Reinsurance negotiated separately for each individual risk or policy, as opposed to treaty reinsurance which covers a portfolio. Provides flexibility for unique or large risks.

Example: A cedent purchasing facultative coverage for a $500M skyscraper that exceeds treaty limits.

A reinsurance agreement covering a specified portfolio of risks over a period of time. The reinsurer agrees to accept all risks within the treaty terms, providing automatic coverage.

Example: An annual proportional treaty covering 25% of all commercial property policies written by a cedent.

Reinsurance where premiums and losses are shared between cedent and reinsurer based on an agreed percentage. Includes quota share and surplus treaties.

Example: A 30% quota share where the reinsurer receives 30% of premiums and pays 30% of all losses.

Reinsurance where the reinsurer only pays when losses exceed a specified retention amount. The reinsurer receives a premium but not a share of original premiums.

Example: Excess of loss treaty where reinsurer pays losses above $10M per occurrence.

Reinsurance purchased by a reinsurer to protect their own portfolio. The reinsurer becomes the cedent, transferring risk to another reinsurer (the retrocessionaire).

Example: A reinsurer buying $200M CAT XoL protection from a retrocessionaire.

Reinsurance with limited risk transfer where investment income is explicitly considered. Often involves multi-year agreements with experience accounts.

Reinsurance transaction where an insurer transfers existing loss reserves and related liabilities to a reinsurer for a premium.

Example: Transferring $50M in workers compensation reserves to a reinsurer to exit the line of business.

Catastrophe Excess of Loss reinsurance - A non-proportional reinsurance structure providing coverage for catastrophic events exceeding a specified retention. Commonly used for natural catastrophes like hurricanes and earthquakes.

Example: $100M xs $50M CAT XoL covering hurricane losses in Florida.

A proportional treaty where the reinsurer accepts a fixed percentage of all policies within the treaty scope. Simple and automatic coverage.

Example: 25% quota share on all personal auto policies written by the cedent.

A proportional treaty where the cedent retains a fixed amount per risk and cedes the surplus to reinsurers. Provides flexibility for varying policy sizes.

Example: Cedent retains $1M per risk, cedes surplus up to $9M to reinsurers across 9 lines.

Non-proportional reinsurance providing coverage for losses exceeding a specified retention amount. Can be per risk, per occurrence, or aggregate.

Example: $5M xs $2M per occurrence excess of loss on commercial property.

An excess of loss layer with relatively low attachment point that is expected to be penetrated frequently. Covers more predictable, frequent losses.

Example: $2M xs $1M working layer covering typical large property losses.

Aggregate excess of loss reinsurance protecting the cedent when total losses exceed a specified aggregate retention in a period.

Example: Stop loss covering aggregate losses above 75% of earned premium.

Reinsurance protection against multiple policies or treaties being triggered by a single catastrophic event. Protects against cumulative losses across different contracts.

Example: Clash cover protecting against a single event triggering liability, property, and workers comp treaties.

A ceding commission that varies based on loss experience, incentivizing the cedent to maintain profitable underwriting.

Example: Commission ranges from 25% to 35% based on loss ratio performance.

Additional commission paid to the cedent when a proportional treaty produces underwriting profit for the reinsurer.

Example: Cedent receives 20% of underwriting profit above target loss ratio.

Retrospective reinsurance arrangement where pricing adjusts based on actual loss experience over multiple years.

Reinsurance protecting against adverse development on existing loss reserves. The reinsurer assumes risk that reserves will prove inadequate.

Cumulative retention amount that must be reached before reinsurance coverage begins for aggregate covers.

Restoration of reinsurance coverage after a loss has eroded the original limit. May require additional reinstatement premium.

Example: Two automatic reinstatements at 100% of original premium after CAT losses.

The insurance company that transfers (cedes) risk to a reinsurer. Also called the ceding company or reinsured. Primary insurers are cedents to reinsurers.

Example: State Farm acting as cedent when purchasing catastrophe reinsurance.

Company that accepts insurance risk transferred from cedents. Provides capacity and risk diversification to the insurance market.

Example: Munich Re, Swiss Re, and Hannover Re are major global reinsurers.

A reinsurer that accepts retrocession business from another reinsurer. Provides reinsurance to reinsurers.

The London-based insurance and reinsurance marketplace consisting of syndicates backed by members. Known for specialty and complex risks including large reinsurance placements.

Example: Lloyd's Syndicate 33 providing specialty CAT XoL capacity.

Underwriting entity at Lloyd's of London, backed by members' capital. Each syndicate has a managing agent and underwrites specific classes of business.

Intermediary representing cedents in placing reinsurance with reinsurers. Major brokers include Aon, Marsh, and Guy Carpenter.

