Reinsurance Glossary

Actuary

Mathematics professional who specializes in the probability of insurance, annuities, and financial instruments.

Annuity

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

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.

Cedant/Ceding company

Direct insurer or reinsurer that passes on shares of its insured or reinsured risks to a reinsurer in exchange for premium.

Claim

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

Demutualization

Process of converting the ownership of a mutual company (owned by its policyholders) to stock ownership.

Direct insurance

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

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.

Financially motivated reinsurance

(also known as financial reinsurance, asset-intensive reinsurance or non-traditional 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.

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.

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.

Mortality experience

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

Preferred risk coverage

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

Premium

Amounts paid to insure a risk.

Private placement

An issue of securities that is not directed to the public and where the issued security is not registered or handled by any securities exchange.

Production

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

Portfolio

The totality of risks assumed by an insurer or reinsurer.

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.

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 retrocessionare), in return for payment of premium.

Underwriting

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