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Declaratory Judgment

A decision by a court in a proceeding, which can be brought by either the insurer or the insured, to determine the rights of the parties. In insurance, for example, a court decision may be sought to determine whether an insurance company has an obligation to defend, indemnify or pay on behalf of its insured policyholder under a policy with regard to a particular loss or losses.

Declaratory Judgment Expense

Treatment within a reinsurance contract of costs associated with raising and defending Declaratory Judgment actions.  Agreements typically include a definition of Declaratory Judgment, how these costs are treated, and if there are any limitations to the coverage. 

Pro rata contracts usually deem Declaratory Judgment expenses to be loss adjustment expense for cession purposes.

The treatment of DJE within a working excess of loss reinsurance agreement must be specifically detailed in order that there is no confusion.  If DJE is treated as loss adjustment expense, and the reinsured is successful (there is no loss), the reinsured may not be able to recoup any DJE dollars incurred.  Reinsurance agreements have evolved to the point where it is common for DJE to be treated as loss adjustment expense if the reinsured is unsuccessful and there is a loss, and deemed to be loss if the DJ action is successful and there is no loss.  The reinsurer would then be liable for DJE in excess of the reinsurance attachment point, up to the limit of reinsurance.

Deemed (Or So Deemed)

A condition which is said to exist by agreement between the parties even though it may not exist in fact (e.g., "all policy limits greater than $1,000,000 are to be reinsured on a pro rata facultative basis, or be so deemed.") To deem means to treat as if.

Deficit

Generally, when ceded losses are greater than ceded premium, a reinsurer is in a deficit position.

The term can be used whenever inflow is less than payout.

In a sliding scale ceding commission, a deficit is created when the ceding commission calculated per the terms of the slide is below the minimum commission payable by the slide. 

Direct Writer

In reinsurance, a reinsurer which negotiates with a ceding company without going through an intermediary or broker.

In insurance, a primary insurer that sells insurance without use of agents or brokers.

Direct Written Premium

The gross premium income (written instead of earned) of an insurance company, adjusted for additional or return premiums but before deduction of any premiums for reinsurance ceded, and excluding any written premiums from assumed reinsurance.

Domestic Company

An insurer conducting business in its domiciliary state from which it received its charter to write insurance, as opposed to a foreign company (which is an insurer conducting business in a state other than its domiciliary state), or an alien company (which is an insurer domiciled outside the U.S. while conducting business within the U.S.).

 

In reinsurance, the term domestic reinsurers, or domestic markets, refers to U.S. domiciled reinsurers.

Drop Down

A situation in insurance or reinsurance where a layer responds to a loss below the expected attachment point.