To follow claims paid on the original policy or policies, but only insofar as the reinsured is liable in law.

Reinsurance is considered to be a long term arrangement (even as a partnership between reinsured and reinsurers). In the event of reinsurers suffering a major loss the renewal premium may be increased to include an element of compensation for this loss. A contract in this situation is considered to be in "pay back"

The practice of an underwriter binding on the basis of a pencilled initial on a copy of the slip. When time allows the pencilled line will be cancelled and replaced on the main slip. This practice is intended to expedite completion of the risk prior to inception date.

The information given to the reinsurers at the time of placing the risk that can be used by them to consider the risk. This can include written and verbal information and may include standard market questionnaires

See SLIP

Provisional Notice Of Cancellation

An arrangement whereby a group of insurers or reinsurers agree to accept a fixed proportion of each risk placed with the group

The "book" of business covered by the treaty assumption and withdrawal of Unearned Premium Reserves and/ or Outstanding Loss Reserves (see further CLEAN CUT).

The assumption and withdrawal of Unearned Premium Reserves and/ or Outstanding Loss Reserves (see further CLEAN CUT).

See CLEAN CUT.

See ESTIMATED MAXIMUM LOSS

Pro rata

Premium Reserve

The introduction to a treaty wording, establishing the parties to the contract and the basis for operating the contract.

Premium

See FLAT PREMIUM

A method of transferring unexpired liability from one year to another. Thus, if one reinsurer is to be relieved of its liability under a treaty at the end of the treaty year, it will be debited with an amount representing the UNEARNED PREMIUM in the last account of the year. The new reinsurer who takes over the business for the subsequent year is credited with the premium which has thus been withdrawn from the previous reinsurer. The effect of this transaction is to release the previous reinsurer from any liability in respect of the unexpired portion of the risks which were accepted in the preceding year and the new reinsurer accepts this liability. Thus the new reinsurer assumes liability for all claims which might arise in the current year on the running off of the old risks.

The reinsurance premium expressed as a percentage.

PREMIUM RESERVE

See PREMIUM RESERVE DEPOSIT. See also UNEARNED PREMIUM RESERVE

PREMIUM RESERVE DEPOSIT

A proportion of the premium due to the reinsurer but which is retained by the ceding company as a guarantee for the fulfilment of the obligations of the reinsurer.

A condition in a reinsurance contract which requires the reinsured to pay the premium, usually by a specified date.

See DEDUCTIBLE

Proportionate part

See ESTIMATED MAXIMUM LOSS

A company that specialises in writing reinsurance business, particularly treaty reinsurance, generally using its own in house sales force. Generally, companies of this nature will deal directly with a reinsured client without using the intermediary of a reinsurance broker.

A contingent commission which is allowed to the reinsured in addition to the ceding commission and is based upon the underwriting results of a treaty. There are many methods of calculating Profit Commissions - see further DEFICIT CLAUSE and THREE-YEAR AVERAGE.

A series of PROPORTIONAL TREATIES and/or layers of EXCESS OF LOSS reinsurance designed to protect the reinsured's account.

A term used to describe all forms of reinsurance (facultatively or treaty) where the reinsurer accepts a pro rata share of the premiums and losses in respect of risks which are ceded by the reinsured. See FACULTATIVE; FACULTATIVE OBLIGATORY; QUOTA SHARE TREATY; SURPLUS TREATY.

See PROPORTIONAL REINSURANCE

The cause of a loss. It can be defined as "The active, efficient cause that sets in motion a train of events which brings about a result without the intervention of any force started and working actively from a new and independent source."

PSAC

Policy Signing and Accounting Centre. A London market organisation which was merged in 1991 with the Reinsurance Offices Association (ROA) to form LIRMA.

The actual BURNING COST