Facultative Obligatory Treaty (Also Semi-obligatory Treaty)
A reinsurance contact under which the ceding company may cede
exposures or risks of a defined class that the reinsurer must
accept if ceded.
A reinsurance contract under which the ceding company has the
option to cede and the reinsurer has the option to accept or decline
classified risks of a specific business line. The contract merely
reflects how individual facultative reinsurance shall be handled.
A form of protection which reimburses an employer for losses caused
by dishonest or fraudulent, acts of employees.
Financial Loss Insurance
Insurance of legal liability for financial loss not involving
bodily injury or loss of or damage to property
A combustion accompanied by a flame or glow, which escapes its
normal limits to cause damage.
Coverage for losses caused by fire and lightning, as well as the
resultant damage caused by smoke and water
A policy under the terms of which protection follows moveable
property, covering it wherever it may be
Overflow of water from its natural boundaries. More specifically
defined by the National Flood Act of 1968 as 'a general and temporary
condition of partial or complete inundation of normally dry land
areas from (1) the overflow of inland or tidal waters or (2) the
unusual and rapid accumulation or runoff of surface waters from
Abbreviation for free-on-board, used in commerce to describe the
value of goods at point of embarkation, excluding transport and
insurance costs. Export values are usually expressed f.o.b. for
customs and excise purposes, while imports are usually valued
cost insurance and freight or charged in full.
Deductible in which the insurer has no liability if the loss is
under a certain amount, but once this amount is exceeded; the
entire loss is paid in full.
General average (in marine insurance)
A loss that must be borne partly by someone other than the owner
of the goods that were lost or destroyed: for example, if it is
necessary to jettison cargo to save a ship, the owners of the
ship and the rest of the cargo that is saved will share in the
loss of the goods that were intentionally sacrificed.
Damages awarded to an injured persons for intangible loss which
cannot be measured directly by rupees. Popularly known as "pain
and suffering." General damages are distinguished from special
damages which are awarded from actual economic loss, such as medical
costs, loss of income, etc.
The period of time following the due date of a policy premium
during which the payment of the premium will continue the policy
and during which the policy is in full force and effect
A reduced commission justified by the size of the premium
Intentional failure to perform a duty, reckless disregard of the
consequences as affecting the life or property of another
The premium paid by the policyholder.
The figure calculated by adding turnover to closing stock and
work in progress and subtracting from this amount the sum of the
opening stock and work in progress and the variables selected
by the insured (usually defined as specified working expenses).
Any insurance plan under which a number of employees and their
dependants are insured under a single policy, issued to their
employer, with individual certificates given to each insured employee;
the most commonly written lines are life and accident and health
Form of insurance that protects against loss of crops from
A condition that creates or increases the probability of
A generic term applying to all types of insurance indemnifying
or reimbursing for losses caused by bodily accident or sickness
or for expenses of medical treatment necessitated by sickness
or accidental bodily injury.
When the theft is committed entering into or out of the
The general care, cleanliness and maintenance of an insured
A package of insurance providing homeowners with a broad
range of property and liability coverages
Hull insurance (in ocean marine and aviation insurance)
Coverage for physical damage to a vessel or aircraft
A tropical storm marked by extremely low barometric pressure
and circular winds with a velocity of 120 miles an hour
IBNR (Incurred but not Reported) provision
Provision for claims incurred but not reported by the balance-sheet
date. That is, it is anticipated that there would be a number
of policies that have, but for the advice of the claim to
the insurer, occurred and therefore are likely to result
in a liability on the insurer.
The magnitude of this provision can be expected to reduce
as the time since the insurance risk on the contract expired
extends. The magnitude is also likely to vary depending
on the type of insurance risk covered by any particular
class of insurance contract.
It is a contract, which is contrary to law and against the
interests of public. It can not be sustained and does not
have legal effect.
Case in which responsibility for damage can be transferred
from the negligent party to another person, such as an employer
Incurred claims equal the claims paid during the policy
year plus the claim reserves as of the end of the policy
year, minus the corresponding reserves as of the beginning
of the policy year. The difference between the year end
and beginning of the year claim reserves is called the increase
in reserves and may be added directly to the paid claims
to produce the incurred claims.
Incurred Loss Ratio
The percentage of losses incurred to premiums earned.
Compensation to the victim of a loss, in whole or in part,
by payment, repair, or replacement
Legal principle that specifies an insured should not collect
more than the actual cash value of a loss but should be
restored to approximately the same financial position as
existed before the loss.
The period, beginning with the date of the damage, during
which the turnover of the business is affected by the damage.
It lasts until the turnover recovers and reaches the point
at which it would have been had the loss not occurred, or
the expiry of the maximum indemnity period -the number of
months selected by the insured -whichever occurs first.
Of a general legal principle related to insurance which
holds that the individual recovering under an insurance
policy should be restored to the approximate financial position
he or she was in prior to the loss.
One who adjusts losses on behalf of companies but is not
employed by any one. He or she is paid by fee for each loss
Indirect Loss (Or Damage)
Loss resulting from a peril, but not caused directly and
immediately thereby. For example: Loss of property due to
fire is a direct loss, while the loss of rental income as
the result of the fire would be an indirect loss.
A characteristic depreciation such as the fading of ink,
a cracking of parchment, the graying of hair
An interest which might be damaged if the peril insured
against occurs: the possibility of a financial loss to an
individual which can be protected against through insurance.
