Glossary of Key Terms and Initials
This glossary is made up of definitions (some very old[1]) from a range of sources that I have been given over a period of some years.  – the core ones  probably being Lloyd’s, CII, Hiscox, Guy Carpenter, Communicade and many of my own.
As in anything, different people can see different words in different contexts

Although there is a good cross-section of words and definitions, there is likely to be more emphasis on Reinsurance (my background).

Where a word or words are shown in bold there should be(!) a further definition of that particular word.

THIS IS DEFINITELY WORK IN PROGRESS (seems everlasting), especially towards the higher letters in the Alphabet. Any corrections, additions greatly appreciated – please Contact Me

[1] e.g. Insurance Institute of Australia (1985). Glossary of Insurance Terms, Insurance Training Council, 1997

BAILEE:A person or concern having possession of property committed in trust from the owner. E.g. Warehouse owner, storing a Third Parties Property.

BAILEE’S CUSTOMERS POLICY:A policy providing for loss or or damages to property of bailee’s customers, payable either to bailees for their account or direct to customers.

BALANCE. In some way limiting the fluctuations in loss burden to an acceptable degree. For example an insurance or reinsurance portfolio might be considered balanced if it has sufficient spread by territory, class, premium volume…….

BALANCE (Reinsurance) In a proportional Treaty the ratio of Limit/Estimated Premium Income : 1
i.e. 10 Line 1st Surplus. Retention $1,000,00. 0 Treaty Limit $10,000,000.  EPI $4,000,000
$10,000,000/$4,000,000 = Balance 2.5:1. 1 total loss wipes out profit for 2.5 years. A simple way of showing the likely smoothness of the over result over a period of time. (Well Balanced).
Compare to a similar Treaty with an EPI of $400,000 creating a Balance of 25:1. (Unbalanced). 1 total loss wipes out any profit for 25 years!  N.B. From an underwriter’s view point Balance should be considered AFTER deducting Treaty Commission %.

BASE PREMIUM (Reinsurance) The reinsured’s premiums to which a reinsurance rate is applied to produce the final premium for an excess of loss contract. In most cases this would be referred to as G.N.P.I. (Gross Net Premium Income)

BASIS (OF INSURANCE) CLAUSEA clause that makes the declarations contained in an insurance proposal form the “basis” of any contract of insurance that is made in consequence of the completion of that form. Such declarations are thereby converted into warranties with the result that if one of them is found to be untrue then the insurer may disclaim all liability under the relevant contract from the date of the breach, regardless as to whether the false declaration was material to the underwriting of the contract or causative of any loss.

Basis of insurance clauses are not normally found in personal lines insurance contracts sold in the United Kingdom and, where they appear in other contracts, they may be qualified by the inclusion of a term in the proposal form that the declarations made in that document are true to the best of the knowledge and belief of the person making the declarations.

Regulators do not like this position

BATCHES AND LOTS See Aggregate Extension Clause

BENEFIT OF INSURANCE CLAUSE:   A clause by which the bailee of goods claims the benefit of any insurance policy effected by the cargo owner on the goods in care of the bailee. 

BEYOND ECONOMIC REPAIRWhere the cost of repairing the insured property, e.g. a car, exceeds the market value of that property. In such circumstances the insurer will pay the insured the market value of the insured property at the date of loss, subject to the terms of the policy (assuming the insurer is not under any obligation to provide a replacement).

BILL OF LADING:   Contract of carriage and receipt for goods, issued by carrier.

BINDER See Binding Authority

BINDING AUTHORITY (BINDER)A contractual agreement between an underwriter and a Coverholder under which the Coverholder is authorised to enter into contracts of (re)insurance on behalf of the underwriter  subject to specified terms and conditions. The Coverholder is not taking a share of the risk themselves. Within Lloyd’s there are very specific formats for placing and administering “Binders” based around the Lloyd’s Delegated Authority Bylaw – see also

A number of underwriters  may agree to participate in the same binding authority on a percentage basis so that each underwriter takes a proportion of the premiums and pays the same proportion of the claims arising under the agreement.      Under a Binding Authority the Binding entity (Coverholder/Managing General Agent) is NOT accepting risk themselves.  See also Line Slip

BLANKET INSURANCE:  (1) Property-liability insurance that covers more than one type of property in one location in one policy or form instead of under separate items, or one or more types of property at more than one location;

(2) A contract of health insurance that covers all of a class of persons not individually identified.

