Glossary
Plain-English definitions of essential reinsurance and ILS terms. 39 terms and counting.
Catastrophe Bonds
The loss level at which a reinsurance contract or cat bond begins to pay. Also called the 'strike' or 'retention'.
The mismatch between a parametric or industry-loss trigger and the cedant's actual losses.
A high-yield debt instrument that transfers catastrophe risk from insurers to capital market investors.
The loss level at which a reinsurance contract or cat bond is fully used up. Attachment plus limit.
The probability-weighted average annual loss for a cat bond or ILS structure. The core pricing input.
The market where previously issued catastrophe bonds are bought and sold between investors.
An isolated legal entity used to issue catastrophe bonds and other ILS instruments, ring-fencing collateral from counterparty risk.
The mechanism that determines whether a catastrophe bond pays out to the sponsor. Four main types: indemnity, industry loss, parametric, and modelled loss.
Insurance-Linked Securities
A private reinsurance contract where the reinsurer (typically an ILS fund) posts 100% of the limit as cash collateral upfront.
An investment fund that deploys capital into insurance-linked securities, including cat bonds, collateralised reinsurance, and sidecars.
A binary reinsurance contract that pays out when total insured industry losses from an event exceed a defined threshold.
Financial instruments whose returns are linked to insurance or reinsurance losses rather than financial markets.
A short-term special purpose vehicle that provides quota-share capacity to a reinsurer, funded by third-party ILS capital.
An increase in the yield premium demanded by ILS investors, typically caused by a catastrophe event or tightening capacity.
Reinsurance
An insurer or reinsurer that purchases reinsurance or ILS protection, 'ceding' risk to another party.
A measure of reinsurer profitability: claims + expenses divided by premiums. Below 100% means underwriting profit.
A non-proportional reinsurance treaty that responds only when losses exceed a defined retention level.
A reinsurance market cycle phase where prices increase, capacity reduces, and terms tighten — typically following large losses.
Claims incurred divided by premiums earned, expressed as a percentage. A core measure of underwriting performance.
The largest loss a portfolio is likely to suffer from a single catastrophe event at a defined probability level (e.g. 1-in-100 years).
A proportional reinsurance treaty where the reinsurer takes a fixed percentage of all premiums and losses.
The premium paid as a percentage of the reinsurance limit. The primary pricing metric for excess-of-loss reinsurance.
Reinsurance purchased by a reinsurer to protect its own book. The 'reinsurance of reinsurance'.
Parametric Insurance
Onchain / DeFi
Assets that regulators accept as valid collateral backing insurance and reinsurance obligations.
Bermuda's integrated financial regulator overseeing insurance, reinsurance, banking, and digital asset businesses.
The ability of DeFi smart contracts and tokens to interact with one another trustlessly, enabling stacked strategies.
Bermuda's 2018 law requiring companies conducting digital asset business to obtain a BMA licence.
The regulated safekeeping of digital assets such as stablecoins and tokenised securities, analogous to traditional securities custody.
ERC-20 tokens issued by Ensuro representing a capital provider's share of a reinsurance risk pool.
A BMA designation providing a supervised, proportionate regulatory pathway for novel (re)insurance business models.
A leveraged DeFi strategy involving repeated deposit and borrow cycles to amplify yield exposure.
Reinsurance contracts executed via blockchain smart contracts, with collateral held in stablecoin pools and payouts automated by oracle data.
An objective, measurable trigger that activates a payout based on a physical parameter rather than actual insured loss.
The risk that a bug or exploit in protocol code causes loss of funds without any insurance loss event occurring.
The total capital deposited in a DeFi protocol, denominated in USD. A standard measure of protocol size.
A regulated US dollar stablecoin issued by Circle, backed 1:1 by cash and US Treasury reserves — the dominant collateral currency in onchain reinsurance.