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Accident Year Experience

The matching of all losses occurring (regardless of when the losses are reported) during a given twelve-month period of time (usually a calendar year) with all premium earned (regardless of when the premium was written) during the same period of time. More specifically, the total value of all losses occurring (losses paid, plus loss reserves, minus recoveries) during the defined twelve-month time period (i.e., the date of loss falls within the time period) is divided by the earned premium for this same exposure period. As the experience is developing, loss reserves are used in the calculation, but the ultimate result cannot be finalized until all losses are settled.  Schedule P of the Annual Statement is calculated on an Accident Year basis.

Acquisition Costs

All expenses incurred by an insurance or reinsurance company which are directly related to acquiring insurance accounts (insured, or reinsured) for the company.  The typical Acquisition Cost of an insurance company is agent commissions.  Acquisition costs are reimbursed in a reinsurance contract through the ceding commission.

Administration Expenses

Costs incurred in conducting an insurance operation other than loss adjustment expenses, acquisition costs, and investment expenses.  Underwriting expenses and Company Operations costs are typically included in Administration Expenses.   Such costs are usually reimbursed by the reinsurer through the ceding commission in the reinsurance contract.

Admitted Assets

Assets recognized and accepted by state insurance laws in determining the solvency of insurers or reinsurers. 

Admitted Company

An insurer licensed to conduct business in a given state, or, a reinsurer licensed or approved to conduct business in a given state.

Agency Reinsurance

  • A designation that identifies the reinsurance of one or more of an agent's policies, with the agent acting for the reinsured under its authority.

  • A contract of reinsurance between a policy-issuing insurer and a reinsurer that concerns or is confined to business produced by a named agent of the insurer, usually generated by that agent and administered directly with the reinsurer with permission of the insurer. While there are other reasons for the practice, the usual intent is to allow an agent to issue larger policies than the insurer would otherwise permit. Usually, agency reinsurance is written as proportional reinsurance on property or other first-party insurances.

Aggregate Excess of Loss

The reinsurer indemnifies an insurance company (the reinsured) for an aggregate (or cumulative) amount of losses in excess of a specified aggregate amount. Can be written excess of a dollar amount (e.g., $500,000 in the aggregate excess of $500,000 in the aggregate) or excess of a percentage (loss ratio) amount (e.g., 50 loss ratio points excess of 75 loss ratio points). Can also be written with an interior deductible, i.e., to apply only to losses excess of a stated dollar amount (e.g., $500,000 in the aggregate excess of $500,000 in the aggregate applying only to losses greater than $50,000 per loss).

Aggregate Extension

A provision within a reinsurance contract permitting the aggregating of what would otherwise be two or more accidents or occurrences so that they are considered as one accident or occurrence for purposes of cession to an excess of loss reinsurance contract. Thus, only one company retention and one reinsurer's limit of liability apply. Many variations may be used in further defining the term, e.g., the aggregating is usually tied to loss arising out of one policy during one policy period or, if not to one policy, then loss to one insured during a specified period

Aggregate Extraction

A provision within a reinsurance contract permitting a portion of what would traditionally be considered as one loss to be extracted and included as part of a separate loss. Example: an aggregate policy, where the reinsurance contract considers all loss under such a policy to be one occurrence, when one of the losses under that policy is involved in the same loss as another policy(ies) of the reinsured company. The aggregate policy loss may be extracted and combined with the other policy(ies) loss to make a more favorable claim under the reinsurance contract. 

Aggregate Stop Loss Reinsurance

A form of aggregate excess of loss reinsurance which indemnifies the reinsured against the amount by which the reinsured's aggregate losses incurred during a specific period exceed either an agreed amount or an agreed percentage of some other business measure, such as aggregate net premiums over the same period.  This form of reinsurance is also known as stop-loss reinsurance, stop-loss-ratio reinsurance, or excess of loss ratio reinsurance. 

Alien Company

An insurer or reinsurer domiciled outside the U.S. but conducting an insurance or reinsurance business within the U.S. 


Alternative Risk Transfer (ART)
Any form of risk transfer that includes at least an element of insurance risk, rather than purely financial risk. Possible features of ART include, but are not restricted to:
        Tailor-made solutions
        Multi-year policies
        Often the coverage of risks that the conventional market would regard as uninsurable
        Often the inclusion of some form of risk transfer of non-insurance risk

The definition of ART includes, but is not restricted to, finite reinsurance and securitisation of insurance risks.

from International Association of Insurance Supervisors


Alternative Risk Transfer (ART) Market

Name for the marketplace in which nontraditional risk transfer approaches (as compared to commercial insurance) can be arranged. Some of the types of entities and approaches included in this marketplace are captive insurance companies, pools, and risk retention groups.


Amortization Period (Payback Period)

This term is used in the rating of per occurrence excess of loss agreements and represents the number of years, at a given premium level, necessary to accumulate total premiums equal to the indemnity limit of the contract.


Example:  A $10,000,000 XS $1,000,000 Property Catastrophe Excess of Loss layer priced at $500,000 has an Amortization Period of 20 years.  The inverse of Amortization Period/Payback is Rate on Line (ROL).  This layer of coverage would have a 5% ROL. 

Attachment Point

In an excess of loss structure, the point at which the reinsured's retention is satisfied, and above which losses are ceded to the reinsurer.  The attachment point can be stated as a dollar amount or a percentage (such as in an aggregate stop loss agreement placed on a loss ratio basis).


Example:  In a $1,000,000 XS $500,000 excess of loss, the attachment point of the reinsurance is $500,000. 

Authorized Reinsurance

Reinsurance placed with a reinsurer which is licensed or otherwise approved by a particular state insurance department.  This is a very important distinguishing characteristic, as an insurance company cannot take credit for unauthorized reinsurance in Schedule F of its Financial Statement.