Treaty or Facultative Agreement screen

Agreement Number

Data type: String

An identifier for the agreement, usually assigned by the reinsurer. In the default configuration, the number is entered by hand. You can customize PolicyCenter to generate the agreement number automatically. You can also customize PolicyCenter to use the agreement number when communicating with other systems about this agreement.

Name

Data type: String

Text description of the agreement for the user interface.

Type

Data type: typelist

The type of agreement. You can only select the type when creating a new treaty.

For treaties, values are:

• Per Even Treaty
• Annual Aggregate Treaty
• Quota Share Treaty
• Surplus Treaty
• Excess of Loss Treaty
• Net Excess of Loss Treaty

For facultative agreements, values are:

• Proportional Facultative Agreement
• Excess of Loss Facultative Agreement
• Net Excess of Loss Facultative Agreement

Effective Date

Data type: Datetime

The date that coverage begins under the agreement.

Expiration Date

Data type: Datetime

The date that coverage ends under the agreement.

For validation, the Expiration Date must be greater than the Effective date. Validation does not use the time portion of this field because the time that reinsurance starts on a particular day can differ by jurisdiction or country. If this agreement is part of a program, then the time of reinsurance is consistent for all agreements in the program.

Status

Data type: Typelist

The status of the agreement. Values are:

• Draft – Not yet finalized or ready for use.
• Active – Finalized and usable.
• Inactive – Either never made active or removed after making active, but not longer in active use. This status does not indicate that the agreement is past its expiration date.

Currency

In a multicurrency system, you can search by Currency. This drop-down list displays the currencies configured in the base application. For more information, see Multicurrency features.

Ceded Share (%)

Data type: XX.XXXX%

The percentage ceded to the reinsurer. This field applies to the following types of agreements:

• Quota share treaties – Applies to the ceded share within the layer. No default value.
• Facultative proportional – Applies to the ceded share for the agreement (total risk minus any risk covered by an excess of loss agreement).
• Non-proportional agreements – Applies to the ceded share within the layer. The ceded share extends from the attachment point to the coverage limit. Default value is 100%.

Note: This field does not apply to surplus treaties because they do not have a fixed value for ceded share.

Coverage Limit

Defines the upper bound on coverage.

Note: Does not apply to proportional facultative agreements.

Coverage Limit Indexed?

Data type: Boolean

Whether losses are subject to adjustment for inflation before being compared to the attachment point and limit of the agreement.

Note: Applies to non-proportional agreements.

Amount of RI

Data type: Money

Defines the maximum amount of reinsurance that can be recovered from the agreement.

PolicyCenter calculates the value of this field from the attachment point and coverage limit by using a formula:

• For most types, Amount = (Coverage Limit - Attachment Point) * Ceded Share %
• For quota share, Amount = Coverage Limit * Ceded Share %

Note: Does not apply to proportional facultative agreements. For proportional facultative agreements, the amount of reinsurance is equal to the Amount of Risk Ceded.

Apply Only to the Gross Retention

For net excess of loss treaties and facultative agreements only. If Yes, the amount ceded is limited to the layer below the gross retention that is not ceded to a proportional treaty.

Amount of Risk Ceded

Data type: Money

Amount of risk ceded.

Note: Applies to proportional facultative agreements.

Attachment Point

Data type: Money >= 0

The lower limit for the start of coverage. For a Surplus Treaty, this is the lower limit assuming the maximum retention.

Note: Does not apply to quota share or proportional facultative treaties.

Attachment Point Indexed?

Data type: Boolean

Default: false

Whether to adjust the loss costs by an inflation index before determining whether loss costs exceed the attachment point.

Note: Applies to non-proportional agreements.

Max Retention

Data type: Money >= 0

Default: Attachment Point

The maximum underlying gross retention that the insurer can hold. This retention serves as the basis for the amount of reinsurance coverage provided.

For validation, the maximum retention must be less than or equal to the attachment point.

Note: Applies to surplus treaties.

