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Termsort icon Definition Randy Comment
Rate on Line

Rate on Line equals Reinsurance Premium divided by capacity provided in the layer.

Example:

A Property Catastrophe Layer of $5,000,000 XS $10,000,000 per Occurrence, priced at $1,000,000, has a Rate on Line of 20.0% (1,000,000/5,000,000)

 

It is common for Property Catastrophe Reinsurance to be priced on a Rate on Line basis.  This allows an easy correlation of premium to capacity afforded.  Also, catastrophe layers can be priced while underlying per risk covers are still being negotiated, and Catastrophe Subject Premium is not yet finalized.

 

 

Reinsurance Agreement

Synonymous with Reinsurance Contract.  Document specifying the terms and conditions of a reinsurance transaction, executed by both parties - reinsured and reinsurers.

Reinsurance Contract

Document detailing the terms and conditions of the reinsurance transaction, executed by both parties - reinsured and reinsurer.

Reinsurance Home Office Expense Factor (RHOEF)

Synonymous with Reinsurer's Expense, used in the calculation of a contingent commission in a reinsurance contract.

Reinsurance Rate

Reinsurance Rate equals Reinsurance Premium divided by Subject Premium.

 

Example:

A reinsurance treaty which has Subject Premium of $50,000,000 and a Reinsurance Premium of $1,000,000, is priced at a reinsurance rate of 2.0% ($1,000,000/$50,000,000).

In most reinsurance treaties, which are rated prospectively, the premium is set based on projected Subject Premium, and is adjusted at the Reinsurance Rate.