# Reserves, Cat Risk and Reinsurance Glossary

> 61 terms from the Insurance book's Reserves, Cat Risk and Reinsurance part, each defined in a line and linked to the chapter that explains it.

- **Accident year:** the year a loss occurred, the usual origin period of a P&C loss triangle ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#what-a-reserve-contains)).
- **Actual cash value (ACV):** replacement cost less depreciation; many policies pay it first and the holdback on replacement ([Homeowners & Renters](https://www.syntaqx.com/books/insurance/homeowners-and-renters#replacement-cost-acv-and-roofs)).
- **Adverse development cover (ADC):** excess of loss reinsurance on reserves for specified accident years, paying if they develop beyond an attachment ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#adverse-development-covers-and-loss-portfolio-transfers)).
- **Aggregate exceedance probability (AEP):** the annual probability that the sum of all catastrophe losses in a year exceeds an amount ([Catastrophe Models & Their Regulators](https://www.syntaqx.com/books/insurance/catastrophe-models#what-a-model-does)).
- **Aggregate excess of loss:** reinsurance that pays when total subject losses over a period exceed an aggregate retention ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#excess-of-loss)).
- **Appointed Actuary:** the qualified actuary a P&C insurer's board appoints to sign its Statement of Actuarial Opinion on reserves ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#the-statement-of-actuarial-opinion)).
- **Average annual loss (AAL):** the expected catastrophe loss per year, the sum over modeled events of annual rate times mean loss ([Catastrophe Models & Their Regulators](https://www.syntaqx.com/books/insurance/catastrophe-models#a-worked-event-loss-table)).
- **Basis risk:** the difference between what an index or parametric cover pays and the sponsor's actual loss ([Cat Bonds, ILS & State Cat Funds](https://www.syntaqx.com/books/insurance/alternative-capital#triggers)).
- **Bornhuetter-Ferguson method:** a reserving method that sets IBNR to expected losses times the share of ultimate not yet reported, weighting experience by maturity ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#bornhuetter-ferguson)).
- **Broad IBNR:** all unpaid claims other than case reserves: development on known claims, reopenings, pure IBNR and claims in transit ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#what-a-reserve-contains)).
- **Cash call:** a treaty clause letting the cedent bill a large loss immediately instead of in the periodic account ([Reinsurance Operations](https://www.syntaqx.com/books/insurance/reinsurance-operations#accounts-and-bordereaux)).
- **Cat code:** the catastrophe event a claim is assigned to, used to count, staff, reserve and recover the event's losses ([Catastrophe Events](https://www.syntaqx.com/books/insurance/catastrophes#cat-codes-on-claims)).
- **Catastrophe bond:** reinsurance issued as a security by a special purpose insurer, with the limit held in a collateral trust and principal lost if a trigger is met ([Cat Bonds, ILS & State Cat Funds](https://www.syntaqx.com/books/insurance/alternative-capital#catastrophe-bonds)).
- **Catastrophe excess of loss:** reinsurance that pays the part of one loss occurrence's total losses above a retention, up to a limit ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#excess-of-loss)).
- **Cede, cedent:** to transfer risk to a reinsurer; the insurer that does so ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#treaty-and-facultative)).
- **Ceding commission:** the percentage of ceded premium a proportional reinsurer pays the cedent for acquisition and administration costs, flat or sliding with the loss ratio ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#ceding-commission)).
- **Certified reinsurer:** a reinsurer from a qualified jurisdiction, rated by the commissioner, that posts collateral by its rating from 0% (Secure-1) to 100% (Vulnerable-6) ([Reinsurance Operations](https://www.syntaqx.com/books/insurance/reinsurance-operations#credit-for-reinsurance)).
- **Chain ladder (development technique):** a reserving method projecting losses to ultimate with age-to-age factors from earlier accident years ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#chain-ladder)).
- **Collateralized reinsurance:** a reinsurance contract whose full limit is funded in trust by investors ([Cat Bonds, ILS & State Cat Funds](https://www.syntaqx.com/books/insurance/alternative-capital#sidecars-and-collateralized-reinsurance)).
- **Commutation:** a lump-sum settlement of all future obligations under a reinsurance contract ([Reinsurance Operations](https://www.syntaqx.com/books/insurance/reinsurance-operations#recoverables-and-collections)).
