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Glossary - P

Pool (Insurance)
a risk-sharing partnership formed by legally and economically independent insurers and reinsurers in order to create a broader underwriting base for particularly large or unbalanced risks. The members undertake to write certain risks only within the scope of the insurance pool. They include such risks � while maintaining their commercial independence � in the insurance pool against a commission fee. Each insurer participates in the profit or loss of the insurance pool according to its proportionate interest. Reinsurance is often ceded or accepted in order to further diversify the risk. Pools can be divided into two types: coinsurance pools, in which all members take the role of primary insurers according to their interests, and reinsurance pools, in which a primary insurer writes the risks and then spreads them among the participating insurers by way of reinsurance.

Portfolio
a) all risks assumed by an insurer or reinsurer in a defined sub-segment (e.g. line of business, country) or in their entirety; b) group of investments defined according to specific criteria.

Premium
agreed remuneration for the risks accepted from an insurance company. Unlike the earned premium, the written premium is not deferred.

Priority
direct insurer's loss amount stipulated under → non-proportional reinsurance treaties; if this amount is exceeded, the reinsurer becomes liable to pay. The priority may refer to an individual loss, an → accumulation loss or the total of all annual losses.

Probability level
the probability (confidence) level defines the probability with which the defined amount of risk will not be exceeded.

PROBABLE MAXIMUM LOSS
The maximum loss which can be incurred in case of fire when the fire alarm system functions properly and a fire brigade participates in putting out the fire..

PROFIT COMISSION (CONTINGENT COMISSION)
An additional commission paid by the reinsurer to the cedant based on a predetermined percentage of the profit realized under the contract.

Proportional reinsurance
reinsurance treaties on the basis of which shares in a risk or → portfolio are reinsured under the relevant direct insurer's conditions. → Premium and losses are shared proportionately on a pro-rata basis. This is in contrast to → non-proportional reinsurance.

Protection cover
protection of segments of an insurer's portfolio against major losses (per risk/per event), primarily on a non-proportional basis.

Provision for unearned premiums (also: unearned premium reserve)
premium written in a financial year which is to be allocated to the following period on an accrual basis. This item is used to defer the written premium.