BLOCK RATING PLAN A system of rating an Excess of Loss Treaty by applying a loading factor to the actual claims cost over an appropriate block period, usually 3 years, to produce the premium. At the end of each block period, a new block period is commenced. Successive annual adjustments are thereafter made to each block period until all liabilities have been ascertained.

This could also be referred to as a Burning Cost –  3 year basis.

BODILY INJURY LIABILITY:  The liability which may arise from injury or death of another person.

BOILER AND MACHINERY POLICY:  Insurance against loss due to accidents to boilers, pressure vessels or other machinery including the equipment itself, as well as liability arising out of the accident.

BOND:  Want a better definition !! An obligation of the insurance company to protect one against financial loss caused by acts of another.

BORDEREAUX: (Reinsurance) (Premium or Loss) A detailed list of risks and related premiums and/or claims prepared by the reinsured normally for attachment to the accounts under a Proportional reinsurance Treaty The list might show names of risks, Sum Insured, allocation to treaty, premium for the risk, claim for the risk. Enables the reinsurer to get a better idea of the risks being ceded.
Premium Bordereaux A list of all risks ceded to the treaty (in the quarterly account) including entries such as; Insured       Occupation   SI          Cession         Premium allocation

Loss Bordereaux A list of all losses ceded to the treaty (in the quarterly account) including entries such as; Insured       Occupation   SI          Cession         Loss Amount

 BOX (Lloyd’s) (Underwriting Box) The underwriting area of a syndicate(s) in the “Room” at Lloyd’s

BREXIT The decision following a referendum in 2016 for Great Britain to leave the EU.

BROKE See Broking

BROKER: An independent intermediary, who is employed by the (re)insured to place (re)insurance on its behalf, to collect claims and provide other consultancy services. The broker receives Brokerage

1a) An amount of money taken by the broker from premiums due to (re)insurers for their services in obtaining business, seeking out markets, advising the (re)insured on the kind of contract they will require and bringing that contract to the (re)insurers.

This is often based on a percentage of the (re)insurance premium (although can be a fee basis) – Although brokers are in most situations agents of the (re)insured, the brokerage is deducted from the account when submitted to the (re)insurers.

  1. b) The office or business of the broker
  2. c) “Intermediation”

BROKING/BROKE Carrying out the negotiation and placing role of a Broker

BROKERING Carrying out the negotiation and placing role of a Broker, has become an “acceptable” word in the (Re)insurance market apparently in the 2010’s. N.B. A driver does not go “drivering” he/she “drives”.

BUFFER LAYER A layer of coverage between the Maximum point that a primary underwriter will accept and the minimum deductible that and excess underwriter will accpet.

BUILDER’S RISK COVERAGE FORM:  A commercial property coverage form specifically designed for buildings in the course of construction.

BUILDER’S RISK INSURANCE:  Insurance against loss to buildings or structures in the course of construction.

BUILDINGS AND PERSONAL PROPERTY COVERAGE FORM:  A commercial property coverage form designed to insure most types of commercial property (buildings or contents or both). It is the most frequently used commercial property form, and has replaced the General Property Form, Special Building Form, Special Personal Property Form, and others.

BUMBERSHOOT (Old) A variation of an Umbrella Cover.

