 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
|
|
| Contact us to place your ad here |
| INSURANCE DEFINITIONS (CONT'D) |
(November 2005)
- In life and health insurance, a policy covering a mortgagor with benefits intended to pay off the balance due on a mortgage upon the insured's death, or to meet the payments due on a mortgage in case of the insured's death or disability.
- Companies with no capital stock, and owned by policyholders. The earnings of the company--over and above the payments of the losses, operating expenses and reserves--are the property of the policyholders. There are two types of mutual insurance companies. A nonassessable mutual charges a fixed premium and the policyholders cannot be assessed further. Legal reserves and surplus are maintained to provide payment of all claims. Assessable mutuals are companies that charge an initial fixed premium and, if that isn't sufficient, might assess policyholders to meet losses in excess of the premiums that have been charged.
- Perils specifically covered on insured property.
- Net liabilities expressed as a ratio to policyholder surplus. Net liabilities equal total liabilities less conditional reserves, plus encumbrances on real estate, less the smaller of receivables from or payable to affiliates. This ratio measures company's exposures to errors of estimation in its loss reserves and all other liabilities. Loss-reserve leverage is generally the key component of net liability leverage. The higher the loss-reserve leverage the more critical a company's solvency depends upon maintaining reserve adequacy.
- The amount of premium minus the agent's commission. Also, the premium necessary to cover only anticipated losses, before loading to cover other expenses.
- The adjustment of net premiums written for the increase or decrease of the company's liability for unearned premiums during the year. When an insurance company's business increases from year to year, the earned premiums will usually be less than the written premiums. With the increased volume, the premiums are considered fully paid at the inception of the policy so that, at the end of a calendar period, the company must set up premiums representing the unexpired terms of the policies. On a decreasing volume, the reverse is true.
- Represents gross premium written, direct and reinsurance assumed, less reinsurance ceded.
- Net premiums earned less incurred losses, loss-adjustment expenses, underwriting expenses incurred, and dividends to policyholders.
- Insurance for motorists who have poor driving records or have been canceled or refused insurance. The premium is much higher than standard auto due to the additional risks.
- An event that results in an insured loss. In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss doesn't have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected not intended by the insured.
- Measures the funds generated from insurance operations, which includes the change in cash and invested assets attributed to underwriting activities, net investment income and federal income taxes. This measure excludes stockholder dividends, capital contributions, unrealized capital gains/losses and various noninsurance related transactions with affiliates. This test measures a company's ability to meet current obligations through the internal generation of funds from insurance operations. Negative balances might indicate unprofitable underwriting results or low yielding assets.
- This item represents miscellaneous sources of operating income or expenses that principally relate to premium finance income or charges for uncollectible premium and reinsurance business.
- The cause of a possible loss.
- Insurance for individuals and families, such as private-passenger auto and homeowners insurance.
- The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.
- The sum of paid in capital, paid in and contributed surplus, and net earned surplus, including voluntary contingency reserves. It also is the difference between total admitted assets and total liabilities.
- Auto coverage for drivers who have never had an accident and operates vehicles according to law. Drivers are not a risk for any insurance company that writes auto insurance, and no insurance company would be afraid to take them on as risk.
- The price of insurance protection for a specified risk for a specified period of time.
- Premiums and agents' balances in course of collection; premiums, agents' balances and installments booked but deferred and not yet due; bills receivable, taken for premiums and accrued retrospective premiums.
- The amount of the premium that as been paid for in advance that has been "earned" by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.
- That part of the premium applicable to the unexpired part of the policy period.
- Pretax operating earnings before any capital gains generated from underwriting, investment and other miscellaneous operating sources.
- This refers to the risk profile of auto insurance policyholders and can be divided into three categories: standard, nonstandard and preferred. In the eyes of an insurance company, it is the type of business (or the quality of driver) that the company has chosen to taken on.
- An occurrence that triggers an insured's protection.
- Assets that are quickly convertible into cash.
- An unincorporated groups of individuals, firms or corporations, commonly termed subscribers, who mutually insure one another, each separately assuming his or her share of each risk. Its chief administrator is an attorney-in-fact.
- In effect, insurance that an insurance company buys for its own protection. The risk of loss is spread so a disproportionately large loss under a single policy doesn't fall on one company. Reinsurance enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a line of business or a geographical area within a specified time period.