Example: Guy Carpenter structuring a $500M catastrophe program for a regional carrier.

Insurance company wholly owned by a non-insurance parent to insure the parent company's risks. Often uses reinsurance for risk transfer.

Organization authorized to underwrite and bind insurance on behalf of insurers, often using reinsurance to support capacity.

Third-party that administers insurance programs on behalf of carriers, often involving reinsurance structures.

Insurer that issues policies and cedes most or all of the risk to reinsurers, providing regulatory licensing and claims handling.

Organization that assesses the financial strength of insurers and reinsurers. Major agencies include A.M. Best, S&P, Moody's, and Fitch.

Example: A.M. Best rating of A+ indicating superior financial strength.

Broker or agent facilitating reinsurance transactions between cedents and reinsurers.

Periodic reports provided by cedents to reinsurers detailing premiums, claims, and commissions for business ceded under a reinsurance treaty. Essential for reinsurance accounting and reconciliation.

Example: Monthly bordereaux reporting $2.5M in ceded premiums and detailed claim listings.

Commission paid by the reinsurer to the cedent on proportional treaties to compensate for acquisition costs and expenses.

Example: 30% ceding commission on a quota share treaty.

Additional premium charged when reinsurance limits are restored after a loss. Expressed as percentage of original premium.

Example: First reinstatement at 100%, second at 150% of original premium.

The termination of a reinsurance contract where all future obligations are extinguished through a negotiated lump-sum payment. Used to close out runoff treaties.

Example: Commuting a casualty treaty with $15M outstanding reserves for $14M cash payment.

Treaty provision requiring the cedent to keep the reinsurer informed of large claims and obtain approval for settlements.

Reinsurance principle where the reinsurer accepts the cedent's claim settlements as valid, provided they were made in good faith.

Reinsurance doctrine requiring reinsurers to share both favorable and unfavorable developments in the cedent's business.

Modification of reinsurance premium based on actual exposures, losses, or other factors specified in the treaty.

Market initiative requiring all terms and conditions of reinsurance contracts to be agreed and documented before inception.

Amounts withheld by the cedent from reinsurance recoverables, typically earning interest. Used for security or as per treaty agreement.

Provision allowing parties to offset amounts owed to each other under different agreements, reducing credit exposure.

Time delay between when losses occur and when they are reported to reinsurers through bordereaux or claims advice.

Twelve-month period covered by a reinsurance treaty, used for accounting and experience analysis.

Running balance of premiums, losses, expenses, and investment income maintained over multiple years in some reinsurance agreements.

Reinsurance arrangement where the cedent retains no participation in the reinsured business after the effective date.

Historical record of claims and losses for an insured or portfolio over a specific period. Critical for underwriting decisions and pricing analysis.

Example: Five-year loss run showing $12M in commercial property claims.

Historical average loss cost used in pricing reinsurance, calculated by dividing losses in a layer by exposure or premium.

Example: Burning cost of 5% for a working XoL layer based on 10-year history.

Reinsurance pricing metric calculated as premium divided by limit. Expresses premium as percentage of coverage provided.

Example: 10% rate on line means $10M premium for $100M of limit.

Actuarially calculated reinsurance price based on expected losses, without consideration of market conditions or profit margins.

Pricing method using the insured's or portfolio's historical loss experience to determine future premiums.

Pricing approach based on exposure characteristics rather than historical losses, used when loss history is insufficient.

The cedent's gross written premium that serves as the base for calculating proportional reinsurance premiums.

Example: $100M subject premium generating $25M ceded premium on 25% quota share.

The loss amount at which excess of loss reinsurance coverage begins. Below this retention, the cedent pays all losses.

Example: $10M attachment point on a $20M xs $10M layer.

The loss level at which a reinsurance layer is fully consumed, calculated as attachment point plus limit.

Example: $30M exhaustion point for $20M xs $10M layer.

Clause stating reinsurance follows the same terms and conditions as the underlying policies written by the cedent.

Geographic area covered by a reinsurance treaty, defining where underlying policies can be written.

Example: Territory: United States, Canada, and Puerto Rico.

The minimum loss amount required from each underlying policy before clash coverage applies.

Provision defining the time period (typically 72 hours) during which losses from a catastrophic event are aggregated as single occurrence.

Perils, coverages, or circumstances explicitly not covered by the reinsurance treaty.

Example: Exclusions: war, nuclear, cyber, terrorism (unless bought back).

In surplus treaties, multiples of the cedent's retention that can be ceded. Also refers to reinsurer's participation share.

Example: Nine lines surplus treaty allows cedent to cede up to 9x their retention.

Detailed listing of insured properties or risks showing locations, values, and characteristics. Used to assess accumulation and catastrophe exposure.

