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ART INSURANCE SERVICES

CAPTIVE/RRG INDUSTRY

 

DEFINITIONS

 

Association Captive Insurance Company – Any company that insures risks of the member organizations of the Association and their affiliated companies.

 

Captive Insurance Company – any pure captive insurance company, association captive insurance company, or industrial insured captive insurance company formed or licensed under the provisions of this chapter.  A company, which is wholly owned by another organization (generally non-insurance), the main purpose of which is to insure the risks of the parent organization.

 

Commutation – In the event of the termination of this contract, the Reinsurer shall be released from all further liability to the company for all loss and allocated loss expense not finally settled by the company as of the date of termination.   In consideration of that release, the Reinsurer shall pay to the Company all amounts of loss and allocated loss expense due for losses finally settled.

 

Federal Risk Retention Act – Preempts some state functions.  For example, the act does not allow a state insurance regulator to prohibit risk retention groups domiciled in other states from operating within the regulator’s state, thus eliminating the need for a fronting company.

 

Fronting – Most commonly refers to the practice of a non-admitted insurer (or an insured with a captive insurance company contracting with a licensed insurer to issue an insurance policy for regulatory or certification purposes.

 

Industrial Insured – An insured which procures the insurance of any risk or risks by use of the services of a full time employee acting as an insurance manager or buyer and whose aggregate annual premiums for insurance on all risks total at least $25,000 and who has at least 25 full-time employees.

 

Industrial Insured Captive Insurance Company – Any company that insures risks of the industrial insured’s that comprise the industrial insured group, and their affiliated companies.

 

Loss Portfolio Transfer – Is retrospective in nature, as they involve the transfer of incurred losses.  Such programs can utilize reserve discounting – on either a structured or an unstructured basis, and/or they can have adjustment provisions to take into account any future reserve deterioration.

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