https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3AProvisional_premium 2026-06-13T15:42:46Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:Provisional_premium&diff=9703&oldid=prev 2026-03-11T05:43:06Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>📋 &#039;&#039;&#039;Provisional premium&#039;&#039;&#039; is an estimated [[Definition:Premium | premium]] charged at the inception of an insurance or [[Definition:Reinsurance | reinsurance]] contract when the final premium cannot be determined until the policy period ends and actual exposure data becomes available. This situation arises frequently in lines where the premium base — such as [[Definition:Payroll | payroll]], revenue, or number of units — fluctuates over the coverage term. [[Definition:Workers&#039; compensation insurance | Workers&#039; compensation]], [[Definition:General liability insurance | general liability]], and certain [[Definition:Excess of loss reinsurance | excess of loss reinsurance]] treaties are among the most common applications.<br /> <br /> 🔄 At binding, the [[Definition:Underwriter | underwriter]] calculates the provisional premium using the insured&#039;s estimated exposures for the upcoming period, applying the agreed [[Definition:Rate | rates]] to those projections. The policyholder pays this amount — sometimes in installments — to maintain coverage throughout the term. After expiration, an [[Definition:Audit | audit]] or reporting process determines the actual exposure figures. The insurer then computes the earned premium based on real data and issues either an additional premium invoice or a return premium credit, depending on whether actual exposures exceeded or fell short of the original estimates. [[Definition:Minimum premium | Minimum]] and [[Definition:Maximum premium | maximum premium]] provisions often cap the adjustment range to protect both parties.<br /> <br /> ⚖️ Getting the provisional premium reasonably close to the final figure matters for both cash-flow management and financial reporting. An insured that significantly underestimates exposures may face a large additional premium call at audit, straining its budget. Insurers, meanwhile, need accurate [[Definition:Earned premium | earned premium]] figures to calculate [[Definition:Loss ratio (L/R) | loss ratios]] and set [[Definition:Reserve | reserves]] appropriately. In reinsurance, provisional premiums on treaties like [[Definition:Aggregate excess of loss | aggregate covers]] require careful monitoring through periodic [[Definition:Bordereaux | bordereaux]] or statistical reports. The adjustment mechanism ensures that the price ultimately reflects the true risk transferred, preserving the actuarial integrity of the contract.<br /> <br /> &#039;&#039;&#039;Related concepts:&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:Deposit premium]]<br /> * [[Definition:Earned premium]]<br /> * [[Definition:Minimum premium]]<br /> * [[Definition:Audit premium]]<br /> * [[Definition:Adjustable premium]]<br /> * [[Definition:Subject premium]]<br /> {{Div col end}}</div>

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