Loss Portfolio Transfer
What this clause says
In consideration of the Premium, the Company assumes the Subject Business, being all liabilities for losses incurred on or before the Effective Date under the Subject Policies, subject to an Aggregate Limit stated as a multiple of the transferred reserves.
What this actually means
A loss portfolio transfer moves responsibility for a defined block of existing open claims to an insurer for a single premium. It converts an uncertain future liability into a fixed present cost, which releases collateral and takes the liability off the balance sheet.
What it means for an operator
Senior care operators use these before a sale, where a buyer discounting for uncertain legacy claim exposure usually discounts by more than the transfer costs, and to close a captive or exit a retention program whose open claims keep collateral posted long after the operating decision was made. The premium exceeds the discounted reserves because the insurer is taking timing and adverse development risk. Three things to watch: the aggregate limit, usually stated as a multiple of transferred reserves, above which genuinely catastrophic development returns to you; the loss of claims control, since the assuming insurer has no stake in your reputation in your market; and the accounting treatment, which is the point of the transaction and should be confirmed with your auditors in advance.
Why the Policy Checker does not score this
This term is worth understanding and cannot be checked from a declarations page. There is no single field that would answer it, and scoring it from an assumption would produce a confident wrong finding, which is the one thing a tool like this must never do. It is defined here and left out of the check.
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