Travelers 2006 Annual Report Download - page 55

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Rates. ........................ Amounts charged per unit of insurance.
Redundancy .................. With regard to reserves for a given liability, a redundancy exists when
it is estimated or determined that the reserves are greater than what
will be needed to pay the ultimate settlement value of the related
liabilities. Where the redundancy is the result of an estimate, the
estimated amount of redundancy (or even the finding of whether or
not a redundancy exists) may change as new information becomes
available.
Reinstatement premiums .......Additional premiums payable to reinsurers to restore coverage limits
that have been exhausted as a resultof reinsured losses under certain
excess of loss reinsurance treaties.
Reinsurance. .................. The practice whereby one insurer, called the reinsurer, in
consideration of a premium paid tothat 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.
Reported claim development
method..................... An actuarial method to estimate ultimate claim counts for a given
cohort of claims such as an accident year/product line component. If
the reported-to-date counts are then subtracted from the estimated
ultimate counts, the result is an indication of the IBNR counts.
The approach is the same as that described in this glossary under the
“paid loss development method”, but based on the growth in
cumulative claim counts rather than paid losses. The basic premise of
the method is that cumulative claim counts for a given cohort of
claims will grow in a stable, predictable pattern from year-to-year,
based on the age of the cohort.
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 groupof risks. The term may apply toan insurance policy,
where thepolicyholder is an individual, family or business, or a
reinsurancepolicy, where the policyholder is an insurance company.
Retention ratio................ Currentperiod renewal premiums, accounts orpolicies as a
percentage of total premiums, accounts or policies available for
renewal.
Retrospective premiums ........ Premiums related to retrospectively rated policies.