BUREAUX The London Market equivalent of the Banking System’s Clearing House. Processes documentation, premiums, claims…..between Brokers and (re)insurers, both Lloyd’s Syndicates and companies. See also Lloyd’s Policy Signing Office

BURNING COST 1 i.e. The contracts loss ratio
The percentage ratio of Losses/Premiums e.g. on an Excess of Loss placement. The total of paid and outstanding losses Divided by the G.N.P.I.[1]

Pure Burning Cost = Burning cost NOT loaded for profit and expenses

e.g. Losses to layer (Paid and Outstanding) 2,000,000
            G.N.P.I                                                20,000,000

Pure Burning Cost                                                10%

BURNING COST 2 A specific method of pricing Excess of Loss layers. Often used for low layers of Motor and Liability contracts. Also known as Experience Rating or Swing Rate
The terms of the contract will be shown as Rate Burning Cost, loaded by a pre agreed amount to cover reinsurers expenses, brokerage, fluctuations in reserves, subject to a minimum and maximum rate.
e.g. Rate Burning Cost, Loading 100/75ths. Min 1% of GNPI Max 5% of GNPI. If Losses/GNPI 2% reinsured would pay 2% x 100/75.

Normally based on Paid and Outstanding Losses
Traditional Loadings 100/70ths, 100/75ths, 100/80ths
(42.5%)      (33.33%)    ( 25%)

In the 1950’s / 1960’s some contracts were not placed on an annual basis but either on 3 year average basis  or 3/5 year “block Basis”- see also Block Rating Plan

BUSINESS AUTO COVERAGE FORM:  The latest commercial Automobile Insurance coverage form, which may be written as a monoline policy or as part of a commercial package. This form has largely replaced the Business Auto Policy.

BUSINESS INCOME COVERAGE FORM:  A commercial property form providing coverage for “indirect losses” resulting from property damage, such as loss of business income and extra expenses incurred. It has replaced earlier Business Interruption and Extra Expense forms.

BUSINESS INTERRUPTION INSURANCE:  A type of policy that pays for loss of earnings when operations are curtailed or suspended because of property loss.

BUSINESS LIABILITY:  The term used to describe the liability coverages provided by a Business Owner’s Liability Coverage Form. It includes liability for bodily injury, property damage, personal injury, advertising injury, and fire damage.

BUSINESS PERSONAL PROPERTY:  Traditionally known as “contents,” this term actually refers to furniture, fixtures, equipment, machinery, merchandise, materials, and all other personal property owned by the insured and used in the insured’s business.

BUY BACKIn the context of general insurance this refers to the purchase of cover in respect of an otherwise excluded peril by means of the payment of additional premium.

BYLAWS (LLOYD’S)The primary rules made by the Council of Lloyd’s regarding the conduct of insurance business at Lloyd’s.


CALENDAR YEAR All transactions which happen in the same year (1/1 to 31/12) are attributed to that year irrespective of point of occurrence.

CANCELLATIONThe ability to cancel a particiaption in a contract Cancellation clause – A clause in an (Re)insurance contract which permits an (Re)insurer and/or an (Re)insured to cancel the contract before it is due to expire. The clause may provide for a return of premium in respect the unused portion of the policy.
See also Special Cancellation Clause (Reinsurance)                Security Downgrade Clause (Reinsurance)

CAPACITY       a) The amount of insurance or reinsurance available from an individual underwriter or from the entire insurance market. In the Company Market (Non-Lloyd’s Market) the word tends to mean underwriting Capacity on a risk
e.g. ABC Ins Co’s capacity on an Engineering Risks in the UK £50,000,000.  Means they can accept up to £50,000,000 on a specific risk.

CAPACITY (LLOYD’S) This term may refer to:  (a) a member’s allocated capacity (b) syndicate allocated capacity When Lloyd’s refers to CAPACITY it is normally referring to premium. e.g. Syndicate 1111’s Capacity for this year is £1bn means the syndicate can accept £1bn of premium in this Underwriting Year

(c)  the total underwriting capacity of all syndicates combined e.g. Lloyd’s Capacity for 2016 approx £26,500,000,000 = Lloyd’s Maximum Premium Income for all syndicates is estimated at £26,500,000,000

CAPACITY AUCTION (LLOYD’S)A procedure which allows a member of Lloyd’s to sell his participation rights in one or more syndicates for the following year of account to one or more other members, a managing agent or a members’ agent by means of electronic bidding at specific times. Individual members and some corporate members buy and sell capacity through their members’ agents.