An economic device whereby the individual substitutes a
small certain cost (the premium) for a large uncertain financial
loss (the contingency insured against) which would exist
if it were not for the insurance contract: an economic device
for reducing and eliminating risk through the process of
combining a sufficient number of homogeneous exposures into
a group in order to make the losses predictable for the
group as a whole.
1. An organization chartered to operate as an insurer. (2)
Any corporation primarily engaged in the business of furnishing
insurance protection to the public
Any corporate body or individual which is operating as an
insurer, reinsurer or insurance intermediary and which is
subject to insurance regulation
An insurance product is defined as a product that is provided
by an insurance company.
Legal document issued to the insured setting out the terms
of the contract of insurance.
The person to whom or on whose behalf benefits are payable
under the policy
A licensed legal entity, which underwrites insurance, including
a mutual insurance company (but note the exemption of pure
Any person who, or organization which, gives advice by way
of directly offering, advertising or on a person-to-person
basis in respect of an insurance product and includes the
promotion of such a product or the facilitation of an agreement
or contract between an insurer and a customer. Intermediaries
are generally divided into separate classes. The most common
types are 'independent intermediaries' who represent the
buyer in dealings with the insurer (also known as independent
brokers) and 'agents' (which generally include multiple
agents and sub-agents) who represent the insurer.
Beneficiary designation allowing no change to be made in
the beneficiary of an insurance policy without the consent
of the named beneficiary
Act of throwing overboard part of a vessel's cargo or hull
in hopes of saving a ship from sinking.
Jewelers Block Insurance
An all risk insurance contract that provides jewelers with
coverage to losses, which they would be exposed.
A legal principle that permits the injured party in a tort
action to recover the entire amount of compensation due
for injuries from any tort feasor who is able to pay, regardless
of the degree of that party's negligence
Termination of a policy due to failure by the insured to
pay the premium as required
The unlawful taking, carrying, leading or riding away of
another person's property
Law of large numbers
While it is impossible to predict either the time or the
loss amount of adverse events in relation to individuals,
the averages for a sufficiently large set (of insureds)
exhibit certain patterns of loss frequency and loss extent
The costs of defending a claim from a third party and claimant's
costs for which an insured is liable, are usually covered
by a liability policy.
Any liability imposed on a person by a court of law
The person to whom a lease is granted, commonly called the
The person granting a lease, also known as the landlord
Letter of Credit (LOC)
Within the context of reinsurance, a banking instrument
established on a 'standby' basis to secure recoverables
from non-admitted reinsurers to enable the ceding company
to reduce the provision for unauthorized reinsurance in
its statutory statement
Any legally enforceable obligation
Insurance covering the policyholder's legal liability resulting
from injuries to other persons or damage to their property.
Liability Insurance. Provides protection for the insured
against loss arising out of legal liability to third parties
The incorporation of a company in the jurisdiction or the
approval given to a company to underwrite insurance in the
jurisdiction. These are recognized to be separate approvals
and may be made in separate jurisdictions
One line is equal to the ceding company 's retention. A
proportional treaty may have a total capacity expressed
as x lines and a reinsurer's share may be y lines
Line of Business
The general classification of business as utilized in the
insurance industry, i.e., fire, allied lines, homeowners,
A voluntary unincorporated association of individuals organized
for the purpose of writing insurance; normally refers to
Lloyd's of London, a group of individual underwriters and
syndicates that underwrite insurance risks severally, using
facilities maintained by the Lloyd's of London Corporation
To add charges to an insurance premium
An independent professional appointed by the insurers to
Loss of Profits
A synonym for business interruption insurance
The proportionate relationship of incurred losses to earned
premiums expressed as a percentage.
A book of rates, rules, and coverages usually available
for each kind of insurance
Margin of Solvency
The total assets of an insurance company must exceed its
liabilities (other than share capital) by a relevant amount,
known as the margin of solvency
Pertaining to the sea or to transportation: usually divided
as to 'ocean marine' and 'inland marine'; the insurance
covering transportation risks
A form of insurance primarily concerned with means of transportation
and communication, and with goods in transit
The price for which something would sell, especially the
value of certain types of assets, such as stocks and bonds.
It is based on what they would sell for under current market
conditions. For example, common stock market value would
be the price of the stock as of a specified date
Material Damage Policy
The policy covering damage to property (usually a commercial
fire policy) as the result of which damage a business interruption
claim may result. It is a condition of business interruption
insurance that a material damage policy must be and remain
Information about the subject of insurance that if known
would change the underwriting basis of the insurance, and
which would cause the insurer to refuse the application
or charge a higher rate
Act of making, issuing, circulating or causing to be issued
or circulated an estimate, an illustration, a circular or
a statement of any kind that does not represent the correct
policy terms, dividends or share of surplus or the name
or title for any policy or class of policies that does not
in fact reflect its true nature.
Moral Hazard refers to increase in probability of loss that
results from dishonesty in the character of the insured
person. Thus it is the dishonest tendencies on the part
of the insured person that may induce that person to attempt
to defraud the insurance company
An attitude that increases the probability of loss from
a peril. The attitude of, "It's insured; so why worry?"
is an example of a morale hazard
A deposit or conditional transfer to secure the performance
of some act: the person who makes the transfer is called
the 'mortgagor', the other party, the 'mortgagee'; sometimes
an intermediary called a 'trustee' is appointed
A borrower who takes out a mortgage MPL (Maximum Probable
The largest loss thought probable under a given insurance
policy. Normally applied to material damage risks where
the total sum insured is not considered to be at risk from
one loss event
A package policy which provides protection against a number
of separate perils. Multi-peril policies are not necessarily
multiple line policies, since the combined perils may be
all within one insurance line
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