Definitions Flashcards
unpaid claim estimate
the actuary’s estimate of the obligation for future payment resulting from claims due to past events
qualified actuary
meets the education, experience, and continuing education requirements of the SQS for the SAO as set forth in the Qualification Standards for actuaries issuing opinions in the US promulgated by the AAA and both maintains an accepted actuarial designation AND is a member of a professional actuarial association that requires adherence to the AAA code of conduct and USQS and participates in the ABCD for members practicing in the US
SAO Opinion
In my opinion, the amounts carried in Exhibit A on account of the items identified [A] meet the requirements of the insurance laws in state X, [B] are computed in accordance with accepted actuarial standards and principles, [C] make a reasonable provision for all unpaid loss and loss adjustment expense obligations of the company under the terms of its contracts and agreements, and [D] make a reasonable provision for the unearned premium reserves for long duration contracts
materiality
an omission, understatement, or overstatement in a work product is material if it is likely to affect either the intended user’s decision making or their reasonable expectations
nuclear verdict
extremely large jury award, typically in excess of $100M and often including substantial punitive damages
FL Hurricane Catastrophe Fund
a state trust fund that provides reimbursement to residential property insurers for a portion of their FL cat losses
certified reinsurer
non-US reinsurer domiciled in a jurisdiction designated by the NAIC as a Qualified Jurisdiction (Bermuda, France, Germany, Ireland, Japan, Switzerland, UK) that would have been categorized as unauthorized prior to 2012 and has attained certification from the reporting entity’s domiciliary state
reinsurance commutation
an agreement that terminates the relationship between an insurer and a reinsurer by settling all obligations with an immediate payment
novation
the replacement of one of the parties in a reinsurance agreement with the consent of all parties involved
fronting carrier
an insurer that cedes a large portion (more than 75%) of its business so the reinsurer can avoid regulatory oversight
guaranteed cost policy
a policy where an entity transfers all liability to an insurer for a fixed premium
retrospectively rated reinsurance policy
entity transfers all liability to an insurer based on actual loss experience where the final premium depends on an audited exposure base and loss experience
self-insurance
a policy where an entity retains all risk OR purchases coverage for large claims only
captive
affiliated insurance companies that can assume some or all of an entity’s liability and are subject to less stringent regulation than admitted carriers
deductible reimbursement
a policy written by a captive that directly reimburses the entity for its deductible obligations (the entity’s obligations to the insurer but not the claimants)
trust
financial arrangement where funds or assets are set aside to cover potential losses; commonly used to finance professional liability exposures and provide coverage to affiliated entities on a direct basis
Medicare Set-aside Allowance
a portion of WC or liability settlement set aside for future medical costs due to injury; all parties must agree and fund
Center for Medicare & Medicaid Services
administers Medicare and establishes guidelines for review and approval of MSAs
Responsible Reporting Entities
claim payers in WC/Medicare situations
Conditional Payment
when medical costs are incurred before primary coverage begins, Medicare will make these payments to be reimbursed once primary insurer is determined
IRS revenue offset procedure
under SAP, acquisition costs are not deferred so the insurer would incur a loss which would be refunded in the future. to simplify this process, the IRS reduces UPR by 20% for all insurers
Mandatory Action Level
RBC < 150% or multiple unusual IRIS ratios or regulator judgment
Insurers required to submit financial improvement plan, reduce liabilities or raise capital, and have restrictions placed on new/renewal business
Administrative Supervision
Mandatory corrective action fails; RBC <100%, IRIS ratios deteriorate, regulator judgment.
Regulator must give consent to acquisition of new debt, issuance of new policies, purchase of reinsurance, etc.
Receivership
All other corrective measures fail and regulator deems insurer wholly incapable of managing its operations
Legally appointed receiver acts as custodian of an insurer’s assets and operations.
Rehabilitation - reorg of finances to (partially) meet obligations
Liquidation - closure and distribution of assets to creditors in priority order