Example: Exposure schedule showing 5,000 properties with total insured value of $2B in Florida.

The maximum loss expected from a catastrophic event at a specific probability level (typically 1-in-100 or 1-in-250 years). Key metric for reinsurance pricing.

Example: 1-in-250 year PML of $180M for hurricane exposure.

Sum of all insured property values in a portfolio or location. Used to measure exposure concentration.

Example: $500M TIV in Miami-Dade County for hurricane exposure analysis.

Computer simulation of natural catastrophes to estimate potential losses. Major vendors include RMS, AIR, and CoreLogic.

Example: Running RMS model to estimate hurricane losses for Florida exposure.

Concentration of exposures in a geographic area or to a single risk that could result in large aggregate losses from one event.

Average frequency with which a loss of given magnitude is expected to be exceeded. Common return periods: 100-year, 250-year.

Example: 250-year return period event has 0.4% probability in any year.

Statistical measure estimating maximum potential loss at a specified confidence level over a time period.

Example: 99.5% VaR of $200M means 0.5% chance of exceeding this loss annually.

Expected loss given that VaR threshold has been exceeded. Measures average severity beyond VaR point.

Probability distribution of potential losses, showing frequency and severity of expected outcomes.

Graph showing estimated losses at various probability levels, used for reinsurance structure optimization.

Modeling uncertainty beyond primary perils, including demand surge, loss amplification, and model error.

Geographic area with high catastrophe exposure concentration, requiring special underwriting attention.

Example: Miami-Dade and Broward counties as hurricane peak zones.

Phenomenon where actual catastrophe losses exceed modeled losses due to demand surge, inflation, and other factors.

Evaluation of potential losses from specific catastrophe scenarios to supplement probabilistic modeling.

Example: Analyzing loss from hypothetical Category 5 hurricane hitting Tampa Bay.

Statistical relationship between different risks or portfolios that affects diversification benefits.

A special purpose vehicle that allows third-party investors to participate in an insurer or reinsurer's business. Provides additional capacity for specific risks or time periods.

Example: Reinsurer launching $200M sidecar to access capital markets for CAT business.

Financial instruments whose value is derived from insurance loss events. Includes catastrophe bonds, collateralized reinsurance, and other alternative risk transfer mechanisms.

Debt instrument that transfers catastrophe risk to capital markets. Principal is forgiven if specified trigger event occurs.

Example: $300M CAT bond with Florida hurricane trigger protecting insurer's capital.

Reinsurance fully backed by collateral held in trust, eliminating counterparty credit risk.

Legal entity created specifically to issue insurance-linked securities or provide collateralized reinsurance.

Non-traditional reinsurance capacity from capital markets, pension funds, and hedge funds through ILS and other structures.

Condition that must be met for ILS or parametric coverage to pay. Can be indemnity, index, modeled loss, or parametric.

Example: CAT bond with 250-year modeled loss trigger for named windstorm in Florida.

Risk that non-indemnity coverage (parametric, index) pays differently than actual losses due to imperfect correlation.

Assets pledged to secure reinsurance obligations, protecting cedents from counterparty default.

Profitability measure calculated as net income divided by shareholders' equity. Key metric for reinsurer performance.

European Union directive establishing risk-based capital requirements for insurance and reinsurance companies. Requires sophisticated risk modeling and reporting.

Minimum capital level required under Solvency II, calibrated to 1-in-200 year risk.

U.S. regulatory framework requiring insurers and reinsurers to maintain capital proportional to their risks.

Reinsurer licensed and authorized to transact business in a jurisdiction, allowing cedents to take full statutory credit for reinsurance.

Statutory accounting treatment allowing cedents to reduce liabilities for ceded reinsurance on financial statements.

Bank guarantee securing reinsurance obligations, allowing non-admitted reinsurers to provide statutory credit to cedents.

Legal arrangement where reinsurer deposits assets in trust to secure obligations and provide statutory credit to cedent.

U.S. statutory reporting schedule detailing reinsurance receivables and payables, showing credit quality of reinsurers.

Ratio of incurred losses to earned premiums, expressed as percentage. Key profitability metric for insurance and reinsurance.

Example: 60% loss ratio indicates $60 in losses for every $100 of earned premium.

Sum of loss ratio and expense ratio, measuring overall underwriting profitability. Ratio below 100% indicates underwriting profit.

Example: 95% combined ratio = 65% loss ratio + 30% expense ratio = 5% underwriting profit.

Estimated reserves for losses that have occurred but not yet been reported to the insurer or reinsurer.

Total estimated losses for an accident period including paid losses, case reserves, and IBNR.

Changes in estimated ultimate losses over time as claims are reported, settled, and reserves are adjusted.