Page 337 - Reinsurance Management IC85

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primary insurance insurer (as the reinsured) and the original
reinsurer.

Retrocessionnaire

The assuming reinsurer in a retrocession, where the ceding
reinsurer is known as the retrocedent.

Risk Based Capital

The amount of capital needed to absorb the various risks of
operating an insurance business. For example, a higher risk
business requires more capital than one with lower risks. The
calculation is intended to be unique to each insurer.

Run-Off Cancellation or Termination

A provision in the termination clause (or endorsement) of a reinsurance
contract stipulating that the reinsurer shall remain liable for loss under
reinsured policies in force at the date of termination, as a result of
occurrences taking place after the date of termination, until their natural
expiry (and often that the run-off period may not exceed twelve months
from the date of termination).

Setoff

The reduction of the amount owed by one party to a second party
under one agreement or transaction by crediting the first party with
amounts the second party owes the first party under other agreements
or transactions for the purpose of determining the amount, if any,
the first party owes to the second.

Sliding Scale Commission

A contractual formula used in pro rata treaty reinsurance under
which the ultimate ceding commission payable varies inversely
to the loss ratio, within stated parameters. In effect, a retroactive
pricing mechanism for pro rata reinsurance.

Slip

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