- **Credit for reinsurance:** the extent to which a cedent may count reinsurance on its statutory balance sheet, set by the reinsurer's category and collateral ([Reinsurance Operations](https://www.syntaqx.com/books/insurance/reinsurance-operations#credit-for-reinsurance)).
- **Cumulative development factor (CDF):** the product of age-to-age factors from an age to ultimate ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#chain-ladder)).
- **Defense and cost containment (DCC), adjusting and other (A&O):** the NAIC's split of loss adjustment expense since 1998: defense litigation and medical cost containment, and all other claim adjusting expense ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#loss-adjustment-expense)).
- **Event loss table (ELT):** a catastrophe model's output listing each simulated event with its annual rate and the portfolio's loss ([Catastrophe Models & Their Regulators](https://www.syntaqx.com/books/insurance/catastrophe-models#what-a-model-does)).
- **Exceedance probability (EP) curve:** the annual probability that losses exceed each amount, on an occurrence (OEP) or aggregate (AEP) basis ([Catastrophe Models & Their Regulators](https://www.syntaqx.com/books/insurance/catastrophe-models#what-a-model-does)).
- **Exposure snapshot:** a frozen set of insured locations with values, characteristics and terms sent to a catastrophe model ([Catastrophe Models & Their Regulators](https://www.syntaqx.com/books/insurance/catastrophe-models#exposure-data)).
- **Facultative reinsurance:** reinsurance of a single risk, negotiated individually ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#treaty-and-facultative)).
- **Florida Commission on Hurricane Loss Projection Methodology:** the 12-member panel whose accepted hurricane and flood models Florida insurers must use, unmodified, in residential rate filings ([Catastrophe Models & Their Regulators](https://www.syntaqx.com/books/insurance/catastrophe-models#florida-s-commission)).
- **Florida Hurricane Catastrophe Fund (FHCF):** Florida's mandatory state reinsurance fund reimbursing 45%, 75% or 90% of residential hurricane losses above a statutory retention ([Cat Bonds, ILS & State Cat Funds](https://www.syntaqx.com/books/insurance/alternative-capital#the-florida-hurricane-catastrophe-fund)).
- **Hours clause:** a reinsurance contract's definition of one loss occurrence as losses within a set number of hours from one cause ([Catastrophe Events](https://www.syntaqx.com/books/insurance/catastrophes#cat-codes-on-claims)).
- **IBNER:** incurred but not enough reported: future development on known claims ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#what-a-reserve-contains)).
- **IBNR:** incurred but not reported; in the broad sense, all unpaid claims other than case reserves ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#what-a-reserve-contains)).
- **Indemnity trigger:** a cat bond or reinsurance trigger that pays on the sponsor's own losses ([Cat Bonds, ILS & State Cat Funds](https://www.syntaqx.com/books/insurance/alternative-capital#triggers)).
- **Industry index trigger:** a trigger that pays on an industry loss estimate, such as Verisk PCS's ([Cat Bonds, ILS & State Cat Funds](https://www.syntaqx.com/books/insurance/alternative-capital#triggers)).
- **Industry loss warranty (ILW):** reinsurance that pays based on the industry's total insured loss from an event rather than the buyer's own ([Cat Bonds, ILS & State Cat Funds](https://www.syntaqx.com/books/insurance/alternative-capital#triggers)).
- **Inuring order:** the contractual order in which reinsurance recoveries reduce the losses subject to other covers ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#inuring-order)).
- **Layer:** an excess of loss cover between an attachment and attachment plus limit, written as "limit xs attachment" ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#excess-of-loss)).
- **Loss development triangle:** losses by origin period and development age, each diagonal a valuation date ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#the-development-triangle)).
- **Loss portfolio transfer (LPT):** a cession of existing reserves and the assets backing them to a reinsurer ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#adverse-development-covers-and-loss-portfolio-transfers)).
- **Occurrence exceedance probability (OEP):** the annual probability that the largest single catastrophe event exceeds an amount ([Catastrophe Models & Their Regulators](https://www.syntaqx.com/books/insurance/catastrophe-models#what-a-model-does)).
- **Parametric trigger:** a trigger that pays on a measured physical parameter such as wind speed or magnitude ([Cat Bonds, ILS & State Cat Funds](https://www.syntaqx.com/books/insurance/alternative-capital#triggers)).
