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Bad Faith The failure of an insurer to settle within policy limits when there was an opportunity to do so (and a court award in excess of the policy limits).

Balance A concept in surplus share reinsurance dealing with the relationship between written premium under the treaty and the maximum limit of liability to which the reinsurer is exposed. The precise relationship will vary from treaty to treaty, but if the ratio desired for a specific treaty is achieved, the treaty if referred to as "balanced."

Banking Plan An agreement in which the ceding company pays the reinsurer a premium over a specified number of years which is intended to fully fund a specific limit of liability. If the premium is not fully expended by a payment of losses within the contract period the unused portion is returnable, less a reinsurance expense. Also known as Advance Deposit Premium Plan.

Base Premium The reinsured company's premiums (written or earned) to which the reinsurance premium rate is applied to produce the reinsurance premium. Also known as Subject Premium, Premium Base, and Underlying Premium.

Basic Limits The minimum amounts of insurance for which it is the practice to quote premiums in liability insurance. Additional amounts are charged for by the addition of certain percentages of the premium for the minimum (or basic) limits.

Binder (Reinsurance) A record of reinsurance arrangements pending the issuance of a formal reinsurance contract (which then replaces the binder). See Cover Note.

Boilerplate (Language) Clauses employing generally accepted wording with little variation, considered to be common among most treaties as so-called standard language.

Bordereau(x) Furnished periodically by the reinsured, a detailed report of insurance premiums or losses affected by reinsurance. A premium bordereau contains a detailed list of policies (or bonds) reinsured under a reinsurance treaty during the reporting period, reflecting such information as the name and address of the primary insured, the amount and location of the risk, the effective and termination dates of the primary insurance, the amount reinsured and the reinsurance premium applicable thereto. A loss bordereau contains a detailed list of claims and claims expenses outstanding and paid by the reinsured during the reporting period, reflecting the amount of reinsurance indemnity applicable thereto. Bordereau reporting is primarily applicable to pro rata reinsurance arrangements and to a- large extent has been supplanted by summary reporting.

Broker A reinsurance intermediary who negotiates contracts of reinsurance between a reinsured and reinsurer on behalf of the reinsured, receiving commission for placement and other services rendered from the reinsurer. Under the terms of one widely used intermediary clause, premiums paid a broker by a reinsured are considered paid to the reinsurer, but loss payments and other funds (such as premium adjustments) paid a broker by a reinsurer are not considered paid to the reinsured until actually received by the reinsured.

Brokerage Commission An amount paid a broker for insurance or reinsurance placement and other services.

Brokerage Market A collective reference to those reinsurers which accept business mainly through reinsurance intermediaries.

Buffer Layer Used in casualty insurance to describe a stratum of coverage between the maximum policy limit which the primary underwriter will write and the minimum deductible over which the excess or umbrella insurer will cover.

Burning Cost The ratio of actual past reinsured losses to a ceding company's subject matter premium (written or earned) for the same period. Used to analyze past reinsurance experience or to project the future.

Burning Ratio In primary insurance, the ratio of losses suffered to the amount of insurance in effect. Thus, not a "loss ratio," which is the ratio of losses incurred to premiums earned.

Buy-Back Agreement A negotiated contractual attempt by an insurer writing primary insurance or excess insurance to curtail further exposure to the insured for defense or indemnity by making a lump sum payment to the insured. Open questions exist as to how these agreements affect third-party beneficiaries of the original insurance policy.

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