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Reinsurance Terms Admitted Reinsurance – A company is “admitted” when it has been licensed and accepted by appropriate insurance governmental authorities of a state or country. In determining its financial condition a ceding insurer is allowed to take credit for the unearned premiums and unpaid claims on the risk reinsured if the reinsurance is placed in an admitted reinsurance company. Arbitration Clause – Language providing a means of resolving differences between the reinsurer and the reinsured without litigation. Usually, each party appoints an arbiter. The two thus appointed select a third arbiter, or umpire, and a majority decision of the three becomes binding on the parties to the arbitration proceedings. Bordereau (plural Bordereaux) – A form providing premium or loss data with respect to identified specific risks which is furnished the reinsurer by the reinsured. Burning Cost – A term most frequently used in spread loss property reinsurance to express pure loss cost or more specifically the ratio of incurred losses within a specified amount in excess of the ceding company’s retention to its gross premiums over a stipulated number of years. Cancellation – (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 meant 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. Capacity – 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. Catastrophe Reinsurance – 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. NEXT PAGE
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