Reinsurance Glossary​​​

​​Actuary

A specialist in the mathematics of risk, especially as it relates to insurance calculations such as premiums, reserves, dividends, and insurance and annuity rates.

Annuity

Contract that provides for income payments to an insured at regular intervals, either for a specific period or for the lifetime of the insured, in exchange for premiums.

ASEAN

Association of Southeast Asian Nations

Asset-intensive reinsurance

A transaction (usually coinsurance or funds withheld, and often involving reinsurance of annuities) where performance of the underlying assets, in addition to any mortality, is a key element.

Assumed reinsurance

Insurance risk that a reinsurer accepts (assumes) from a ceding company.

Automatic reinsurance

Reinsurance arrangement whereby the ceding company and reinsurer agree that all business of a certain description will be ceded to the reinsurer. Under this arrangement, the ceding company assumes full underwriting responsibility for all business reinsured.

Bancassurance

The provision of insurance and banking products and services through a common distribution channel and/or to the same client base.

Capital-motivated reinsurance

Reinsurance designed to meet a financial objective of an insurer. For example, financial reinsurance can aid in an insurer’s tax planning efforts or can provide capital in order to support an insurer’s future growth. (Also known as financial reinsurance, financially motivated reinsurance or non-traditional reinsurance.)

Captive insurer

An insurance or reinsurance entity designed to provide insurance or reinsurance cover for risks of the entity or entities by which it is owned or to which it is affiliated.

Cedant/Ceding company

Direct insurer (or reinsurer) that passes on, or cedes, shares of its insured or reinsured risks to a reinsurer or retrocess​ionaire.

Claim

Demand on an insurer or reinsurer for payment under the terms of an insurance policy.

Coinsurance

A form of reinsurance under which the ceding company shares its premiums, death claims, surrender benefits, dividends and policy loans with the reinsurer, and the reinsurer pays expense allowances to reimburse the ceding company for a share of its expenses. (Also known as original terms reinsurance.)

Coinsurance funds-withheld
A variant on coinsurance, in which the ceding company retains the assets. 

Counterparty
A party to a contract requiring or offering the exchange of risk.

Counterparty risk
The risk that a party to an agreement will be unable to fulfill its contractual obligations.

Critical illness insurance

Insurance that provides a guaranteed fixed sum upon diagnosis of a specified illness or condition such as cancer, heart disease or permanent total disability. The policy can be arranged in its own right or can be an add-on to a life policy. (Also known as dread disease insurance.)

Enterprise Risk Management (ERM)

An enterprise-wide framework used by a firm to assess all risks facing the organization, manage mitigation strategies, monitor ongoing risks and report to interested audiences.

Expected mortality

Number of deaths predicted to occur in a defined group of people.

Face amount

Amount payable at the death of the insured or at the maturity of the policy.

Facultative reinsurance

A type of reinsurance in which the reinsurer makes an underwriting decision, to accept or decline, on each risk sent to it by the ceding company.

Financial reinsurance

Reinsurance designed to meet a financial objective of an insurer. For example, financial reinsurance can aid in an insurer’s tax planning efforts or can provide capital in order to support an insurer’s future growth. (Also known as financially-motivated reinsurance, asset-intensive reinsurance, capital-motivated reinsurance or non-traditional reinsurance.)

GAAP (Generally Accepted Accounting Principles)

A set of financial accounting principles that companies follow when preparing financial statements for reporting results to stockholders. 

Group life insurance

Insurance policy under which the lives of a group of people are insured in accordance with the terms of one master contract.

Guaranteed issue life insurance
Insurance products that are guaranteed upon application, regardless of past health conditions. 

IFRS (International Financial Reporting Standards)

Standards and interpretations adopted by the International Accounting Standards Board (IASB).

In force sum insured

A measure of insurance in effect at a specific date.

Individual life insurance

Insurance policy that is issued to insure the life of a named person or persons, rather than that of a group.

Longevity product

An insurance product that mitigates longevity risk by providing a stream of income for the duration of the policyholder’s life.

Modified coinsurance
A variant on coinsurance in which the ceding company retains both the assets and the reserves. 

Morbidity

A measure of the incidence of sickness or disease within a specific population group.

Mortality experience

Actual number of deaths occurring in a defined group of people.

Mortality risk reinsurance

Removing some of the major mortality or lapse risk associated with life insurance from the client company.

Preferred risk coverage

Coverage designed for applicants who represent a better-than-average risk to an insurer.

Primary insurance

Insurance business relating to contracts directly between insurers and policyholders. The insurance company is directly responsible to the insured. (Also known as direct insurance.)

Premium

Amounts paid to insure a risk.

Production

Refers to new business that was produced during a specified period.

Portfolio

The totality of risks assumed by an insurer or reinsurer.

Quota share

A reinsurance arrangement in which the reinsurer receives a certain percentage of each risk reinsured. (Also known as ‘first dollar’ quota share.)

Recapture

The right to cancel reinsurance under certain conditions.

Reinsurance

A type of insurance coverage that one company, the ceding company, purchases from another company, the reinsurer, in order to transfer risk associated with insurance. Through reinsurance, a reinsurer “insures” the ceding company.

Reserves

The amount required to be carried as a liability in the financial statement of an insurer or reinsurer, to provide for future commitments under outstanding policies and contracts.

Retakaful
A form of reinsurance that is acceptable within Islamic law (see also Takaful).

Retention limit

The maximum amount of risk a company will insure on one life. Any amount in excess of the retention limit must be reinsured.

Retrocession

Transaction in which the reinsurer transfers all or part of the risks it has assumed to another reinsurer (the retrocessionaire), in return for payment of premiums.

Securitization

The structuring of financial assets as collateral against which securities can be issued to investors.

Simplified issue life insurance
Insurance products with limited face amounts that require no or minimal underwriting.


Statutory capital

The excess of statutory assets over statutory reserves, both of which are calculated in accordance with standards established by insurance regulators.

Takaful
A form of insurance that is acceptable within Islamic Law, and that is devised upon the principles of mutual advantage and group security.

Tele-underwriting
A telephone interview process, during which an applicant’s qualifications to be insured are assessed.

Treaty
A reinsurance agreement between a reinsurer and a ceding company. The three most common methods of accepting reinsurance are automatic, facultative, and facultative-obligatory. The three most common types of reinsurance treaties are YRT (yearly renewable term), coinsurance, and modified coinsurance. (Also known as a contract.)

Underwriting

The process by which a company assesses the risk inherent in an application for insurance prior to acceptance of the policy.

Variable life insurance

A form of whole life insurance under which the death benefit and the cash value of the policy fluctuate according to the performance of an investment fund. Most variable life insurance policies guarantee that the death benefit will not fall below a specified minimum.