• Each and Every

    An expression used in treaties and certificates to mean in the aggregate, without exception.

  • Early Warning Tests

    Financial ratio and performance criteria designed by the National Association of Insurance Commissioners to identify insurance companies which may need closer surveillance by state insurance departments.

  • Earned Premium

    That portion of written premium equal to the expired portion of the time for which the insurance or reinsurance was in effect. Technically, the following definitions are appropriate:

    1. Accounting Earned: This is the most common and widely understood method. The unearned premium reserve at the beginning of the period is added to the premium written (booked) during the period, and the unearned premium reserve at the end of the period is subtracted. Accounting Earned is the figure used in the Annual Statement.
    2. Exposure Earned: This method calculates the premiums which were actually exposed to loss (or earned) for the period. The date on which premiums were booked is disregarded. What is significant is the effective date and term to which the premium applies. The portion of the premium written which was exposed to loss (earned) is allocated to the exposure period whether the premiums were booked prior to the period, during the period, or after the period. The exposure earned premium eliminates the deficiency contained in accounting earned premium that results from timing problems in the recording of premiums.
  • Errors and Omissions Clause

    A clause in a reinsurance treaty (requiring some affirmative act by the reinsured to activate the reinsurance protection) which stipulates that, in the event of inadvertent error or omission, the reinsured shall not be prejudiced in the fulfillment of the agreement, provided that such error or omission shall be corrected as soon as it is discovered.

  • Event Loss Trigger

    An approach designed to deem that all loss from one occurrence had one date of loss, regardless of the type of coverage (i.e., occurrence or claims made), or the number of dates of loss thereunder, or the reinsurance contracts or periods involved. The opposite of an INTERLOCKING loss trigger.

  • Evergreen Clause

    A provision in a Letter of Credit that calls for the LOC to renew each year for an additional year unless written notice of non-renewal is sent by the bank within a required period of time prior to the LOC's anniversary date.

  • Excess Judgment Loss

    The amount paid by a liability insurer in excess of applicable policy limits occasioned by the failure, on account of negligence or bad faith, to settle a claim for an amount within such policy limits. See Loss in Excess of Policy Limit.

  • Excess Limits Premiums

    In casualty insurance, premiums for limits or layers of liability added to basic limits, calculated as multiples of basic limits premium. Excess limits premiums were the original (and remain a popular) basis of premium paid for casualty excess of loss reinsurance.

  • Excess of Line Reinsurance

    A form of per risk excess agreement under which the indemnity is not a fixed dollar limit but a multiple of the primary company's net loss retention.

  • Excess of Loss Reinsurance

    A generic term describing reinsurance which, subject to a specified limit, indemnifies the reinsured company against all or a portion of the amount of loss in excess of the reinsured's specified loss retention. The term is generic in deserving various types of excess of loss reinsurance, such as per risk (or per policy), per occurrence (property catastrophe or casualty clash), and annual aggregate. The loss retention in excess of loss reinsurance should not be confused with the policy retention in surplus share re-insurance, which always refers to a pro rata form of reinsurance in which, once a cession of insurance is made, the reinsured and reinsurer share insurance liability, premium and losses, beginning with the first dollar of loss. Also known as Non-proportional Reinsurance.

  • Excess per Risk Reinsurance

    A form of excess of loss reinsurance which, subject to a specified limit, indemnifies the reinsured company against the amount of loss in excess of a specified retention with respect to each risk involved in each loss.

  • Exclusions

    Those risks, perils, or classes of insurance with respect to which the reinsurer will not pay loss or provide reinsurance, notwithstanding the other terms and conditions of reinsurance.

  • Ex Gratia Payment

    A claim payment not necessarily required by an insurance policy but made as a commercial accommodation by the insurer to the policyholder.

  • Expense Ratio

    Expenses (other than loss adjustment expenses) incurred during a specific period of time, divided by premiums written during the same period.

  • Expiration

    The cessation of a reinsurance cover when the time period for which it was written has ended. A treaty written on a "continuous until cancelled" basis does not expire automatically but will contain a provision for termination.

  • Exposure in Residence

    Harm from a latent substance within the body, even after active exposure is discontinued. In asbestos or other latent bodily injury context, the period during which the body incurs injury or disease as tissue reacts to the hazardous substance. In Keene Corporation v. INA (667 F2d. 1034, D.C. Cir., 1981), Keene's counsel characterized exposure in residence as the subsequent progress of a disease following exposure.

  • Extra-Contractual Damages (Extra-Contractual Obligations, E.C.O.)

    In reinsurance, monetary awards required by a court of law against an insurer for its negligence to its insured. Such payments required of an insurer to its insured are extracontractual in that they are beyond the insurance contract between insurer and insured. A reinsurance treaty may cover these damages and, if so, will specify covered situations, percentages applicable, and required premium charges.

  • Extraction Factor

    A fraction or percentage of a reinsured company's subject premium which is deducted from the reinsurance premium to recognize and measure that portion of any policies not covered by reinsurance when the policies are written by the reinsured on an indivisible premium basis. For example, if property excess reinsurance does not cover third-party liability or burglary in a reinsured company's Homeowners Policy, an extraction factor would adjust the reinsurance premium accordingly.

  • By Robert W. Strain, CLU, CPCU. Presented with the kind permission of Strain Publishing & Seminars, Inc., P.O. Box 1520, Athens, Texas 75751. This glossary appears in both Reinsurance 1997 and Reinsurance Contract Wording 1996. Both books are available from Permission is given to quote from this glossary or to reproduce it in whole or in part if the source of the quotation or reproduction is cited in the use thereof.