CAPITAL PROVIDERAs regards a Lloyd’s syndicate its member(s). As regards a company, its shareholders.

CAPTIVE INSURER: A very simplistic but good definition would be [2]“An insurance company owned within a business group whose sole or main aim is to (re)insure risks from within the group. likely to have been established for the purpose of insuring all or part of the risk exposures of the parent group. Sometimes accepting business from other operations as well. They are normally located in countries offering flexible regulation and possible tax advantages.

Single Parent (one shareholder or sponsor) 70% of all captives
Group Owned – more than one shareholder – PHIL (2003) 7 Pharmaceutical Companies       – Fire and BI
Association Captive Insuring risks for members of a Trade Association e.g. Association of Swiss Butchers – Products Liability

Rent a Captive

  • a captive set up by a Captive Manager
  • to accept insurance and reinsurance from unrelated organisations
  • express purpose to return underwriting profit and investment income to insureds
  • aim of the managers – to make a profit for themselves on management fees – rental

Protected Cell Company (PCC)

  • a legally created company with core funds but with separate “cells” (PCs) within it
  • funds within the “cell” are protected against creditors from other cells BY LEGISLATION – not by contract

A very useful development for “Rent a Captives”

The next variation ?

Incorporated Cell Company – ICC
A formally created company
– created under company law
Within it Cells that are legally seen as being separate cells but legally formatted as ring fenced companies

CARPENTER PLAN (CARPLAN) (Reinsurance – Old) A working, excess of loss, reinsurance which incorporated a rating basis similar to a block rating plan but using a revolving block period rather a series of separate block periods, based on the  Burning Cost (Loss Ratio) of the specific reinsurance contract.
This concept was invented originally by Mr Guy Carpenter founder of the reinsurance broker with his name – now part of Marsh – in the 1920’s  to help provide insurance coverage for growing cotton.

The concept of using Burning Cost  was then used for low level Excess Loss Contracts, still based on a period of years – e.g. 3 years average, or three year rolling average  ( – up to the 1960’s/ 1970’s)

CAR See Contractors All Risks

CARRIER (1) An insurance company which “carries” the insurance. (The terms “insurance company” or “insurer” are preferred because of the possible confusion of “carrier” with transportation terminology). (2) In transportation, the trucker, air carrier, ocean steamship company or other entity which moves the goods.

CARRY FORWARD PROVISION (Reinsurance) See; Profit Commission Sliding Scale commission

CASH CALL (Reinsurance) A Proportional Treaty condition A term that is meant to ensure that reinsurers pay their share of individual larger losses very promptly on request. In some cases regrettably reinsurers (and some reinsurance brokers) do not pay as promptly as they should. In many cases there is no specific penalty for non-compliance. Even where this is provided for in the Contract it is often overlooked.

CASH LOSS  See Cash Call

CASUALTY INSURANCE:  That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed for such injury or for damage to property of others. It can also include such diverse forms as Plate Glass, insurance, Crime, such as robbery, burglary or forgery, Boiler and Machinery insurance, and Aviation insurance. Many Casualty insurers also write Surety business under this heading. There is NO one definition of Casualty classes. Always ask for “their” definition if you are an underwriter or broker

CAT X/L See Catastrophe X/L

A methodology for placing Catastrophe Risk into the Financial Markets as opposed to the traditional reinsurance market by way of Catastrophe X/L.
e.g. China Re needs $50,000,000 more Flood cover than available under its existing catastrophe programmes.
Issues a Bond for $50,000,000 repayable in 3 years, Coupon (Interest) of LIBOR +x%
IF there is a Flood bigger than $xx,xxx,xxx the Bond Underwriters have lost their money. No repayment of the Principal.
These deals will normally need a SPV (Special Purpose Vehicle) in place acting as a “converter”. Thus the money market lends money to the SPV (not doing reinsurance) and the SPV provides $50,000,000 of Catastrophe Cover to the “reinsured” (who is seen to be buying reinsurance NOT borrowing money). The name of the SPV on this particular deal – Panda Re. See for list of deals.

