LATENT DISEASE - An illness which may lie dormant for years before manifesting itself e.g. silicosis, "black lung", asbestosis, noise induced hearing loss, mesothelioma and various carcinomas.

Lloyd's American Trust Fund

Where the reinsurance coverage is placed in sections, one above the other, rather than in a single contract. Thus a coverage for a total of $5,000,000 may be placed as:-

1st Layer Up to $200,000 in excess of $50,000

2nd Layer Up to $750,000 in excess of $250,000

3rd Layer Up to $4,000,000 in excess of $1,000,000

Different reinsurers will probably be involved with each layer and each layer will be rated individually. The construction of the layering is often dependent upon market conditions.

The underwriter who usually sets the terms for the reinsurance contract. In some cases the agreement to certain modifications to a contract is delegated to the leading underwriter.

These are clauses incorporated into the SLIP whereby insurers and REINSURERS agree to delegate certain responsibilities to the LEADING UNDERWRITER.

A document issued by a Bank which undertakes to pay a stated sum of money to the addressee subject to certain conditions. These are as guarantees of performance under treaties (e.g. as a replacement for Reserve Deposits). Such LOCs are often "Clean" (not subject to conditions) and "Irrevocable" (not cancellable prior to the stated expiry date). See also RESERVE DEPOSITS.

Reinsurance placement where the reinsurance coverage is less wide than the original coverage. For example an Insurer may place TOTAL LOSS ONLY reinsurance in respect of a hull risk that he had accepted on an all risks basis.

The amount which can be ceded under a SURPLUS TREATY is usually expressed in terms of a number of "lines". A "line" is the amount of the REINSURED's retention. Thus a "20 line treaty" means that the treaty will accept a maximum of 20 times the REINSURED's retention.

London Insurance and Reinsurance Market Association.

A broker who is authorised to place insurances at Lloyd's of London.

An additional factor which is taken into account in premium rating or loss reserving (e.g. to include an element for reinsurer's profit in the premium quotation or to increase outstanding claims estimates to cover IBNR losses). See also REVALUATION OF LOSSES, UNUSED EXPOSURE and VARIANCE LOADING.

Excess of Loss Reinsurance contracts of Lloyd's Syndicates and London Companies (see FRINGE) which accept business in what is referred to as the SUBSCRIPTION MARKET. Reinsurances of Lloyd's Motor and Employers Liability Syndicates (which are not part of the "subscription" market) are not considered to be LMX. The concept of what is or is not LMX used to embrace whether or not the account reinsured contained REINSURANCE ASSUMED or business emanating from the USA. See also SPIRAL.

Those types of insurance (e.g. products liability and many classes of third party liability) where it is known from experience that notification, manifestation and settlement of losses may take many years.

The amount of the outstanding losses at a particular date. Occasionally a treaty might provide for the loss portfolio to be withdrawn at termination of the treaty. In such event the reinsurer will pay the reinsured a negotiated percentage (generally in the range from 90% to 110%) of the outstanding losses to the treaty at the termination date in return for a release from any and all future liability. Treaties can also be structured to require the reinsured to assume a loss portfolio. The reinsurer will be credited with the loss portfolio from the previous year and will thus assume liability for all losses paid in the current year but which may have occurred in previous years.

Technically speaking the Loss portfolio is a premium paid by the reinsurers of one year to obtain a release from future liability. This is generally not recognised as such by insurance regulators; probably because of the adverse effect that these transfers could have on an insurer's solvency margins which are calculated upon premium income figures.

LOSSES OCCURRING - The form of excess of loss reinsurance contract whereby only those losses which occur during the period of the treaty are covered thereby. Such losses would be covered even though the original policy of insurance to which they relate may have incepted outside the period of the reinsurance. See also RISKS ATTACHING. LATENT DISEASE losses, particularly in the US., have shown how difficult it is to define this term. Thus the date of the loss occurrence may range from when an insured was exposed to a peril (see EXPOSURE BASIS) or when the disease manifested itself (see MANIFESTATION) or may include the whole of the latent interval in between.