- **PCS catastrophe:** an event Verisk Property Claim Services designates and numbers when it expects more than US$25 million of US insured damage affecting many policyholders and insurers ([Catastrophe Events](https://www.syntaqx.com/books/insurance/catastrophes#how-an-event-becomes-a-catastrophe)).
- **Per risk excess of loss:** reinsurance that pays the part of a loss on one risk above a retention ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#excess-of-loss)).
- **Probable maximum loss (PML):** the loss at a stated return period on a stated EP curve ([Catastrophe Models & Their Regulators](https://www.syntaqx.com/books/insurance/catastrophe-models#what-a-model-does)).
- **Provision for reinsurance:** a Schedule F liability reducing surplus for unsecured, overdue or under-collateralized recoverables ([Reinsurance Operations](https://www.syntaqx.com/books/insurance/reinsurance-operations#schedule-f)).
- **Quota share:** proportional reinsurance ceding a fixed percentage of every policy's premium and losses ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#proportional-reinsurance)).
- **Rate on line (ROL):** an excess of loss layer's premium divided by its limit ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#excess-of-loss)).
- **Reciprocal jurisdiction reinsurer:** a reinsurer from the EU, the UK, an accredited US state or a qualifying jurisdiction that may post no collateral under the 2019 NAIC revisions ([Reinsurance Operations](https://www.syntaqx.com/books/insurance/reinsurance-operations#credit-for-reinsurance)).
- **Reinstatement premium protection (RPP):** a cover that pays the reinstatement premium a cedent would owe after a loss ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#reinstatements)).
- **Reinstatement (reinsurance):** restoration of an excess of loss layer's limit after a loss, usually for an additional premium pro rata as to amount ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#reinstatements)).
- **Reinsurance recoverable:** an amount a reinsurer owes the cedent on paid or unpaid losses ([Reinsurance Operations](https://www.syntaqx.com/books/insurance/reinsurance-operations#recoverables-and-collections)).
- **Retention (attachment):** the amount of loss a cedent bears before an excess of loss layer responds ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#excess-of-loss)).
- **Return period:** the reciprocal of an annual exceedance probability: a 1% probability is the 1-in-100-year loss ([Catastrophe Models & Their Regulators](https://www.syntaqx.com/books/insurance/catastrophe-models#what-a-model-does)).
- **Risks attaching, losses occurring:** the two bases deciding which losses belong to a reinsurance contract: policies written in its period, or losses happening in it ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#treaty-and-facultative)).
- **Schedule F:** the annual statement schedule of a P&C insurer's reinsurance by counterparty, with recoverables, collateral and the provision for reinsurance ([Reinsurance Operations](https://www.syntaqx.com/books/insurance/reinsurance-operations#schedule-f)).
- **Schedule P:** the annual statement's ten-year loss and expense development schedules by line, "the actuarial portion of the Annual Statement" ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#schedule-p)).
- **Sidecar:** a vehicle funded by investors that takes a quota share of a reinsurer's or insurer's book for a period ([Cat Bonds, ILS & State Cat Funds](https://www.syntaqx.com/books/insurance/alternative-capital#sidecars-and-collateralized-reinsurance)).
- **Statement of Actuarial Opinion:** the Appointed Actuary's annual opinion on whether carried reserves make a reasonable provision for unpaid losses and LAE ([Loss Reserving & Development](https://www.syntaqx.com/books/insurance/loss-reserving#the-statement-of-actuarial-opinion)).
- **Surplus share:** proportional reinsurance ceding a per-risk share set by the risk's size in multiples (lines) of the cedent's retention ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#proportional-reinsurance)).
- **Terrorism Risk Insurance Program (TRIP):** the federal program sharing 80% of certified terrorism losses above a 20% insurer deductible, authorized through December 31, 2027 ([Cat Bonds, ILS & State Cat Funds](https://www.syntaqx.com/books/insurance/alternative-capital#the-terrorism-risk-insurance-program)).
- **Treaty reinsurance:** reinsurance covering a defined class of business automatically for a period ([Reinsurance Structures](https://www.syntaqx.com/books/insurance/reinsurance-structures#treaty-and-facultative)).

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