Those losses that have arisen on policies or contracts written by the insurer or reinsurer but which have not yet been advised to them.

The total of paid and outstanding claims.

INCURRED LOSSES expressed as a percentage of PREMIUMS (which can be related to EARNED or WRITTEN PREMIUMS, depending upon the basis of the contract).

INCURRED CLAIMS

INDEX CLAUSE - A clause usually contained in excess of loss reinsurances covering third party bodily injury. The intention is for both the REINSURED and the REINSURER to share the effects of inflation by maintaining the monetary values existing at inception of the treaty. These effects are shared pro-rata in the ratio that the original deductible and reinsurance coverage bear to the ultimate indemnity payment. The usual form provides for the deductible and the reinsurer’s limit to be increased according to the increase in an Index (generally a wages index) between the date of inception of the treaty and the date of settlement of the loss. Without such a clause the effects of inflation on claims would fall solely upon the REINSURER The SEVERE INFLATION CLAUSE is a variation whereby the indexation applies only if the rate of inflation exceeds, say, 20% or some other negotiated figure.

A clause usually included in a TREATY WORDING whereby it is stated that the loss to the REINSURER shall not be increased due to the inability of the REINSURED to collect from another REINSURER.

A clause usually found in treaty wordings which allows for the reinsurer or its representative to inspect those records of the reinsured relating to transactions under the contract. An important requirement is that the right of inspection should be allowed to continue after termination of the reinsurance and for as long as the reinsurer has any liability arising therefrom.

An organisation of marine and Aviation Insurance companies based in London. Working closely with Lloyd’s marine and aviation underwriters, the ILU provides facilities for discussion between underwriters whereby matters of common interest can be considered and recommendations made for the benefit of all marine insurers. The ILU also provides many services for the use of members, including a policy signing service, and publishes the widely used Institute clauses.

The relationship of the assured, or reassured, to the subject matter exposed to risk.

In the event that a REINSURED retains PREMIUM RESERVES or LOSS RESERVES (which actually belong to the REINSURER) the contract agreement will usually provide for interest at a certain agreed rate to be paid to the REINSURER.

Interlocking Clause - A clause in a contract which is on risks attaching basis which allows for a loss occurrence to be apportioned between years of account when a loss occurrence arises on policies that attach to different underwriting years. This is done by proportionately reducing the deductible and reinsurer’s liability for each of the two years by the percentage that the loss to each year of account bears to the total amount of the loss arising from the loss occurrence.

A clause generally used in a treaty wording, where a broker is involved, to nominate the broker as the official channel through whom communications are to be directed. Certain versions can impose obligations on the broker as to payment of premiums or recovery of losses.

A clause appearing in the treaty wording which specifies the legal system to be applied to the reinsurance contract. Formerly it was usually assumed that English Law would apply to treaties but nowadays, because of the international nature of the business, it is becoming increasingly important to specify the relevant legal system.