Accumulation loss

Sum of several individual losses incurred by various policyholders as a result of the same loss event (e. g. windstorm, earthquake). This may lead to a higher loss for the direct insurer or reinsurer if several affected policyholders are insured by the said company.

Accumulation risk

cf. > Accumulation loss

Acquisition cost, deferred (DAC)

Cost of an insurance company that arises from the acquisition or the renewal of an insurance contract (e.g. commission for the closing, costs of proposal assessment and underwriting etc.). Capitalisation results in a distribution of the cost over the duration of the contract.

Aggregate excess of loss treaty

The reinsurance treaty attaches when if a ceding insurer incurs losses on a particular line of business during a specific period (usually twelve months) in excess of a stated amount.

Agricultural insurance

Agricultural insurance covers provide protection for farmers, forestry operators and the fishing industry - especially in developing countries - against the consequences of natural disasters such as crop failures due to hail, windstorm, frost, flood damage or disease.

Allocated capital

cf. > capital allocation

Alternative risk financing

Use of the capacity available on the capital markets to cover insurance risks, e.g. through the securitisation of natural catastrophe risks.

American Depositary Receipt (ADR)

Share certificates written by US Banks on foreign shares deposited there. Instead of trading the foreign shares directly, US stock exchanges trade the American Depositary Receipts (ADR).

Asset/liability management

Matching of the invested assets with the liabilities arising out of the reinsurance business.