Flashcards_Surplus
(244 cards)
1
Q
Admitted market or standard market
A
The distribution system consisting of admitted insurers and their producers.
2
Q
Surplus lines market
A
The distribution system of surplus lines insurers and intermediaries that provides insurance on risks for which insurance is not available from admitted insurers.
3
Q
Admitted insurer
A
An insurer to which a state insurance department has granted a license to do business within that state
4
Q
Nonadmitted insurer
A
An insurer not authorized by the state insurance department to do business within that state.
5
Q
Surplus lines law
A
A state law that permits any producer with a surplus lines license issued by that state to procure insurance from an eligible surplus lines insurer if the applicant cannot obtain the desired type of insurance in the admitted market.
6
Q
Distressed risk
A
A risk characterized by unfavorable attributes that have made it unacceptable to admitted insurers.
7
Q
Unique risk
A
A risk that is so specialized or unusual that admitted insurers are unwilling to insure it.
8
Q
High-capacity risk
A
A risk that requires high limits of insurance that may exceed the underwriting criteria of admitted insurers.
9
Q
Export list
A
A list of coverages or classes of business that can be exported (written in the surplus lines market) without fulfilling the diligent search requirement.
10
Q
Reinsurance
A
The transfer of insurance risk from one insurer to another through a contractual agreement under which one insurer (the reinsurer) agrees in return for a reinsurance premium to indemnify another insurer (the primary insurer) for some or all of the financial consequences of certain loss exposures covered by the primarys insurance policies.
11
Q
Stock insurer
A
An insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders.
12
Q
Mutual insurer
A
An insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them.
13
Q
Lloyds (Lloyds of London)
A
An association of investors grouped in syndicates who are represented by underwriters to write insurance and reinsurance.
14
Q
Captive insurer or captive
A
A subsidiary formed to insure the loss exposures of its parent company and the parents affiliates.
15
Q
Underwriting
A
The process of selecting insureds pricing coverage determining insurance policy terms and conditions and then monitoring the underwriting decisions made.
16
Q
Risk control
A
A conscious act or decision not to act that reduces the frequency and/or severity of losses or makes losses more predictable.
17
Q
Premium audit
A
Methodical examination of a policyholders operations records and books of account to determine the actual exposure units and premium for insurance coverages already provided.
18
Q
Domestic insurer
A
An insurer doing business in the jurisdiction in which it is incorporated.
19
Q
Foreign insurer
A
An insurer licensed to operate in a jurisdiction but incorporated in another jurisdiction.
20
Q
Alien insurer
A
An insurer domiciled in a country other than the one in which it seeks to conduct or is conducting business.
21
Q
National Association of Insurance Commissioners (NAIC)
A
An association of insurance commissioners from the 50 U.S. states the District of Columbia and the five U.S. territories and possessions whose purpose is to coordinate insurance regulation activities among the various state insurance departments.
22
Q
Guaranty fund
A
A state-established fund that provides a system for the payment of some of the unpaid claims of insolvent insurers licensed in that state generally funded by assessments collected from all insurers licensed in the state.
23
Q
NAIC Annual Statement
A
The primary financial statement prepared by insurers and required by every state insurance department.
24
Q
Focused differentiation strategy
A
A business-level strategy through which a company focuses on one group of customers and offers unique or customized products that permit it to charge a higher price than that of the competition.
25
Target market niche
A collection of customers with similar characteristics that an organization identifies in order to meet their needs.
26
Binding authority
An insurance agents authority to effect coverage on behalf of the insurer.
27
Solvency
The ability of an insurer to meet its financial obligations as they become due even those resulting from insured losses that may be claimed several years in the future.
28
Foreign insurer
An insurer licensed to operate in a state but incorporated in another state.
29
Alien insurer
An insurer domiciled in a country other than the United States.
30
Reciprocal insurance exchange (interinsurance exchange)
An insurer owned by its policyholders formed as an unincorporated association for the purpose of providing insurance coverage to its members (called subscribers) and managed by an attorney-in-fact. Members agree to mutually insure each other and they share profits and losses in the same proportion as the amount of insurance purchased from the exchange by that member
31
Market conduct regulation
Regulation of the practices of insurers in regard to four areas of operation: sales practices underwriting practices claims practices and bad-faith actions.
32
Unfair trade practices law
State law that specifies certain prohibited business practices.
33
Reserve
The amount the insurer estimates and sets aside to pay on an existing claim.
