Defined terms for the annuity market and lifetime income landscape.
Quota share reinsurance is a proportional reinsurance structure in which the reinsurer assumes a fixed percentage of every policy in a defined block of business, taking the same percentage of premium and bearing the same percentage of losses on every individual policy in that block.
Reinsurance is the practice by which one insurance company transfers part of the risk it has underwritten — and the corresponding share of premium — to another insurance company called the reinsurer, in order to manage its risk exposure and capital requirements.
Risk-based capital is the NAIC's standard framework for measuring the capital adequacy of US insurance carriers, calculating a required capital amount that scales with the specific risks each carrier bears and comparing it to actual capital to determine whether intervention is warranted.
The risk-based capital ratio is the standard summary measure of an insurance carrier's capital adequacy, calculated as the ratio of the carrier's total adjusted capital to its authorized control level risk-based capital amount and reported as a percentage.
Spread compression is the narrowing of the difference between an insurance carrier's investment yield and the rate it credits to the contracts that yield supports, typically driven by rate changes that affect new-money asset yields more than the rates already promised to in-force owners.