CATASTROPHE X/L (Reinsurance). A form of Non-Proportional reinsurance under which the reinsurer agrees to pay for any loss above the deductible (retention) up to the cover limit following a Catastrophe Event e.g. Earthquake, Hurricane, Flood….

An Aggregate X/L, with a twist. To pay if event losses only, individually larger than $xx,xxx,xxx exceed $YYY,000,0000 in the aggregate in the year. Protecting against frequency of event losses. e.g 2011 in Asia Pacific, Queensland Floods, NZ Earthquake, Japanese earthquake and tsunami, Thai Floods. Whilst Cat X/L  might have helped with the individual event losses it would NOT help with the problem of frequency

CATASTROPHE EXCESS OF LOSS: A form of excess of loss reinsurance which pays in excess of a specified deductible (also called retention) up to a further identified amount when the accumulation of retained losses from one event on individual risks exceeds the deductible The contract protects the reinsured against an aggregation of losses arising from one catastrophic event, normally caused by natural or fundamental perils.

CATASTROPHIC EVENT: an event which causes severe and widespread loss or damage to insured interests

CAUSES OF LOSS:  Under some commercial property forms, this term replaces the earlier term “perils” insured against – see also Perils

CEDE: When an insurer transfers part of its liability to a reinsurer under a proportional reinsurance treaty, it is said to cede (give) that business.

The root of all the “Ceding” words. Latin – cedere = to give. Thus a cedant cedes a cession = the reinsured gives a risk to a reinsurer – see also Retrocedant

CEDANT/CEDANT (there seems to be no consistent spelling of this word)
CEDING COMPANY: The insurer who transfers part of its risk to a reinsurer normally this expression is used under a proportional reinsurance treaty or facultative placement. Also called Reinsured.

See Commission

CENTRAL ACCOUNTINGA facility in the London Insurance and Reinsurance Market whereby sums due to and from individual Lloyd’s brokers and syndicates are processed centrally and their accounts debited and credited on a net basis regularly. Urgent one off payments may be made more quickly. See also Bureaux

CENTRAL FUND A general phrase to cover the various assets that Lloyd’s that Lloyd’s has at its disposal to back the Syndicates operating under the Lloyd’s franchise. These funds including Syndicate’s Premiums, Reserves, Members Assets….are said to be sufficent to cover syndicate failures aftera 1:200 year catastrophe

CERTIFICATE OF INSURANCEDepending on the context this term may refer to:  (a)  A document which evidences the existence of insurance cover but which does not detail all its terms which are contained in a separate policy of insurance.  Certain certificates are required as a matter of law in the United Kingdom, for example for motor insurance. (b) A document that is issued by a Coverholder under a Binding Authority which evidences the existence of insurance cover and details the terms of such cover.  No policy of insurance is issued where such a certificate is issued.
(c) A document attached to a Facultative acceptance by a specific reinsurer by which the reinsurer is imposing their own specific conditions. e.g. Claims to be advised within….., : Premiums to be paid within…..

CESSION: The amount of individual risk transferred to reinsurers under a proportional reinsurance treaty. The risk, premium and claims will be settled in accordance with the amount of the cession (normally expressed as a percentage of the original risk).