34
Solvency surveillance
The process conducted by state insurance regulators of verifying the solvency of insurers and determining whether their financial condition enables them to meet their financial obligations and to remain in business.
35
Insurance Regulatory Information System (IRIS)
An information and early-warning system established and operated by the NAIC to monitor the financial soundness of insurers.
36
Stamping office
An organization that facilitates and encourages compliance with state laws and regulations regarding surplus lines placements.
37
Ten Guiding Principles
Standards that states use to regulate rather than eliminate surplus lines insurance.
38
International Insurers Department (IID)
An organization that collects and reviews information from nonadmitted alien insurers about their financial conditions trust funds and deposits.
39
Diligent search
A surplus lines regulatory requirement establishing that coverage for the risk is unavailable from admitted insurers.
40
Affidavit
A signed statement summarizing efforts to find coverage from admitted insurers.
41
Policyholders surplus
Under statutory accounting principles (SAP) an insurers total admitted assets minus its total liabilities.
42
Premium-to-surplus ratio or capacity ratio
A capacity ratio that indicates an insurers financial strength by relating net written premiums to policyholders surplus.
43
Residual market
The term referring collectively to insurers and other organizations that make insurance available through a shared risk mechanism to those who cannot obtain coverage in the admitted market.
44
Automobile insurance plan
Plan for insuring high-risk drivers in which all auto insurers doing business in the state are assigned their proportionate share of such drivers based on the total volume of auto insurance written in the state.
45
Fair Access to Insurance Requirements (FAIR) plans
An insurance pool through which private insurers collectively address an unmet need for property insurance on urban properties especially those susceptible to loss by riot or civil commotion.
46
Adverse selection
The decision to reinsure those loss exposures that have an increased probability of loss because the retention of those loss exposures is undesirable.
47
Underwriting cycle
A cyclical pattern of insurance pricing in which a soft market (low rates relaxed underwriting and underwriting losses) is eventually followed by a hard market (high rates restrictive underwriting and underwriting gains) before the pattern again repeats itself.
48
Managing general agent (MGA)
An authorized agent of the primary insurer that has underwriting authority on behalf of the insurer usually in a specific geographic area.
49
Treaty reinsurance
A reinsurance agreement that covers an entire class or portfolio of loss exposures and provides that the primary insurers individual loss exposures that fall within the treaty are automatically reinsured.
50
Facultative reinsurance
Reinsurance of individual loss exposures in which the primary insurer chooses which loss exposures to submit to the reinsurer and the reinsurer can accept or reject any loss exposures submitted.
51
Hard market
Market conditions in which insurer competition diminishes buyers have difficulty finding coverage premiums increase and insurer profitability rises.
52
Soft market
Market conditions in which insurer competition is intense and is indicated by widely available coverage lower premiums and decreased insurer profitability.
53
Capacity
The amount of business an insurer is able to write usually based on a comparison of the insurers written premiums to its policyholders surplus.
54
Lead user
A customer who currently has needs that are likely to become more widespread in the future.
55
Risk purchasing group (RPG)
A group of insurance buyers collectively negotiating the terms of coverage with insurers.
56
Target market
A homogeneous market segment to which a unique product is directed or with which a unique approach is used.
57
Niche marketing
A type of marketing that focuses on specific types of buyers who are a subset of a larger market.
58
Competitive strategy
A formal plan for achieving a favorable competitive position in an industry.
59
Competitive advantage
The ability of one company to gain market share over its competitors by providing either lower prices or more unique products or services than those of its competitors.
60
Marketing mix
The combination of marketing attributes that an organization offers to a customer in hopes of solving the customers problem.
61
Managing general agency (MGA)
An independent business organization that functions almost as a branch office for one or more insurers and that appoints and supervises independent agents and brokers for insurers using the independent agency and brokerage system.
62
Underwriting guidelines (underwriting guide)
A written manual that communicates an insurers underwriting policy and that specifies the attributes of an account that an insurer is willing to insure.
63
Binding authority
A method of placing insurance in which a surplus lines intermediary can bind coverage for a particular submission that falls within the parameters of the binding authority contract without prior submission to the surplus lines insurer
64
Program business
An insurers offering of a policy or combination of policies with special coverages prices or both to insureds with similar characteristics.
65
Program manager
A surplus lines intermediary that has created a special or niche program that fits a particular market.
66
Subsidiary
A company owned or controlled by another company
67
Lloyds broker
An insurance broker who procures coverage in the Lloyds market on behalf of insureds.
