What is an index clause?
Index Clause — an index clause, also referred to as an inflation clause, a stability clause, or an indexation clause, redistributes inflation-related increases in the costs of claims between the ceding insurer and its reinsurer.
What are the forms of reinsurance?
7 Types of Reinsurance
- Facultative Coverage. This type of policy protects an insurance provider only for an individual, or a specified risk, or contract.
- Reinsurance Treaty.
- Proportional Reinsurance.
- Non-proportional Reinsurance.
- Excess-of-Loss Reinsurance.
- Risk-Attaching Reinsurance.
- Loss-occurring Coverage.
What is FGU insurance?
From the Ground Up (FGU): Term used in excess of loss reinsurance to describe the amount of an incurred loss from zero (the ground) to its ultimate incurred amount.
What is excess clause?
An excess clause is any clause which attempts to make the policy in question excess if there are any other policies of insurance that would cover an accident.
What is non-proportional reinsurance?
Nonproportional Reinsurance — also known as excess of loss reinsurance. Losses excess of the ceding company’s retention limit are paid by the reinsurer, up to a maximum limit. Reinsurance premium is calculated independently of the premium charged to the insured. The reinsurance is frequently placed in layers.
What is non-proportional facultative reinsurance?
Non-proportional reinsurance, or excess of loss basis, is based on loss retention. The ceding insurer agrees to accept all losses up a predetermined level. The reinsurer agrees to reimburse the ceding insurer for losses above the predetermined level and up to the reimbursement limit provided for in contact.
What is proportional reinsurance?
Proportional reinsurance coverage is reinsurance of part of original insurance premiums and losses being shared between a reinsurer and insurer. Under proportional reinsurance coverage, the insurer and the reinsurer both share the premiums and the claims on a given risk in a specified proportion.
What is UNL in reinsurance?
In reinsurance, ultimate net loss refers to the unit of loss to which the reinsurance applies, as determined by the reinsurance agreement. In other words, the gross loss less any recoveries from other reinsurance which reduce the loss to the treaty in question.
What is ground cover?
What Is Ground-Up Loss? Ground-up loss is the total amount of loss that is covered by an insurance policy. Ground-up loss does not include deductibles paid by the insured, nor does it include liabilities ceded to a reinsurance company.
What is the difference between primary and excess coverage?
Primary insurance is the policy that covers a financial liability for the policyholder as a result of a triggering event. Primary insurance kicks in first with its coverage even if there are other insurance policies. Excess insurance covers a claim after the primary insurance limit has been exhausted or used up.
What if my claim is less than the excess?
If the damage to your vehicle is minor, and the cost of repairing it is less than your excess, lodging a claim is unnecessary. You can still have a claims adjustor make an assessment of the damage so you have an accurate idea of the bill you’re facing, but without any obligation to file a claim.
How is the stability clause used in non-proportional reinsurance?
In this article, we shall take a look at how these claim expenditures arise and how the stability clause is used to manage them. Under non-proportional reinsurance, the liability of the reinsurer attaches at the point of a claim. Any claim in excess of the agreed priority is borne by the reinsurer.
What are the terms of a proportional reinsurance agreement?
A proportional reinsurance agreement, also known as “Pro Rata” reinsurance, obligates the reinsurer to share a percentage of the losses. The reinsurer receives a prorated share of the insurer’s premiums. For example, a proportional reinsurance agreement may require a reinsurer to cover 60% of losses.
Can a reinsurance contract trigger an index clause?
Here, if claims are affected by inflation, the reinsurer will pay less and less over time (R.L. Carter, Reinsurance ). An index clause in a reinsurance contract can also trigger at different points of a claim. A predominant type of index clause used by European ceding insurers is the London Market Indexation Clause (LMIC).
How are index clauses used in a proportional treaty?
In proportional treaties, the ceding insurer and the reinsurer share the premiums and losses on a percentage basis, and thus the burden of inflation appears to fall on both parties ratably. As reinsurance markets began to adopt the use of index clauses, index clauses began to take various forms.