Handle Cancellation Conditions
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Cancellation
Conditions button | If a reinsurer or a cedent has agreed on conditions for termination of the agreement, it is here that those conditions are defined. |
The cancellation conditions are not available for businesses with no insured period specified. Note that this type of ‘To be Advised’ insured period only exist if your System Administrator has set up the system to allow for it
Maintain Cancellation Conditions #
Click the Cancellation Conditions button and you see the Cancellation Conditions window. Click the Edit button (on the bottom right-hand side of the window) to add or make changes to any of the cancellation terms fields
At the top of the window you see the Effective Period, Underwriting Year, Inception Date, Cancellation Date, and Scope of Cover. Below that is the Cancellation Terms section. Click the Edit button (on the bottom right-hand side of the window) to add or make changes to any of the cancellation terms fields.
If Cancelled as at: If you are working with a continuous treaty, you see this field. Cancellation at refers to the date as of when the agreement must be cancelled in order that it is not automatically renewed.
When you type in a date directly, you can type in the last two digits of the year and the system will compute the year for you. Numbers from 00-22 are automatically calculated as 2000. Anything else is automatically calculated as 1900. For example, if you type in 010105, the system will read it as 01.01.2005.
PNOC for Cedent within: If you are working with a continuous treaty, you see this field. Here you can select a time frame from within which the provisional notice of cancellation must be sent by the cedent to have the right to cancel. Use the drop-down list to select between Year, Month, or Da y and enter, for example, PNOC within 3 months. A new PNOC date (according to the information you input and the Cancellation at date) is automatically generated.
PNOC for Reinsurer within: If you are working with a continuous treaty, you see this field. Here you can select a time frame from within which the provisional notice of cancellation must be sent by the reinsurer. Use the drop-down list to select between Year, Month, or Day. A PNOC date (according to the information you input and the Cancellation at date) is automatically generated.
NOC for War within: Here you can indicate number of days for notice of cancellation in the event of war. If, for example, you select Day(s) from the drop-down list, and type a 7 in front of it, you indicate that cancellation applies seven days after the notice of cancellation was submitted.
NOC for Political Risks within: Here you can indicate number of days for notice of cancellation in the event of a political risks (such as, for example, political upheaval). If, for example, you select Day(s) from the drop-down list, and type a 7 in front of it, you indicate that cancellation applies seven days after the notice of cancellation was submitted.
Maintain Special Termination Clause #
Some reinsurance contracts include a provision allowing the cedent or both the cedent and reinsurer to bring the reinsurance contract to an end prior to its natural expiry. By capturing these special termination clauses, the parties are better equipped to assess the business risk of the agreement and to give proper notification in case such events occur. This clause may define for example the events that will trigger the right to select to cancel the agreement, e.g. rating downgrade of one of the parties or decrease in the policyholder surplus.
Register Special Termination Clause #
- Open wanted contract and then open the Cancellation(CA) condition
- Select the Special Termination Clauses tab.
- If required, select Edit or Create from menu button
- Enter the applicable information related to clauses, method of termination and termination triggers.
- Select OK
Special Termination Clause is only available for proportional and non prop treaty business
Maintain Triggering Rates by Rating Agency #
A triggering event might be that the reinsurer suffers rating downgrade by a rating agency. To record the agreed triggering rates for agencies:
- Open wanted contract and then open the Cancellation Condition
- Select the
- Special Termination Clause tab and open in edit mode
- In the table for ratings, select
- Add Rating from the pop up menu
- Select the Rating Agency and select
- Rate At (the agreed triggering rate within a rating system)
- Enter a percentage in Business At Stake if applicable
- Enter other information related to clauses if applicable
- Select OK
| Field | Description |
|---|---|
| Reason for Clause | Indication of why a special termination clause applies. Values: Customized by your company, e.g.: Mandatory, Client Request, Unknown Default: No Mandatory: Yes Functional Impact: None |
| At Inception Exempt Wording: | Terms exempting the reinsurer from some or all special termination clauses, based on circumstances that existed at inception. For example, the option to terminate the agreement if the reinsurers S&P rating has been downgraded to B+ should not apply if the reinsurer at the inception had a S&P rating of A or better. Values: <None>, Full Special Termination Exemption, Partial Special Termination Exemption Default: <None> Mandatory: Yes Functional Impact: Other fields in Special Termination Clause |
| At Inception Details: | Description of exemption terms and threshold, e.g. ‘Threshold A or better /S&P’. Values: Free text, max 35 characters Validations: Must be entered if At Inception Exempt Wording is other than <None> Mandatory: No Functional Impact: None |
| Cedent Notice of Termination Within Days: | The period in which the cedent may exercise the option to terminate the contract after an event that may cause special termination has occured Values: * Maximum: 999 * Minimum: 0 _Default:_ No _Mandatory:_ No _Functional Impact:_ None |
| Authorization Reference: | The reference to an authorization workflow system, if your company uses one. Values: Free text, max 35 characters Default: No Mandatory: No Functional Impact: None |
