GLOSSARY

C

CANCELLATION – (a) Run-off basis means that the liability of the reinsurer under policies, which became effective under the treaty prior to the cancellation date of such treaty, shall continue until the expiration date of each policy;  (b) Cut-off basis means that the liability of the reinsurer under policies, which became effective under the treaty prior to the cancellation date of such treaty, shall cease with respect to losses resulting from accidents taking place on and after said cancellation date.  Usually the reinsurer will return to the company the unearned premium portfolio, unless the treaty is written on an earned premium basis.

CAPACITY – The largest amount of insurance an insurer or a reinsurer is willing and able to underwrite, including the amount they retain and the amounts for which they automatically bind their reinsurer.

CAPTIVE INSURANCE COMPANY – A risk-financing method or form of self-insurance involving the establishment of a susidiary corporation or association organized to write insurance.  Captive insurance companies are formed to serve the insurance needs of the parent organization and to escape uncertainties of commercial insurance availability and cost.  The insureds have a direct involvement and influence over the company’s major operations, including underwriting, claims, management policy, and investments.

CATASTROPHE REINSURANCE – A form of reinsurance that indemnifies the ceding company for the accumulation of losses in excess of a stipulated sum arising from a catastrophic event such as conflagration, earthquake or windstorm.  Catastrophe loss generally refers to the total loss of an insurance company arising out of a single catastrophic event.  These losses typically must exceed a specified amount and number of insurers and locations.

CEDE– To cede is to transfer part or all of a risk to another company (reinsurer).  A fee is charged for the service of accepting that risk.

CEDING COMMISSION – An amount paid by a reinsurer to the ceding company to cover the ceding company’s acquisition and other expenses.  The cedant’s acquisition costs and overhead expenses, taxes, licenses and fees, plus a fee representing a share of expected profits – sometimes expressed as a percentage of the gross reinsurance premium.

CEDING COMPANY – The original or primary insurer; the insurance company that transfers its risk to a reinsurer.

CELL CAPTIVE – A sponsored captive or rent-a-captive, which maintains underwriting accounts separately for each member.

CLAIMS-MADE BASIS – A form of reinsurance under which the date of the claim report is deemed to be the date of the loss event.  Claims reported during the term of the reinsurance agreement are therefore covered, regardless of when they occurred.  A claims made agreement is said to “cut off the tail” on liability business by not covering claims reported after the term of the reinsurance agreement – unless extended by special agreement.  See Occurrence Basis.

COMMISSION – In reinsurance, the primary insurance company usually pays the reinsurer its proportion of the gross premium it receives on a risk.  The reinsurer then allows the company a ceding or direct commission allowance on such gross premium received, large enough to reimburse the company for the commission paid to its agents, plus taxes and its overhead.  The amount of such allowance frequently determines profit or loss to the reinsurer.

COMMUTATION – In the result of the termination of this contract, the reinsurer shall be free from all further liability to the company for all loss and allocated loss expense not finally settled by the company as of the date of termination. In consideration of that release, the reinsurer shall pay to the company all amounts of loss and allocated loss expense due for losses finally settled.

COMMUTATION CLAUSE –  A clause in a reinsurance agreement, which provides for estimation, payment and complete discharge of all future obligations for reinsurance losses incurred regardless of the continuing nature of certain losses such as unlimited medical and lifetime benefits for Workers’ Compensation.

CONTINGENT COMMISSIONS – (or Profit Commission) – A payment to the ceding company in addition to the normal ceding commission allowance.  It is a pre-determined fixed percentage of the reinsurer’s net profits after a charge for the reinsurer’s overhead, derived from the subject treaty.

CONTRIBUTING EXCESS – Where there is more than one reinsurer sharing a line of insurance on a risk in excess of a specified retention, each such reinsurer shall contribute towards any excess loss in proportion to his original participation in such risk.  Example: Retention $75,000, reinsurer A accepts one-half contributing share part of $1,000,000 in excess of said $75,000. reinsurer B accepts remaining one-half contribution share part of $1,000,000

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After experiencing tremendous losses due to a natural disaster uncovered by my commercial carrier, I knew it was time to form a captive and shopped around for a captive manager...we couldn’t be happier that we chose Elevate.

Joe M.

Communication is quick and effective, documents are always organized and available and my questions are always answered efficiently and professionally.

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We chose Elevate because of their reputation in our business community, and their services have exceeded expectations. We trust Elevate.

John R.

I have worked with Jerry Messick and the Elevate Captive team since 2012. They have been instrumental in guiding us properly on how to implement and run a captive successfully. The due diligence and proactive service on the part of the Elevate team is unrivaled. Their product knowledge and how to use the instrument to our benefit, while providing sound risk management and compliance principles is another huge differentiating factor for their firm. In addition, the team of experts that Elevate has referred us to in the legal and financial advisory areas has turned out to be top notch. The Captive is only as good as the entire team. Finally, it has to be mentioned that we “just plain like” Jerry and Co.. Friendly, smart and easy to work with. A real pleasure.

John H.