What is a downgrade clause?
What is a downgrade clause?
Downgrade clauses allow the (re)insured to terminate the policy (triggering a return of unearned premiums) in the event that the insurer or reinsurer suffers a ratings downgrade below a pre-agreed level.
What is an insolvency clause?
This insurance will most likely have a small but important clause within it called an Insolvency Exclusion Clause. Basically the clause protects the insurer in case any party goes into administration, insolvency or bankruptcy. If any of these events happen then the insurer doesn’t have to cover those costs or losses.
What is a downgrade clause in insurance?
A contract provision used by ceding insurers asking reinsurers, as part of their treaty agreement, to make adjustments to strengthen their balance sheet if a financial rating service lowers their financial rating.
What is a reinsurer company?
A reinsurer is a company that provides financial protection to insurance companies. Reinsurers handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to.
What is insolvency exclusion in insurance?
What is an insolvency exclusion. The wording of insolvency exclusions in the market varies significantly, but, broadly speaking, a standard insolvency exclusion will seek to exclude cover for claims and/or loss that arise from, or are otherwise sufficiently related to, the insolvency of an insured organisation.
What is a declaration of solvency?
A declaration of solvency is where a company wishes to pass a resolution for a Members voluntary liquidation. The directors have formed the opinion that the company will be able to pay its debts, together with interest at the official rate.
What is the difference between insurer and reinsurer?
How They Are Similar. Insurance and reinsurance are similar in many ways. Insurance is purchased to provide protection from covered losses; reinsurance guards the insurance company from too many losses. They both contractually transfer the cost of the loss to the company issuing the policy.
How does a reinsurer work?
The idea behind reinsurance is relatively simple. Reinsurance companies help insurers spread out their risk exposure. Insurers pay part of the premiums that they collect from their policyholders to a reinsurance company, and in exchange, the reinsurance company agrees to cover losses above certain high limits.
What is a reinsurance contract?
Reinsurance contracts may provide cover across different groups of insurance contracts. For example, a motor reinsurance contract is likely to provide protection for underlying insurance contracts within a portfolio comprising both onerous contracts and those not expected to become onerous.
What is a default clause in a contract?
In general, a default clause lets the non-breaching party do one of the following: 1 Terminate the agreement 2 Request damages 3 Execute a course of action
What is the runoff obligation of a reinsurance contract?
The runoff obligation may be articulated differently from reinsurance contract to reinsurance contract, depending on the type of reinsurance agreement, the nature of the underlying policies, and the prevailing market conditions. Some contracts limit the reinsurer’s runoff exposure to an additional 12 months.
What is a proportionate reinsurance contract?
Proportionate reinsurance contracts could be written on a treaty basis where a reinsurer accepts a share of all policies written over a specified time period; or they could be facultative where they cover a specified risk or contract.