| Special Termination Cancellation Basis: | The method of terminating business. It indicates whether it is done on a cut-off basis with return of unearned premiums or run-off with no return of unearned premium. If the method is both run off and cut off, the cedent may select the method. Values: Run-off, Cut-off Default: No Validations: Must be selected if At Inception Exempt Wording is <None> Multiple values allowed Mandatory: No Functional Impact: None |
| Retroactive Cancellation/Reimbursement: | Information on whether or not notice of termination by the cedent may be effective retroactively from the beginning of the agreement year and/or reimbursement of earned premiums will be required. Values: No Retro Cancellation with Return of Earned premium Retro Cancellation without Return of Earned premium Return of Earned Premium - no Retro Cancellation Default: No Validations: Must be selected if At Inception Exempt Wording is <None> Mandatory: No Functional Impact: None |
| Commutation: | Information on whether or not commutation is part of the terms. Values: Customized by your company, e.g.: No, Forced, Mutually Agreed Default: No Validations: Must be selected if At Inception Exempt Wording is <None> Mandatory: No Functional Impact: None |
| Post Collateral: | Information on whether or not security must be provided. Values: Customized by your company, e.g.: No, Forced, Optional Default: ‘No’ Validations: Must be selected if At Inception Exempt Wording is <None> Mandatory: No Functional Impact: Other Special Termination Clause items |
| Return of Res. and/or IBNR: | Indicates whether or not Return of Reserves and/or IBNR applies. Values: Yes, No Default: ‘No’ Validations: Must be selected if At Inception Exempt Wording is <None> Mandatory: No Functional Impact: Other Special Termination Clause items |
| Return of Unearned Prem: | Indicates whether or not Return of Unearned Premium applies. Values: Yes, No Default: ‘No’ Validations: Must be selected if At Inception Exempt Wording is <None>Mandatory: No Functional Impact: Other Special Termination Clause items |
| Reinsurer to Assume Other Reins. Share: | Indicates whether or not the cedent may require the reinsurer to take over shares of one or more of its co-reinsurers Values: Yes, No, Not Specified Default: ‘No’ Validations: Must be selected if At Inception Exempt Wording is <None> Mandatory: No Functional Impact: None |
| Reinsurer Payment Within Days: | The number of days within which payment must be made if the termination results in a refund. Values: Min-Max 0-999 Default: No Validation: Enabled when at least one of the following has value other than ‘No’: Post Collateral Return of Res. and/or IBNR Return of Unearned Premium Mandatory: No Functional Impact: None |
| Rating Agency: | The name of the applicable rating agency when an agency downgrade is a triggering event. Values: Available Rating Agencies defined by System Administrator, e.g. Moody’s, Fitch, AM Best etc. Mandatory: No Functional Impact: Other Special Termination Clause items |
| Rate At: | The triggering rate specified in the clause applying to the rating system of the selected agency. Values: Available Ratings for the selected Agency customized by your company, e.g. A, A+, B, B+, etc. Default: No Validations: Must be selected if Rating Agency is selected Mandatory: No Functional Impact: None |
| Business At Stake: | The business at stake that applies to the selected rating agency/rate expressed as a percentage. Values: * Minimum: 1 * Maximum: 100 _Default:_ No _Mandatory:_ No _Functional Impact:_ None |
| Number of Breaches Required: | The minimum number of rating breaches required to trigger event. Values: Customized by your company, e.g.: 1 of 2, 2 of 2, etc. Default: No Mandatory: No Functional Impact: None |
| Policy Holders Surplus: | The triggering percentage relating to policy holders surplus. Values: * Minimum: 0 * Maximum: 999 _Default:_ No _Mandatory:_ No _Functional Impact:_ None |
| Solvency Model - Ratio: | The solvency model used by your company to express the solvency rate, e.g. Swiss Solvency Test, with the triggering percentage. Values: Solvency model: As customized by your company, e.g. SST Ratio Ratio value: * Minimum: 0 * Maxium:999 _Default:_ No _Mandatory:_ No _Functional Impact:_ None |
| RBC Ratio: | The triggering percentage relating to Risk Based Capital. Values: * Minium: 0 * Maxium: 999 _Default:_ No _Mandatory:_ No _Functional Impact:_ RBC Ratio Type |
| RBC Ratio Type: | Expresses the basis for the entered ratio. Values: Customized by your company, e.g.: Company Action Level Regulatory Action Level Not Specified Default: Not Specified Validations: Must be selected if RBC Ratio exists Mandatory: No Functional Impact: None |
| Number of Trigger Types Required: | The minimum number of trigger types that must occur for the cedent to specially terminate the business. Trigger types in this respect are Rating Downgrade (regardless of number of rating agencies), Policy Holders Surplus, RBC Ratio and Selected Solvency Model. Values: Minimum 1 Maximum: 4 Default: No Validations: Must be selected if At Inception Exempt Wording is <None> Mandatory: No Functional Impact: None |
| Other Triggers: | Additional triggering events not covered by other fields. Values: List of available values customized by your company, e.g.: Change in Control Insolvency Ordered Cease Voluntarily Cease Other Default: No Mandatory: No Functional Impact: Other Special Termination Clause items |
| Other Trigger Comments: | If the applicable triggering event is not already defined as Other Triggers or additional information is required, this information can be recorded here. Values: Free text, max 35 characters Default: No Validations: Must be selected if ‘Other’ is selected as Other Triggers Mandatory: No Functional Impact: None |
| STC Notes: | Used for additional information relating to the special termination clause that can not be captured within other fields. Values: Free text Mandatory: No Functional Impact: None |