Lines

Number of lines of coverage. PolicyCenter calculates this value by using the following formula:

    (Coverage Limit - Attachment Point) / Max Retention

The number of lines is used to calculate the values of Attachment and Limit on the Per Risk tab in the policy file. For an example, see Gross retention.

Note: Applies to surplus treaties.

Start Line

PolicyCenter calculates this value by using the following formula:

    Attachment Point / Max Retention

Note: Applies to surplus treaties.

Stop Line

PolicyCenter calculates this value by using the following formula:

    Coverage Limit / Max Retention

Note: Applies to surplus treaties.

Min Deposit Premium

Data type: Money

Indicates the minimum premium due for the contract regardless of any per risk calculation of ceded premiums. PolicyCenter does not use this field in the default configuration.

Note: Applies to treaties.

Deposit Payment Schedule

Data type: Typelist

The payment schedule for the deposit premium. Values are:

• Fully in advance
• Quarterly in advance

PolicyCenter does not use this field in the default configuration.

Note: Applies to treaties.

Payable on Written

Data type: Typelist

When the ceded premiums and commission are payable. Values are:

• As Written – The ceded premiums and commissions are reported and considered payable as the written premium is recognized.
• As Earned – The ceded premiums and commissions are considered payable as the underlying premium is earned.

PolicyCenter does not use this field in the default configuration.

Commission (%)

Data type: XX.XXXX%

The commission that the insurer earns from the reinsurers for sending them reinsurance business.

The commission is a percentage of the ceded premium. The commission for a participant to the agreement is calculated by using this commission percentage and the participant’s commission rate.

Enter 0 if there is no commission. For example, many non-proportional agreements do not pay a commission.

Set Differential Commission Rates

Click this button to:

• Add a Commission % column for each participant in the Agreement Participants tab.
• Remove the Commission (%) field.

For additional information, see Shared reinsurance agreements.

Broker

Data type: Contact

The broker, if any, who helped arrange this agreement.

Ceded Premium (flat amount)

Data type: Money

For facultative agreements, the flat amount that is paid to the reinsurer rather than ceding a proportional percentage.

Note: Applies to non-proportional facultative agreements. Applies to proportional facultative agreements if the value is greater than 0.

Set Differential Flat Premium

Click this button to:

• Add a Flat Premium column for each participant in the Agreement Participants tab.
• Remove the Ceded Premium (flat amount) field.

For additional information, see Shared reinsurance agreements.

Note: Applies to facultative agreements.

Ceding Rate (%)

Data type: XX.XXXX%

A percentage per dollar of the underlying net premium that is ceded to the reinsurer.

For validation, the ceding rate must be greater than or equal to 0.

Note: Applies to non-proportional treaties.

Set Differential Ceding Rates

Click this button to:

• Add a Ceding Rate (%) column for each participant in the Agreement Participants tab.
• Remove the Ceded Rate (%) field.

For additional information, see Shared reinsurance agreements.

Note: Applies to non-proportional treaties.

Markup (%)

Data type: XX.XXXX%

Additional amount, expressed as a percentage of ceded premium, to subtract from direct premiums when determining the net premium for ceding to other agreements.

Note: Applies to excess of loss facultative and net excess of loss facultative agreements.

Total Cost

Data type: Money

The total cost of placing the reinsurance in terms of how much premium is subtracted from total premium to understand what premium applies to the remaining risk. Proportional agreements share the remaining risk.

The value of this field is calculated as:

    (1 + Markup) * Ceded Premium

Note: Applies to excess of loss facultative and net excess of loss facultative agreements.

Count Toward Total Limit

Data type: Boolean

Default: true

If false, none of the total insured value on a risk is formally ceded to this treaty when determining how much risk has been ceded versus retained. Set to false for a treaty that provides coverage in the case of replacement cost error. For example, the actual loss could exceed the notional total insured value. Therefore the treaty has no effect on how much of the known total insured value has been ceded or retained.

This limit is not counted when determining the maximum amount of insurance that any one risk can have.

Note: Applies to all per risk agreements. In the default configuration, this field does not apply to annual aggregate or per event treaties.

