Guy Carpenter

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Reinsurance
Terms

  • Incedental Coverage

    Coverage for a risk, class or type of insurance that is primarily excluded from a reinsurance contract but is excepted from the exclusion because the risk presents only a minimal exposure to the excluded category. The underwriter judges the extent to which the minor (excluded) aspect of a risk might over-balance the larger exposure of the unexcluded portion of the risk.

  • Incurred But Not Reported (IBNR)

    The liability for future payments on losses which have already occurred but have not yet been reported in the reinsurer's records. This definition may be extended to include expected future development on claims already reported. Thus, technically IBNR covers the field from a) those individual losses that have occurred but have not been reported to the insurer or reinsurer to b) that amount of loss that may arise from a known loss which has been reported as an event but which has not been recorded in full to its ultimate loss value (known as loss development). See Loss Development.

  • Incurred Expense (Other than Loss Expense)

    An expense which has happened but which may or may not have been paid.

  • Incurred Loss Ratio

    The relationship between incurred losses and earned premium, usually expressed as a percentage.

  • Incurred Losses

    1. In insurance accounting, an amount representing the losses paid plus the change (positive or negative) in outstanding loss reserves within a given period of time. In other words, loss reserves outstanding at the end of the accounting period, plus losses, paid during the accounting period, minus loss reserves outstanding at the beginning of the accounting period. For example,
      A loss occurs when specific bodily injury or property damage is legally recognized.
      A loss is incurred when the amount of a loss is booked by the accountants in the financial records of the company.
      A loss occurrence is the accumulation of all loss incurred from the losses that occurred from the same cause.
    2. Losses which have happened and which will result in a claim under the terms of an insurance policy or a reinsurance agreement.

  • Indemnity, Contract of

    In business or insurance, a contract to make a party whole from a loss already, or yet to be, sustained. In reinsurance, however, because a reinsurer is obligated to reimburse (indemnify) the reinsured only after the reinsured's payment of a loss, a reinsurance contract is a contract of indemnity rather than a contract of insurance.

  • 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.

  • In-Force Business

    Insurance policies in effect (i.e., whose time of coverage is unexpired) as a reinsurance contract period of time begins, with or without reinsurance coverage.

  • Insolvency Clause

    A provision now appearing in most reinsurance contracts (because many states require it) 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 groups. The basic purpose is to spread the net (after outside reinsurance) writings and exposures of that group evenly across the group's entire policyholder surplus.

  • Interlocking Clause

    A clause in a reinsurance treaty designed to mesh and apportion loss from a single occurrence between two or more reinsurance contracts. The exact opposite is the event approach, designed to cause all loss from one occurrence to have one deemed date of loss, regardless of the number of dates of loss or reinsurance contracts involved.

  • Intermediary

    A reinsurance broker who negotiates contracts of reinsurance on behalf of the reinsured, receiving a commission for placement and other services rendered. Under the terms of one widely used intermediary clause, premiums paid a broker by a reinsured are considered paid to the reinsurer, but loss payments and other funds (such as premium adjustments) paid a broker by a reinsurer are not considered paid to the reinsured until actually received by the reinsured.

  • Intermediary Clause

    A provision in a reinsurance contract which identifies the specific intermediary or broker involved in negotiating the contract, communicating information, and transmitting funds. The clause should state clearly whether payment to the broker does or does not constitute payment to the other party of the reinsurance contract. Currently a widely used clause provides that payments by the reinsured company to the intermediary shall be deemed to constitute payment to the reinsurer(s) and that payments by the reinsurer(s) to the intermediary shall be deemed to constitute payment to the reinsured company only to the extent that such payments are actually received by the reinsured company.

  • Intermediate Excess

    Used in property reinsurance to describe a cover exposed to both catastrophe (occurrence) losses and policy limit exposures, excess of the probable maximum loss.

  • Inure to the Benefit of

    To take effect for the benefit of either the reinsurer or the reinsured. With respect to a given reinsurance contract (usually treaty), other reinsurances which are first applied to reduce the loss subject to the given contract are said to inure to the benefit of the reinsurer of that given contract. If the other reinsurances are to be disregarded as respects loss to the given contract, they are said to inure to the benefit of the reinsured. For example, a reinsured has a 50% quota share contract and a per occurrence excess of loss contract (e.g., catastrophe reinsurance) for $80 million excess of $20 million. A catastrophe loss of $100 million occurs. If the quota share contract inures to the benefit of the catastrophe reinsurer, the loss would be divided in this way. Of the gross loss of $100 million, the quota share reinsurer pays $50 million. Of the remaining $50 million, the reinsured bears $20 million (the catastrophe retention) and the catastrophe reinsurer indemnifies the reinsured to the extent of $30 million. On the other hand, if the quota share contract is to inure to the benefit of the reinsured (i.e., disregarded as respects the catastrophe reinsurance contracts), the catastrophe reinsurer pays $80 million and the remaining $20 million is divided equally between the reinsured and the quota share reinsurer. The reader should note that the inuring reinsurances affect the amount of risks being transferred by the reinsured and which contract is affected. In the first case, the bulk of the risks went to the quota share reinsurer; in the second case, to the catastrophe reinsurer.

  • Investment Income

    Money earned from invested assets. May also include realized capital gains, or be reduced by capital losses, over the same period.