Travelers 2005 Annual Report Download - page 54

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Property insurance................. Insurance that provides coverage to a person orbusiness with an
insurable interest in tangibleproperty for that person’s or
business’s property loss, damage or loss of use.
Quota share reinsurance............ Reinsurance wherein theinsurer cedes an agreed-uponfixed
percentage of liabilities, premiums and losses for each policy
covered on a pro rata basis.
Rates ............................. Amounts charged per unit of insurance.
Reinstatement premiums............ Additional premiums payable to reinsurers to restore coverage
limits that have been exhausted as a result of reinsured losses
under certain excess of loss reinsurance treaties.
Reinsurance ....................... The practice whereby one insurer, called the reinsurer,in
consideration of a premium paid to that insurer, agrees to
indemnify another insurer, called the ceding company, for part
or all of the liability of the ceding company under one or more
policies or contracts of insurance which it has issued.
Reinsurance agreement............. A contract specifying the terms of a reinsurance transaction.
Residual market (involuntary
business) ........................ Insurance market which provides coverage for risks for those
unable to purchase insurance in the voluntary market. Possible
reasons for this inability include the risk being too great or the
profit potential too small under the required insurance rate
structure. Residual markets are frequently created by state
legislation either because of lack of available coverage such as:
property coverage in a windstorm prone area or protection of
the accident victim as in the case of workers’ compensation. The
costs of the residual market are usually charged back to the
direct insurance carriers in proportion to the carriers’ voluntary
market shares for the type of coverage involved.
Retention ......................... The amount of exposure a policyholder company retains on any
one risk or group of risks. The term may apply to an insurance
policy, where the policyholder is an individual, family or
business, or a reinsurance policy, where the policyholder is an
insurance company.
Retention ratio .................... Current period renewal accounts or policies as a percentage of
total accounts or policies available for renewal.
Retrospective premiums ............ Premiums related to retrospectively rated policies.
Retrospective rating ................ A plan or method which permits adjustment of the final
premium or commission on the basis of actual loss experience,
subject to certain minimum and maximum limits.
Return on equity ................... The ratio of net income to average equity.