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Termsort icon Definition Randy Comment
In Force Business

Insurance policies in effect at a specific poin in time. 

 

Some reinsurance contracts refer to "in force, new and renewal business", meaning that those policies written and renewed during the contract period, plus those already in effect, are subject to the reinsurance.

 

Statistical profiles developed on an In Force basis include all of the policies in effect as of the report date.

Incurred But Not Reported (IBNR)

The liability for future payments on losses which have already occurred but have not yet been reported to the insurer (or reinsurer). This definition may be extended to include expected future development on claims already reported. Thus, technically IBNR covers both a) those individual losses that have occurred but have not been reported to the insurer or reinsurer, and b) that amount of loss that may arise from a known loss which has been reported but which has not been recorded at its its ultimate loss value.

Incurred Loss Ratio

Incurred Losses / Earned Premium

Incurred Losses

Loss Reserves + Paid Losses

The calculation of Incurred Losses is dependednt on the statistical basis being used - Calendar Year, Accident Year, or Policy Year.

Calendar Year Incurred Loss equals losses paid during the period, plus loss reserves recorded at the end of the period, minus losses recorded at the beginning of the period.

Accident Year Incurred Loss equals all paid loss amounts and loss reserves relating to losses occurring during the period

Policy Year Incurred Loss equals all paid loss amounts and loss reserves relating to losses incurred under policies in effect during the period.

Incurred Losses

Loss Reserves + Paid Losses

 

The calculation of Incurred Losses is dependednt on the statistical basis being used - Calendar Year, Accident Year, or Policy Year.

 

Calendar Year Incurred Loss equals losses paid during the period, plus loss reserves recorded at the end of the period, minus losses recorded at the beginning of the period.

 

Accident Year Incurred Loss equals all paid loss amounts and loss reserves relating to losses occurring during the period

 

Policy Year Incurred Loss equals all paid loss amounts and loss reserves relating to losses incurred under policies in effect during the period.

Indexing

A procedure which adjusts retention and limit provisions of excess of loss reinsurance agreements in accordance with the fluctuations of a published economic index, such as wage, price, or cost-of-living.

Industry Loss Warranty

A coverage trigger within a reinsurance treaty, whereby reinsurers are only liable for losses when the event causes losses to the entire insurance industry of a stated amount. 

 

Example:  A $100,000,000 XS $50,000,000 Property Catastrophe Program with a $2 Billion Industry Loss Warranty (ILW) is subject to up to $100,000,000 in loss in excess of the reinsured's $50,000,000 retention, only when the industry wide loss emanating from that event is $2 Billion or greater.  The reinsurer would not be liable for any loss if the total losses incurred by the reinsued are less than $50,000,000, and/or the industry wide loss is less than $2 Billion. 

Insolvency Clause

A standard provision in a reinsurance contract stating that the reinsurance is payable, in the event the reinsured is insolvent, directly to the company or its liquidator without reduction because of its insolvency or because the company or its liquidator has failed to pay all or a portion of any claim.

Insurance

The transfer of risk (chance of loss) from one party (the insured) to another party (the insurer), in which the insurer promises (usually specified in a written contract) to pay the insured (or others on the insured's behalf) an amount of money (or services, or both) for economic losses sustained from an unexpected (accidental) event, during a period of time, for which the insured makes a premium payment to the insurer.

Intercompany Reinsurance

Reinsurance entered into among the affiliated members of an insurance group. Often called an intercompany "pool," the practice is common among major insurance carriers which own multiple companies.  A common purpose for such transactions is to spread the net (after outside reinsurance) writings and exposures of the group to most efficiently utilize the group's total capital base. 

Interlocking Clause

A clause in a reinsurance treaty designed to apportion loss from a single occurrence between two or more reinsurance contracts.