Our glossary explains technical terms from the areas finance and reinsurance. We hope it facilitates the understanding of our texts, publications and annual reports. If you have comments or suggestions, please use our feedback form!
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.
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 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.
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. The ADRs are traded instead of the foreign shares. In the United States Hannover Re has enabled trading on the OTC (over-the-counter) market through an ADR Level 1 program. New capital cannot be raised and the ADR is not listed on a US exchange under a Level 1 program. The main advantage of an ADR Level 1 program compared to higher-level programs is that there is no requirement for accounting or financial reporting in accordance with US GAAP.