Glossary of Reinsurance Terms

Because the audience of this information includes a large proportion of general business readers (rather than reinsurance specialists), the following definitions are provided for terms previously used in the reinsurance overview.

A

• Adjustment – An element in premium calculations, based on considerations of upper and lower limits in the contract concerned.
• Allocation – The apportioning of premium or claims by contract and participants. SurSITE^® is extremely flexible and accurate in all types of allocation required in reinsurance workflows.
• API or Application Programming Interface – A "package" of functions, messages, data structures, data types, and statements that allow different software programs to interact whether or not they were designed to do so.
• Assumed ceding contracts – The SurSITE^® system uses a combination contract that takes the role of both the ceded and assumed contracts when configuring the reinsurance contract workflow. We refer to this combination contract as the Assumed Ceding Contract, which enables configuration and process automation of extensive treaty and facultative contract combinations and reinsurance programs. SurSITE^® allows each cedant to have one or more assumed ceding contracts per risk, splitting the business by producer, region, line-of-business, etc. to offer flexible configuration alternatives.

B

• Book-of-Business or Pool treaties – Key treaties and information repositories in the SurSITE^® solution environment. SurSITE^® supports flexible and complex book-of-business treaties. In a non-pool environment, these represent the retention of the business generally referred to as the book of business.
• Brokerage commission – Brokerage and ceding commissions are both supported within SurSITE^®. See "commissions," below.
• Business type – Within SurSITE^®, this term refers to the kind of ceded contract, e.g. "direct" (not from secondary sources and therefore accompanied by all detailed policy and claim information) or "indirect" (originating with a third-party and therefore lacking certain details, e.g., the original sum insured is not known).

C

• Cash loss limit – A retrocession contract feature in SurSITE^® that allows users to set notification thresholds that generate immediate recovery notices being issued based on loss limit amounts.
• Catastrophe Excess of Loss – Generally, this is a type of excess of loss reinsurance that covers the reinsured against an amount of loss exceeding a specified amount due to losses from catastrophic events. These treaty contract types are supported by SurSITE^®.
• Cedent (sometimes spelled "cedant" in the industry) – The insurer transferring all or part of the risk it has written to another party.
• Ceding – The transfer of all or part of the risk written to another party.
• Claim notification limit – A retrocession contract feature within SurSITE^® that allows users to set a notification threshold keyed to a claim amount. This would set the value that would trigger automatic claim notifications of contracted parties.
• Co-insurance – In the SurSITE^® system, this term refers to arrangements supporting multiple contract coverages on a single risk, even if the specific limits of coverage intersect, as shown in the figure below.
• Co-insurance options – Used here, this term refers to selections made in defining the co-insurance features of a contract in the course of setting up the contract within the system.
• CMS – Contract Management Server, in addition to being a generic term, is the specific name for the Contract Management Server component of the SurSITE^® system.
• Co-insurance types – As above.
• Commissions – Different commissions common to reinsurance business scenarios are accommodated within the system. These can include the commission paid by a reinsurer to a cedent and the commission paid to a broker/intermediary.
• Contract type – Within SurSITE^®, this term refers to either treaty or facultative agreements.
• Coverage – Coverage is represented within the system by a set of flexible system codes, which can be customized for each implementation and client and can be mapped to any method of documenting coverage that a company uses. They describe the type of insurance, e.g. hull, third party liability, personal accident, etc.

E

• Excess contract limits – A limit above which there is no coverage for a non-proportional reinsurance contract such as excess of loss.
• Excess of loss – This reinsurance contract type indemnifies the cedent against loss for all or a portion or risk in excess of a specified retention. It is a type of ceding treaty supported by SurSITE^®.

I

• Individual accounting – Here, the term refers to that reinsurance role-specific accounting activity performed by the system for each party in a reinsurance contract.

L

• LOD – Loss Occurring During, a loss occurrence basis type used in technical accounting supported by SurSITE^®. It is an option selected during contract definition. SurSITE^® supports two ways of adjusting the premium to reflect LOD, the Pro Rata and Underwriting Year Matching methods.
• LSW 304A – This is the abbreviated designation for the London Standard Wording interlocking clause for catastrophe excess of loss contracts.

M

• Manual method – A technical accounting election under which the user controls calculations and makes manual entries in the system. This is offered as an alternative to the system's automated technical accounting capability.
• MGA – Abbreviation for managing general agent. MGA participation in reinsurance contracts is supported by SurSITE^®.

O

• Occurrence basis – A reinsurance contract provision under which the date of the loss event is deemed to be the date of the occurrence, regardless of when reported, as long as it falls within the policy period. STI uses "occurrence basis" as a term for classifying coverage types such as LOD (Loss Occurring During) and LORA (Loss Occurring Risk Attaching).

P

• Premium – Within the system, premiums are managed as transactions subject to flexible and powerful rules that satisfy reinsurance contractual and accounting requirements.
• Proportional surplus – See Surplus, below.

Q

• Quota share – A technical accounting method enabling a reinsurer or pool member to participate in each unit of business of a contract at a certain percentage, subject to contract limitations.

R

• RCM – Reinsurance Contract Management (RCM), in addition to being a generic term, is the specific name for the reinsurance contract management component of the SurSITE^® system.
• Reinsurance contract value chain – A metaphor representing the value added to reinsurance operations by each participant.
• Retention – This is the amount of risk or loss that the reinsurer retains for itself or for specified others. In the system, it is a contract type sometimes called a "pool treaty."
• Retrocession contract – Generally, this is a reinsurance agreement applied to reinsurance business under which a party reinsures all or part of the risk it has previously assumed. SurSITE^® offers flexible and robust support for such contracts. This is used to reduce the amount of risk retained from the assumed business.
• Risk attaching – An occurrence type supported within SurSITE^® that addresses losses on policies issued or renewed during a contract period. This is also commonly known as LORA. SurSITE^® supports both LORA and "LORA with Interlocking."
• Risk classification, risk type – Risk is represented within the system by a set of flexible system codes which can be customized for each implementation and client and can be mapped to any way of documenting risk types that a company may currently use. One example of a risk classification is "Turbo Jet, MTOM>25,000kg, used for commercial purposes." The system uses a configurable risk category, risk class, and risk use approach to organize and process contract information and automate transactions.
• Risk Excess – This is a contract type supported within the system that reduces exposure on any one risk by transferring risk exceeding any defined level. This is similar to an Excess of Loss contract but supports proportional premium calculations methods and requires detailed information for each risk.

S

• Surplus – This is a technical accounting method within the system. Contracts applying the Surplus method arrange for a reinsurer to assume a share of (only) those risks exceeding a direct insurer’s retention line. Proportional surplus treaty contracts for both assumed ceding and retrocession scenarios are supported by this method.
• Surplus units – These are components of contracts or treaties subject to Surplus calculations. Within the system, a single contract can contain multiple surplus units with the possibility of different participants and participation defined for each unit.
• System codes – See "Coverage," above.

T

• TAMS – This term refers to the Technical Accounting Management Server, a component of the SurSITE^® system.
• Technical accounting methods – The different means for providing reinsurance coverage that determine the structure and methods by which premiums and claim allocations are calculated. Examples of technical accounting methods are quota share, risk excess, surplus, and so on as listed out in this document.
• Total estimated exposure – A calculation used by the system in determining the proportion of a claim, which may be recoverable against a reinsurance contract.