68
Producer
Any of several kinds of insurance personnel who place insurance and surety business with insurers and who represent either insurers or insureds or both.
69
Agent
In the agency relationship the party that is authorized by the principal to act on the principals behalf.
70
Agency
A legal consensual relationship that exists when one party the agent acts on behalf of another party the principal.
71
Principal
The party in an agency relationship that authorizes the agent to act on that partys behalf.
72
Actual authority
Authority (express or implied) conferred by the principal on an agent under an agency contract.
73
Express authority
The authority that the principal specifically grants to the agent.
74
Implied authority
The authority implicitly conferred on an agent by custom usage or a principals conduct indicating intention to confer such authority.
75
Apparent authority
A third partys reasonable belief that an agent has authority to act on the principals behalf.
76
Leverage
The practice of using borrowed money to invest.
77
Liquidity
The ease with which an asset can be converted to cash with little or no loss of value.
78
Open market placement
A method of placing insurance in which insurers decide whether to accept a particular submission before coverage is bound.
79
Errors and omissions (E&O)
Negligent acts (errors) committed by a person conducting insurance business that give rise to legal liability for damages; a failure to act (omission) that creates legal liability.
80
Risk management process
The method of making implementing and monitoring decisions that minimize the adverse effects of risk on an organization.
81
Diligent search affidavit
A signed statement summarizing efforts to find coverage from admitted insurers and establishing that coverage for the risk is unavailable in that market.
82
Fiduciary
A person or entity that holds a position of trust manages another persons or entitys affairs or funds and has a duty to that person or entity to act in a trustworthy manner.
83
Binder
A temporary written or oral agreement to provide insurance coverage until a formal written policy is issued.
84
Underwriting submission
Underwriting information for an initial application or a substantive policy midterm or renewal change.
85
Hazard
A condition that increases the frequency or severity of a loss.
86
Annual report
A source of accounting information of a publicly held company that contains a description of the companys background and growth and an analysis of the previous years operation; prepared by the management of the company.
87
Form 10-K
An annual report that contains financial statistics supplemental statements and a narrative section (managements discussion and analysis); required by the Securities and Exchange Commission (SEC) of all publicly traded companies to update their registration statement.
88
Financial statement
A document that quantitatively presents an organizations financial activities or status.
89
Risk control report
A record that contains account information gathered as a result of a physical inspection by an insurers risk control representative specifically at the request of an underwriter
90
Primary layer
The first level of insurance coverage above any deductible
91
Excess coverage
Insurance that covers losses above an attachment point below which there is usually another insurance policy or a self-insured retention.
92
Book of business
A group of policies with a common characteristic such as territory or type of coverage or all policies written by a particular insurer or agency.
93
Adverse selection
In general the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.
94
Policyholders surplus
An insurers assets minus its liabilities which represents its net worth.
95
Underwriting authority
The scope of decisions that an underwriter can make without receiving approval from someone at a higher level.
96
Line underwriting activity
An underwriting activity that is directed at evaluating new submissions and renewal underwriting.
97
Staff underwriting activity
An underwriting management activity that is aimed at managing the risk selection process and that is often delegated to specialists within the Underwriting Department.
98
Underwriting policy (underwriting philosophy)
A guide to individual and aggregate policy selection that supports an insurers mission statement.
99
Underwriting audit
A review of underwriting files to ensure that individual underwriters are adhering to underwriting guidelines.
100
Loss ratio
A ratio that measures losses and loss adjustment expenses against earned premiums and that reflects the percentage of premiums being consumed by losses.
101
Expense ratio
An insurers incurred underwriting expenses for a given period divided by its written premiums for the same period.
102
Combined ratio
A profitability ratio that indicates whether an insurer has made an underwriting loss or gain.
103
Earned premiums
The portion of written premiums that corresponds to coverage that has already been provided.
104
Incurred losses
The sum of paid losses paid loss adjustment expenses loss reserves and loss adjustment expense reserves.
105
Allocated loss adjustment expense (ALAE)
The expense an insurer incurs to investigate defend and settle claims that are associated with a specific claim.
106
Written premiums
The total premium on all policies written (put into effect) during a particular period.
107
Underwriting expenses
Costs incurred by an insurer for operations taxes fees and the acquisition of new policies.
108
Underwriting loss
An insurers loss incurred when losses and expenses for a given period are greater than its premium earned for the same period.
