Defined terms for the annuity market and lifetime income landscape.
Modified coinsurance is a reinsurance structure in which the reinsurer assumes a share of premium, claims, and reserves, but the assets supporting the ceded reserves remain on the ceding carrier's balance sheet, with investment income paid through to the reinsurer.
Offshore reinsurance is reinsurance in which the reinsurer is domiciled outside the ceding carrier's home regulatory jurisdiction — typically in Bermuda, the Cayman Islands, or another jurisdiction with a distinct regulatory and capital regime.
Operating earnings versus GAAP earnings is the structural comparison between an insurance carrier's reported GAAP net income and the carrier-defined operating-earnings metric, which strips out items management considers non-recurring or non-economic to present the underlying core-business result.
Option budget is the amount per dollar of contract value that an insurance carrier allocates each year to purchase the index options that fund a fixed indexed annuity's index-linked crediting, set as a function of the carrier's general account investment yield net of the spread the carrier retains.
Policyholder surplus is the term used in US insurance statutory accounting for the excess of an insurance carrier's admitted assets over its liabilities, equivalent in most contexts to statutory surplus and named to emphasize that the surplus stands behind obligations to contract owners.
