Reinsurance Terms (Florida Insurance Glossary)

🏦 Reinsurance

Insurance purchased by insurance companies to protect themselves from large losses, especially from hurricanes.

🔁 Treaty Reinsurance

A long-term agreement where the reinsurer covers a whole book of business (e.g., all Florida homeowners policies).

📄 Facultative Reinsurance

Reinsurance purchased for a specific risk or property — usually large, unique, or high-value structures.

📉 Retention

The amount of loss the insurance company must pay before reinsurance kicks in. Similar to a deductible for insurers.

⬆️ Attachment Point

The loss level at which reinsurance coverage begins. If losses don’t reach this point, the insurer pays everything.

⬇️ Exhaustion Point

The maximum amount the reinsurer will pay. Losses above this point fall back on the insurer or require additional layers.

📚 Reinsurance Layers

Multiple stacked levels of reinsurance coverage. Florida carriers often buy several layers to protect against major hurricanes.

🌪️ Catastrophe (CAT) Reinsurance

Reinsurance specifically designed to cover large-scale disasters like hurricanes, storm surge, and severe wind events.

📊 CAT Bond (Catastrophe Bond)

A financial instrument that transfers disaster risk to investors. If a major event occurs, investors lose money and insurers receive funds.

🏛️ FHCF (Florida Hurricane Catastrophe Fund)

A state-run reinsurance program that provides lower-cost hurricane reinsurance to Florida carriers.

💸 FHCF Reimbursement

The portion of hurricane losses the FHCF pays after the insurer meets its retention.

📈 Reinsurance Rate-on-Line (ROL)

The cost of reinsurance expressed as a percentage of the coverage purchased. Higher ROL = more expensive reinsurance.

🌍 Global Reinsurance Market

The worldwide pool of reinsurers that Florida carriers rely on. Global disasters can raise Florida premiums even if no hurricane hits.

🧾 Quota Share

A reinsurance agreement where the reinsurer takes a fixed percentage of premiums and claims.

📦 Excess of Loss (XOL)

Reinsurance that pays only when losses exceed a certain threshold — common in Florida hurricane protection.

🧮 Probable Maximum Loss (PML)

The insurer’s estimate of the largest loss likely to occur from a major event. Used to determine how much reinsurance to buy.

📉 Loss Creep

When claim costs increase over time after a disaster, often triggering additional reinsurance layers.

⚠️ Reinsurance Hard Market

A period when reinsurance becomes more expensive or harder to obtain — often after global catastrophes.

💰 Capital Requirements

The amount of money insurers must hold to remain solvent. Reinsurance helps reduce these requirements.

🚫 Reinsurance Shortfall

When an insurer does not buy enough reinsurance, increasing the risk of insolvency after a major storm.