CESSION LIMIT A limit imposed on some Proportional Treaties in respect of the total amount that can be ceded in a year for a specific catastrophe peril. IF the limit is exceeded and there is a Catastrophe reinsurers have the right to reduce down the overall claims by Cession Limit                    x Loss
Actual Total of ceded risk

Under the English Legal system the reverse of Criminal Law
The core legal system of many countries of the world e.g. France, Germany, Brazil Japan, Its core principal is based on the concept of interpreting the Countries Civil Codes based on “today’s opinion – today”  See also Common Law

CLAIMDepending on the context this term may refer to:  (a) a demand made by a policyholder on his insurer(s) for payment or some other contractual benefit under an insurance policy; (b) a demand made by an insurer on its reinsurer(s) to be paid under a reinsurance  contract; or (c) a demand made by a third party on a policyholder to be compensated for some  injury, damage or loss for which the third party blames the policyholder.
A claim is payable under an insurance or reinsurance contract if it is caused by an insured peril and it is not excluded under the terms of that contract.

CLAIMANTThe person making a claim.

A clause, found in many Proportional Facultative RI contracts which binds the cedant to notify the reinsurer of all claims exceeding for example a stated amount and to accept the reinsurer’s assistance and guidance in negotiating settlement of such claim or claims.

CLAIMS HANDLING EXPENSES  Expenses incurred by an insurance enterprise attributable to the handling of claims.

CLAIMS MADE POLICYA policy which only pays claims that are notified to the insurer during a specified period.

CLAIMS-MADE COVERAGE: An insurance policy providing liability coverage only if a written claim is made during the policy period.
e.g. A claim made in the current reporting year could be charged against the current policy even if the injury or loss occurred many years in the past. If the policy has a retroactive date included in the policy a claim on an occurrence prior to that given date is not covered.

If the policy is cancelled and not replaced extended cover might be granted by insurers to cover claims made on losses occurring during the final policy period for a further 2 years after cancellation bythe inclusion of an extended loss reporting clause

CLAIMS NOTIFICATION CLAUSEA clause in an insurance or reinsurance contract which sets out the procedure that the insured or reinsured must follow in order to make a claim under the contract. Such clauses frequently provide for prompt notification of claims and events which may gives to claims in the future.

Net claims incurred, including IBNR, as a percentage of net earned premiums.

CLASH COVER An excess of loss treaty effected to protect a cedant against accumulation deductibles from more than one Excess of Loss programme following a single event or series of events affecting a number of classes of business e.g. 1 fire hitting Risk X/L, Catastrophe X/L, Engineering X/L, Marine Cargo X/L.
If the accumulation of losses within the 4 deductibles exceeds the deductible of the Clash Cover – there is a claim- see also Umbrella Cover

CLASSIFICATION CLAUSE (CARGO):   A clause in a cargo insurance Open Cover which details the minimum classification for an overseas carrying vessel that is acceptable to the insurers for carriage of the insured goods at the premium rate/s agreed in the contract. Goods carried by lower class vessels are accepted under the open cover, subject to payment of an additional premium.

A provision in a proportional reinsurance treaty, which provides that by returning a Premium Portfolio and a Loss Portfolio to the cedant, or transferring same to the following year’s reinsurers, (new or ongoing) the reinsurer shall not be further liable for loss either as a result of occurrences taking place after the date of termination, or in respect of outstanding losses notified prior to the date of termination on this particular year. ALL liabilities are mover forward into the next Treaty period The clean cut provision simplifies the Treaty accounts procedures.
See also Premium Portfolios and Portfolios

CLOSED LINE  See Signed Line

CLOSED YEAR (Lloyd’s)A year of account that has been closed into another year of account by means of a ReInsurance To Close contract see also RITC and Three Year Accounting

CLOSING (Reinsurance) CLOSING INSTRUCTION (Reinsurance) These words are often used as a description of the Reinsurance Account  in the context of Facultative RI. Why it has historically been called a “closing” or “closing instruction”, not sure as it is quite is possible that there might be an  Original Deposit Premium and later on a share of an adjustment Premium – both might be called a “closing”.

COEFFICIENT SYSTEM (Reinsurance – Old) A simplified system of allocating cessions to a proportional treaty programme by providing classification of insurances into a limited number of groups, each with predetermined retention and reinsurance proportions, so that apportionment of premiums and losses may be made on such groups of cessions rather than individually. (By geometric progression of limits the maximum deviation from a tabular retention can be fixed at an acceptable level.)

