Closed Year

A year of account that has been closed into another year of account by means of a reinsurance to close contract. Historically most Lloyd’s syndicates have operated a three year underwriting account according to which the profit or loss of an underwriting account is determined by the managing agent 36 months after the beginning of that account which is always the start of a calendar year. According to this system the normal closure date of the 2000 year of account (which commenced on 1 January 2000) was 31 December 2003 with the calculation of the reinsurance to close as at that date being finalised in or about February/March 2004.

Coinsurance

This may refer to either of the following situations:
(a) Where two or more insurers underwrite the same risk with several liability such that each insurer is not bound to follow the decisions of any co-insurer unless it has agreed to do so.

(b) Where the insured acts as its own insurer for a specified proportion of the sum insured.

Combined ratio

The claims and expenses of an insurer/reinsurer for a given period divided by its premium for the same period. It is normally expressed as a percentage with any figure in excess of 100% signifying a technical underwriting loss.

Coming into line

A biannual procedure currently undertaken in June and November each year which requires members to demonstrate that they have sufficient eligible assets to meet their current underwriting liabilities and to support future underwriting before they may underwrite for the next following year of account.

Commercial lines

Insurance which is sold to firms. This term is used in contrast to personal lines.

Commutation

The termination of a reinsurance contract by agreement of the parties on the basis of one or more lump sum payments by the reinsurer which extinguish its liability under the contract. The payment made by the reinsurer commonly relates to incurred losses under the contract.

Consortium

An agreement between a group of two or more insurers according to which each member of the group agrees to accept a proportion of all risks of a specified type that are underwritten by one or more designated members of the group which act as leading underwriters.. Unlike a line slip there is usually no restriction on which Lloyd’s brokers may place business with a consortium.

Constructive total loss

Section 60 of the Marine Insurance Act 1906 states that, subject to any policy provision, a constructive total loss arises where the subject matter of an insurance is reasonably abandoned to the insurer by the insured on account of its actual total loss appearing unavoidable or because it could not be preserved from actual total loss without an expenditure that would exceed its value.
The term is sometimes used to refer to insured property, e.g. a car, which is damaged beyond economic repair.

Contract certainty

Refers to the situation where the terms of an insurance or reinsurance contract are agreed before the inception date of the contract rather than being negotiated afterwards.

Conversion arrangement

A scheme sponsored by a members’ agent which allows an individual member to switch from underwriting on an unlimited liability basis to underwriting on a limited liability basis.