Accredited Reinsurer: A reinsurer that is not licensed in the ceding company's state of operation in question may be, or become, accredited in that state. Accreditation procedures and standards vary by state but usually require the reinsurer to show four things:
1) its financial condition meets the standards applied by the ceding company's state to like insurers; 2) it is licensed in at least one state of the United States to transact insurance or reinsurance; 3) it has submitted to that state's jurisdiction and allows its books and records to be examined; and 4) that its directors and management personnel are of acceptable character and experience. Once a reinsurer is accredited by the ceding company's state of operation, that state will normally give full credit to the ceding company for reserves held by the reinsurer on the business ceded and amounts the ceding company shows as recoverable under the reinsurance agreement.
In addition, the NAIC Model Law on Credit for Reinsurance allows credit for reinsurance ceded to a reinsurer which is domiciled and licensed in a state which employs standards regarding credit for reinsurance substantially similar to those applicable under the ceding company's state of operation in question provided the reinsurer maintains at least $20 million of surplus and submits to the authority of the ceding company's state of operation in question to examine its books and records.
Assumption Reinsurance: The form of reinsurance under which the reinsurer steps into the shoes of the ceding company, the original insurer, and directly assumes all the service and financial obligations of the original insurer on the block of business being assumed. Unlike indemnity reinsurance, assumption reinsurance makes the assuming company (reinsurer) directly liable to the policyholders. After the assumption, the reinsured business no longer appears on the books of the original insurer. In some instances, the original insurer may continue to administer and service the business but, if it does so, it does it as the agent of the reinsurer.
It is often used when the original insurer wishes to exit a line of business or market. It is sometimes used at the direction of insurance regulatory authorities, to safeguard the interest of policyholders when an original insurer becomes financially impaired or otherwise unable to perform.
Authorized Reinsurer: A reinsurer that is licensed in the ceding company's state of operation in question. When a company reinsures with an authorized reinsurer, full credit is routinely granted by insurance authorities on the ceding company's financial statements for reserves held by the reinsurer on the business ceded and amounts recoverable under the reinsurance treaty.
Automatic Reinsurance: Reinsurance that is ceded in accordance with an automatic reinsurance agreement or treaty under which the original insurer agrees to cede and the reinsurer agrees to accept a predetermined class of business, such as insurance issued on a particular plan. The reinsurance is ceded on the underwriting judgement of the ceding company without a case by case concurrence of the reinsurer, up to a specified amount, the automatic limit. The ceding company normally is required to keep its full stipulated retention for the class of business involved on any case ceded automatically. Often certain defined types of cases are not eligible for automatic treatment. Cases in excess of the automatic limits or otherwise ineligible for automatic cover can usually be submitted for facultative consideration.
Bordereau Reinsurance: A form of reinsurance administration, without the use of individual policy documents, in which the ceding company provides the reinsurer with details of each life reinsured in list format, either on paper or by electronic medium. Summary information, possibly including reserves, may be included.
Bulk Reinsurance: A form of reinsurance administration under which the ceding company provides only summary information, without any individual data, to the reinsurer.