Notification Threshold

Data type: Money >= 0

Default: 0

Notify the reinsurer if an individual large loss exceeds this threshold.

Note: Applies to per risk agreements.

Comments

Data type: Text

A text field for the insurer to add notes such additional terms that the system does not use but which are important to document to fully describe the agreement.

Gross Net Premium Basis

Data type: Typelist

When calculating how much premium to cede to a treaty, the gross net premium is the premium you are starting with. For example, proportional treaties get a share of the premium net of all excess of loss treaties. The net premium coming in is the gross net premium and premium coming out (after ceding to proportional treaties) is the net net premium. The value of this field is used to determine what premium, if any, to net out prior to calculating premium for this treaty.

Determine the basis of the gross net premium by using one of the following methods:

• Gross Premium – Prior to netting out any other ceded premiums (including proportional cedings)
• Net of proportional – Net premiums after ceding to proportional agreements but prior to any other non-proportional cedings
• Net of per risk – Premiums after all cedings to per risk agreements but prior to any cedings to aggregate agreements
• Net of all per event – Premiums after all cedings to per event agreements
• Net of all prior – Premiums after all cedings

Note: Applies to all non-proportional agreements.

Calculate Ceded Premium

Data type: Boolean

Premiums are ceded based on either written value or earned value for the reinsured period. This field is intended to control whether PolicyCenter calculates ceded premiums on a per policy basis. It is common to calculate ceded premiums for non-proportional agreements on a whole of class basis rather than on a per policy basis. For example, an insurer often calculates ceded premiums quarterly based on all earned premium for a whole set of policies. If ceded premiums are calculated on a whole of class basis, then there is no reason to calculate those ceded premiums in PolicyCenter. In this case, you can set this value to No.

In this version of PolicyCenter, ceded premiums are not calculated even if you set this value to Yes. However, you can configure PolicyCenter to calculate these premiums.

Note: Applies to non-proportional agreements.

Loss Attachment Basis

Determines whether reinsurance coverage is based on the date of loss or the policy period effective date.

Values are:

• Loss Date Attachment (Earned Premium) – Ceded premiums are paid based on earned premiums that fall within the treaty period.
• Loss Date Attachment (Written Premium) – Ceded premiums are paid based on written premiums that fall within the treaty period.
• Policy Attachment – This value is available for excess of loss and net excess of loss treaties.

Note: Applies to non-proportional agreements.

Participant

Data type: Contact

The name of the reinsurer. This field has a link to the contact information for the reinsurer.

Risk Share %

Data type: XXX.XXXX%

Enter the participant’s share of any losses to the agreement. When you add a new row, this value defaults to the remaining amount to get to 100%.

Ref #

Data type: String

Enter the agreement identifier provided by the reinsurer. This field is similar to a insurer’s policy number.

Ceding Rate (%)

Data type: XX.XXXX%

Appears when you click the Set Differential Ceding Rates button.

If multiple participants share a non-proportional treaty, then they each negotiate a rate for their participation.

Note: Applies to non-proportional treaties.

Premium Share %

Data type: XX.XXXX%

Appears when you click the Set Differential Ceding Rates button.

PolicyCenter calculates each participant's share of the overall ceded premium, so that ceded premiums calculated for the treaty as a whole can be divided among the participants. The formula for premium share is:

    Participant’s Ceding Rate / Overall Ceding Rate

Note: Applies to non-proportional treaties.

Commission %

Data type: XX.XXXX%

Appears when you click the Set Differential Commission Rates button.

The commission that will be paid to each participant. Defined as a percentage of their share of ceded premiums.

% of Total Commissions

Data type: XX.XXXX%

Appears when you click the Select Differential Commission Rates button.

How the participants share the commission.

PolicyCenter calculates this field by using this formula:

    (Risk Share * Commission Rate) / Agreement Overall Commission Rate

The formula for the Agreement Overall Commission Rate is:

    sum of (Risk Share * Commission Rate) for each participant

Flat Premium

Data type: Money

Appears when you click the Set Differential Flat Premium button.

Enter the premium amount that paid to each participant.

Note: Applies to facultative agreements.