Reinsurance Types
Loss Portfolio Transfer
Definition
Reinsurance transaction where an insurer transfers existing loss reserves and related liabilities to a reinsurer for a premium.
Practical Example
Transferring $50M in workers compensation reserves to a reinsurer to exit the line of business.
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Related Terms
Treaty Structures
Adverse Development Cover
Reinsurance protecting against adverse development on existing loss reserves. The reinsurer assumes risk that reserves will prove inadequate.
Reinsurance Operations
Commutation
The termination of a reinsurance contract where all future obligations are extinguished through a negotiated lump-sum payment. Used to close out runoff treaties.