COLATERALISED REINSURER A reinsurer who does not/does not need a credit rating. Perhaps only want to be involved in reinsurance for a couple of years when prices are higher…. Instead provides AAA Rated Collateral to cover any reserved losses.

CO-(RE)INSURANCE:  (1) A clause under which the (re)insured shares in losses with the (re)insurer e.g. “to pay 95% of …….” Thus if there is a loss (re)insurers only pay 95% of this loss In certain types of (re)insurance coverage, (re)insurers might ask the (re)insured to bear a certain percentage of the limit as a (co)-reinsurance. The reinsured is thus interested in minimising any loss recoverable.
(2) Where 2 or more (re)insurers jointly cover the same risk.

COMBINATION PLAN (Reinsurance – Old) A form of combined reinsurance where the reinsurer will indemnify the reinsured up to a stated amount of loss on each risk in excess of a specified deductible. After deducting the excess of loss recoveries on each risk, the reinsurer will also reinsure the reinsured for a fixed percentage (quota share) of all remaining losses.

COMBINED RATIOThe claims and expenses of an insurer/reinsurer for a given period divided by its premium for the same period. It is normally expressed as a percentage with any figure in excess of 100% signifying a technical underwriting loss.

e.g. 70% Loss Ratio        25% Expense Ratio

=    95% Combined Ratio = 5% Underwriting Profit

COMMERCIAL LINES  – Insurance which is sold to firms. This term is used in contrast to Personal Lines. (Homwowners…)

COMMISSION (Reinsurance) – PROPORTIONAL A percentage of the premium ceded under a proportional reinsurance retained by the reinsured to cover acquisition costs….. – in very rare scenarios might be found in X/L contracts
A percentage of the premium being paid to reinsurers is deducted by the reinsured. It is meant to reimburse the ceding company (cedent / reinsured) for its original costs in obtaining the business (acquisition costs). Depending on results, can be more (or less) than this figure – thus impacting on the Profit and Loss Account of the Reinsured.
This form of commission is also known as Contingent Commission.
Might be based on; Fixed %age e.g. 25% or Sliding Scale (better the loss ratio the higher the commission, the worse the loss ratio the lower the commission)

COMMON ACCOUNT (Reinsurance) A term used to describe the joint interests of a cedant and its reinsurer(s). The term is commonly used in relation to the provision of joint reinsurance protection to both parties e.g. Catastrophe excess of loss for “common account” protecting both the  reinsured and reinsurers covering both parties’ interests e.g. “Me and my Quota share reinsurers.

N.B. It is quite common for people to initially confuse Common Account reinsurance of two or more different parties) and Whole Account (reinsurance of all classes) COMMON LAW

The core legal system of many countries of the world e.g. England, U.S. (Most states), Australia, Singapore. Its core principal, it is based on the concept of precedent. i.e. What a more senior Court has said before should be followed unless one can differentiate.

COMMUTATIONThe termination of a (re)insurance contract by agreement of the parties on the basis of one or more lump sum payments by the (re)insurer which extinguish its liability totally under the contract.

COMMUTATION CLAUSE The clause within the contract, provides, by mutual agreement between both parties, for the estimation and complete discharge, by payment by the reinsurer to the cedant, of all future obligations for reinsurance loss or losses incurred (including I.B.N.R.) regardless of the continuing nature of certain losses.

CONFLAGRATION COVER (Reinsurance – Old) Reinsurance protection specifically designed to cover the hazard of extensive and widespread fire damage e.g. bush fires and/or city blocks.

CONSORTIUM (LLOYD’S) An agreement between a group of two or more insurers under which each member of the group agrees to accept a proportion of all risks of a specified type/class/size…. that are underwritten by one or more designated members of the group acting as the Binding Underwriter. e.g. IF A agrees to accept a specific share of the offer B, C, D, E and F are all automatically bound, but same story if F took a share, all the others are automatically bound. Unlike a line slip there is usually no restriction on which Lloyd’s brokers may place business with a consortium.