109
Underwriting profit
Income an insurer earns from premiums paid by policyholders minus incurred losses and underwriting expenses.
110
Output
Any product or service that results from a work process
111
Retention ratio
The percentage of insurance policies renewed.
112
Success ratio
The ratio of insurance policies written to those that have been quoted to applicants for insurance.
113
Rate
The price per exposure unit for insurance coverage.
114
Ratemaking
The process insurers use to calculate insurance rates which are a premium component.
115
Indication
In a rate filing the amount that the loss experience suggests that the insurer should charge to cover costs.
116
Loss costs
The portion of the rate that covers projected claim payments and loss adjusting expenses.
117
Loss adjustment expense (LAE)
The expense that an insurer incurs to investigate defend and settle claims according to the terms specified in the insurance policy
118
Premium
The price of the insurance coverage provided for a specified period.
119
Pure premium
The average amount of money an insurer must charge per exposure unit in order to be able to cover the total anticipated losses for that line of business.
120
Expense provision
The amount that is included in an insurance rate to cover the insurers expenses and that might include loss adjustment expenses but that excludes investment expenses.
121
Unallocated loss adjustment expense (ULAE)
Loss adjustment expense that cannot be readily associated with a specific claim.
122
Ultimate loss
The final paid amount for all losses in an accident year.
123
Loss reserve
An estimate of the amount of money the insurer expects to pay in the future for losses that have occurred.
124
Trending
A statistical technique for analyzing environmental changes and projecting such changes into the future.
125
Investment income
Interest dividends and net capital gains received by an insurer from the insurers financial assets minus its investment expenses.
126
Pure premium method
A method for calculating insurance rates using estimates of future losses and expenses including a profit and contingencies factor.
127
Loss ratio method
A method for determining insurance rates based on a comparison of actual and expected loss ratios.
128
Judgment ratemaking method
A method for determining insurance rates that relies heavily on the experience and knowledge of an actuary or an underwriter who makes little or no use of loss experience data.
129
Advisory organization
An independent organization that works with and on behalf of insurers that purchase or subscribe to its services.
130
Loss cost multiplier
A factor that provides for differences in expected loss individual company expenses underwriting profit and contingencies; when multiplied with a loss cost it produces a rate.
131
Calendar-year method
A method of collecting ratemaking data that estimates both earned premiums and incurred losses by formulas from accounting records.
132
Policy-year method
A method of collecting ratemaking data that analyzes all policies issued in a given 12-month period and that links all losses premiums and exposure units to the policy to which they are related.
133
Accident-year method
A method of organizing ratemaking statistics that uses incurred losses for an accident year which consist of all losses related to claims arising from accidents that occur during the year and that estimates earned premiums by formulas from accounting records.
134
On-level factor
A factor that is used to adjust historical premiums to the current rate level.
135
Loss development factor
An actuarial means for adjusting losses to reflect future growth in claims due to both increases in the incurred amount for reported losses and incurred but not reported (IBNR) losses.
136
Exponential trending
A method of loss trending that assumes a fixed percentage increase or decrease for each time period.
137
Unearned premiums
The portion of written premiums that corresponds to coverage that has not yet been provided.
138
Bulk reserves
Reserves set aside for future expected claim payments but not associated with any specific claim; include a provision for incurred but not reported (IBNR) claims future development of known claims (beyond the carried case reserves) and potential reopening of claims that have been settled.
139
Schedule P
The NAIC Annual Statement Schedule that shows detailed historical information on paid and reserved losses and LAE.
140
Claims-made coverage
Coverage that is triggered by a claim alleging bodily injury or property damage that is made during the policy period even if the claim arises from an event that happened before policy inception.
141
Experience period
The period for which all pertinent statistics are collected and analyzed in the ratemaking process.
142
Credibility
The level of confidence an actuary has in projected losses; increases as the number of exposure units increases.
143
Increased limit factor
A factor applied to the rates for basic limits to arrive at an appropriate rate for higher limits.
144
Catastrophe model
A type of computer program that estimates losses from future potential catastrophic events.
145
Credibility factor
The factor applied in ratemaking to adjust for the predictive value of loss data and used to minimize the variations in the rates that result from purely chance variations in losses.
146
Basic limit
The limit for which a liability policy can be written without either a charge for an increased limit or a credit for a reduced limit.
147
First-party claim
A demand by an insured person or organization seeking to recover from its insurer for a loss that its insurance policy may cover.
