The term bonus–malus (Latin for 'good-bad') is used for a number of business arrangements which alternately reward (bonus) or penalize (malus).
Bonus usually is a discount in the premium which is given on the renewal of the policy if no claim is made in the previous year.
Academic literature concerning bonus malus systems typically presupposes that the quantity of claims within a given period follows a Poisson distribution.
[1] In this context, the parameter λ of the Poisson distribution, signifying claim frequency, is assumed to be accurately known and serves as a risk metric for the policy.
[2][3] Consequently, practical approaches involve fitting it through modal intervals[4] or employing fuzzy numbers,[5] for instance.
In executive compensation, particularly at banks, bonus–malus refers to schemes where annual bonuses are held in escrow (do not immediately vest), and can be reduced retroactively (clawed back) in case of losses in future years.
[6] Author Jim Collins proposed that executives be expected to buy stock with their own money (as was done at IBM in the 1990s) taking on both up-side rewards and down-side risk.
The environmental tax is also applied as a malus, to all vehicles newly registered after 1 January 2008, affecting all passenger cars emitting more than 109 g of CO2 per kilometer emissions (as of 2020).
[9] Currently, the certificate holder must pay a penalty to the registration, according to the following rates (2020):[10] Further taxes may apply according to vehicle classification.