost (Also Burning Cost)

The ratio of the reinsurance losses incurred to the Ceding Company's Subject Premium