CONTRIBUTING X/L Where the reinsured not only pays the deductible before reinsurers pay anything, but also participates in the losses above the deductible

CONSTRUCTIVE TOTAL LOSS – Section 60 of the Marine Insurance Act 1906
(MIA 1906) states that, subject to any policy provision, a constructive total loss arises where the subject matter of an insurance is reasonably abandoned to the insurer by the insured on account of its actual total loss appearing unavoidable or because it could not be preserved from actual total loss without an expenditure that would exceed its value.
The term is sometimes used to refer to insured property e.g. a car, which is damaged beyond economic repair.

CONTINGENCY COVER Reinsurance for an unusual combination of losses, probably not really necessary but if the price is right, could be bought.

CONTINGENCY LOADING A loading on the risk premium to help compensate for errors in the price estimation


CONTINUOUS CONTRACT A reinsurance contract that does not terminate automatically but continues indefinitely unless  one party or the other delivers notice of intent . Very common on proportional treaties.

CONTRACTORS ALL RISKS Insurance of Contract Works covering damage to property and third party liability

CONTRACT CERTAINTY Refers to the situation where the terms of an insurance or reinsurance contract are agreed before the inception date of the contract rather than being negotiated afterwards.  See MRC

CONTRACTUAL LIABILITY  – See Assumed Liability


CO-REINSURANCE Where the reinsured is asked by the reinsurers to pay part of any claim themselves e.g. To Pay 95% of XX,XXX,XXX in excess of XX,XXX,XXX or Where the reinsurance  is placed with more than one reinsurer (a Co-Reinsurer)

CO-REINSURER see Co-Reinsurance

CORPORATE MEMBER SYNDICATE (LLOYD’S)A syndicate with a single corporate member as its only member.

CORPORATE MEMBER (LLOYD’S) A company incorporated, admitted to Membership of the Society of Lloyd’s e.g. AIG

CORPORATION OF LLOYD’S (LLOYD’S) The executive of the Council of Lloyd’s, Lloyd’s Franchise Board and their respective committees. The Corporation does not underwrite insurance or reinsurance itself but provides the licences and other facilities that enable business to be underwritten on a worldwide basis by managing agents acting on behalf of members.

COUNCIL OF LLOYD’SThe Council of Lloyd’s was constituted as the governing body of Lloyd’s by Lloyd’s Act 1982. It currently comprises 6 external members, 6 working members and 6 nominated members and is empowered to make byelaws governing the conduct of insurance business at Lloyd’s. Since 2003 the Council has acted through Lloyd’s Franchise Board as regards the development and direction of the implementation of the commercial policy of the Lloyd’s franchise and the direction and regulation of the business of insurance of Lloyd’s.

COVER – Scope of protection provided by a (re)insurance contract.

1)    A document issued by a broker pending the issue of a policy which confirms the arrangement of cover for the named insured/reassured.
2)    Motor insurance cover notes that are issued in the United Kingdom (which incorporate a certificate of insurance) are usually of short duration.

COVERHOLDER A firm or individual that is authorised under the terms of a binding authority to enter into contracts of (re)insurance in the name of the members of the syndicate (Lloyd’s) or an insurer, subject to certain written terms and conditions. A Lloyd’s broker may act as a Coverholder.

CREDIT FOR REINSURANCE The right of a reinsured under statutory accounting and regulatory provisions to treat amounts due from reinsurers as assets or reductions in liabilities.

A Clause on an (re)insurance that states that if the (re)insurance company is unable to pay a valid claim that the “reinsurer” will pay their share of such claim directly to the Original Insured.
e.g Insurer in Liquidation
90% of risk facultatively reinsured 90% of a valid claim will be paid directly to the Original Insured Reinsurers need to be very careful with this clause – especially vis a vis the Regulator of the Insurer.
[1] Reinsured’s total retained premium income for the business being protected.
[2] Captives – Paul Bawcutt