- The unit of insurance transferred to a reinsurer by a ceding company.
- Measures a company's dependence upon its reinsurers and the potential exposure to adjustments on such reinsurance. Its determined from the total ceded reinsurance recoverables due from non-U.S. affiliates for paid losses, unpaid losses, losses incurred but not reported (IBNR), unearned premiums and commissions less funds held from reinsurers expressed as a percent of policyholder surplus.
- The automatic re-establishment of in-force status effected by the payment of another premium.
- An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. A reserve is usually treated as a liability.
- Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.
- Liability insurance companies owned by their policyholders. Membership is limited to people in the same business or activity, which exposes them to similar liability risks. The purpose is to assume and spread liability exposure to group members and to provide an alternative risk financing mechanism for liability. These entities are formed under the Liability Risk Retention Act of 1986. Under law, risk retention groups are precluded from writing certain coverages, most notably property lines and workers' compensation. They predominately write medical malpractice, general liability, professional liability, products liability and excess liability coverages. They can be formed as a mutual or stock company, or a reciprocal.
- Having sufficient assets--capital, surplus, reserves--and being able to satisfy financial requirements--investments, annual reports, examinations--to be eligible to transact insurance business and meet liabilities.
- Auto insurance for average drivers with relatively few accidents during lifetime.
- The state in which the company is incorporated or chartered. The company also is licensed (admitted) under the state's insurance statutes for those lines of business for which it qualifies.
- A reserve, either specific or general, required by law.
- An incorporated insurer with capital contributed by stockholders, to whom earnings are distributed as dividends on their shares.
- Any provision in a policy designed to cut off an insurer's losses at a given point.
- The right of an insurer who has taken over another's loss also to take over the other person's right to pursue remedies against a third party.
- The amount by which assets exceed liabilities.
- Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn't build up any of the nonforfeiture values associated with whole life policies.
- A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, and liability insurance is mainly purchased to cover unintentional torts.
- This item is the sum of all admitted assets, and are valued in accordance with state laws and regulations, as reported by the company in its financial statements filed with state insurance regulatory authorities. This item is reported net as to encumbrances on real estate (the amount of any encumbrances on real estate is deducted from the value of the real estate) and net as to amounts recoverable from reinsurers (which are deducted from the corresponding liabilities for unpaid losses and unearned premiums).
- A loss of sufficient size that it can be said no value is left. The complete destruction of the property. The term also is used to mean a loss requiring the maximum amount a policy will pay.
- These investments represent total unaffiliated investments as reported in the exhibit of admitted assets. It is cash, bonds, stocks, mortgages, real estate and accrued interest, excluding investment in affiliates and real estate properties occupied by the company.
- The individual trained in evaluating risks and determining rates and coverages for them. Also, an insurer.
- The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not quality.
- Expenses, including net commissions, salaries and advertising costs, which are attributable to the production of net premiums written.
- Details the underwriting practices of an insurance company and provides specific guidance as to how underwriters should analyze all of the various types of applicants they might encounter. Also called an underwriting manual, underwriting guidelines, or manual of underwriting policy.
- That part of the premium applicable to the unexpired part of the policy period.
- A combination flexible premium, adjustable life insurance policy.
- How much a covered group uses a particular health plan or program.
- A calculation of the policy reserve in life insurance. Also, a mathematical analysis of the financial condition of a pension plan.
- A reserve against the contingency that the valuation of assets, particularly investments, might be higher than what can be actually realized or that a liability may turn out to be greater than the valuation placed on it.
- A form of life insurance whose face value fluctuates depending upon the value of the dollar, securities or other equity products supporting the policy at the time payment is due.
- A combination of the features of variable life insurance and universal life insurance under the same contract. Benefits are variable based on the value of underlying equity investments, and premiums and benefits are adjustable at the option of the policyholder.
- An allocation of surplus not required by law. Insurers often accumulate such reserves to strengthen their financial structure.
- Life insurance which might be kept in force for a person's whole life and which pays a benefit upon the person's death, whenever that might be.
Source: Reproduced with the permission of the A.M. Best Co., Glossary of Insurance Terms, http://www.ambest.com/resource/glossary.html,
(November 2005)
 Return
to first page |
IAC Building, Collymore Rock, St. Michael, BB11115, BARBADOS.
Telephone: (246) 427-5608/9
Fax: (246) 427-7277