Glossary 3
Overriding Commission - comm paid by an RI to an insurer to cover expenses and profit for Prop business (also Return Commission)
Persistency - probability a policy will remain in force at renewal
Points Rating System - using points to identify risk within a risk factor - for example young drivers would have more points ceterus parabus
Pooling - share of premiums and losses, generally for very large risks
Portfolio Claims & Premiums - used in a portfolio transfer to calculate the reinsurance premium required
Probable/Possible/Estimated Max Loss - an estimate of the max loss possible in a single period based on exposure (Possible is usually a larger estimate, but it can depend), clear up the definition in a question
Product Costing - theoretical office premium calculated
Product Pricing - is the actual premium charged
Profit Commission - any commission payable depending on the performance of the book
Profit Testing - used to estimate the value of a single insurance policy using NPV techniques
Protected NCD - can pay an extra premium to protect their NCD, may be limits on number of claims, etc.
Rating Basis - assumptions on the risk used to price the individual risk itself
Reciprocity - sharing of a reinsured risk
Replacement - like new for old insurance
Risk-attaching Basis - claims arising from policies commencing during the period to which RI relates
Risk Premium - premium required to cover claims only
Run-off Basis - cease to write new business, only pay claims for previously written policies
Section 36 Transfer - transfer of business from one insurer to another (Part V of STIA)
Self-Insurance - any risk that the original insured retains (even the excess). Generally for larger companies with financial might
Solvency Ratio - Free Reserves divided by net (of RI) written premiums
Stability Clause - allows for an index of inflation in a non-prop RI agreement