148
Third-party claim
A demand against an insured by a person or organization other than the insured or the insurer seeking to recover damages that may be payable by the insureds liability insurance.
149
Claimant
A party that makes a claim and that can be either a firstparty claimant or a third-party claimant
150
Claims representative
A person responsible for investigating evaluating and settling claims.
151
Third-party administrator (TPA)
An organization that provides administrative services associated with risk financing and insurance.
152
Independent adjuster
An independent claims representative who handles claims for insurers for a fee.
153
Public adjuster
An outside organization or person hired by an insured to represent the insured in a claim in exchange for a fee.
154
Reservation of rights letter
An insurers letter that specifies coverage issues and informs the insured that the insurer is handling a claim with the understanding that the insurer may later deny coverage should the facts warrant it.
155
Nonwaiver agreement
A signed agreement indicating that during the course of investigation neither the insurer nor the insured waives rights under the policy.
156
Diary or suspense
A system to remind claims personnel to perform a particular task on a claim.
157
Activity log
A record of all the activities and analyses that occur while handling a claim.
158
Subrogation
The process by which an insurer can after it has paid a loss under the policy recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.
159
Mediation
An alternative dispute resolution (ADR) method by which disputing parties use a neutral outside party to examine the issues and develop a mutually agreeable settlement.
160
Arbitration
An alternative dispute resolution (ADR) method by which disputing parties use a neutral outside party to examine the issues and develop a settlement which can be final and binding.
161
Appraisal
A method of resolving disputes between insurers and insureds over the amount owed on a covered loss.
162
Mini-trial
An alternative dispute resolution method by which a case undergoes an abbreviated version of a trial before a panel or an adviser who poses questions and offers opinions on the outcome of a trial based on the evidence presented.
163
Summary jury trial
An alternative dispute resolution method by which disputing parties participate in an abbreviated trial presenting the evidence of a few witnesses to a panel of mock jurors who decide the case.
164
Insurable interest
An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred.
165
Actual cash value (ACV)
The cost to replace property with new property of like kind and quality less depreciation.
166
Depreciation
The reduction in value caused by the physical wear and tear or technological or economic obsolescence of property.
167
Replacement cost
The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation.
168
Agreed value method
A method of valuing property in which the insurer and the insured agree at the time the policy is written on the maximum amount that will be paid in the event of a total loss.
169
Salvage rights
The insurers rights to recover and sell or otherwise dispose of insured property on which the insurer has paid a total loss or a constructive total loss.
170
Damages
Money claimed by or a monetary award to a party who has suffered loss or injury for which another party is legally responsible.
171
Compensatory damages
A payment awarded by a court to reimburse a victim for actual harm.
172
Special damages
A form of compensatory damages that awards a sum of money for specific identifiable expenses associated with the injured persons loss such as medical expenses or lost wages.
173
General damages
A monetary award to compensate a victim for losses such as pain and suffering that do not involve specific measurable expenses.
174
Punitive damages (exemplary damages)
A payment awarded by a court to punish a defendant for a reckless malicious or deceitful act to deter similar conduct; the award need not bear any relation to a partys actual damages.
175
Primary insurer
In reinsurance the insurer (also referred to as the ceding company) that transfers or cedes all or part of the insurance risk it has assumed to another insurer in a contractual arrangement.
176
Reinsurer
The insurer that assumes some or all of the potential costs of insured loss exposures of the primary insurer in a reinsurance contractual agreement.
177
Reinsurance agreement
Contract between the primary insurer and reinsurer that stipulates the form of reinsurance and the type of accounts to be reinsured.
178
Retention
The amount retained by the primary insurer in the reinsurance transaction.
179
Ceding commission
An amount paid by the reinsurer to the primary insurer to cover part or all of the primary insurers policy acquisition expenses and other costs.
180
Retrocession
A reinsurance agreement whereby one reinsurer (the retrocedent) transfers all or part of the reinsurance risk it has assumed or will assume to another reinsurer (the retrocessionaire).
181
Retrocedent
The reinsurer that transfers or cedes all or part of the insurance risk it has assumed to another reinsurer.
182
Retrocessionaire
The reinsurer that assumes all or part of the reinsurance risk accepted by another reinsurer.
183
Large-line capacity
An insurers ability to provide larger amounts of insurance for property loss exposures or higher limits of liability for liability loss exposures than it is otherwise willing to provide.
184
Line
The maximum amount of insurance or limit of liability that an insurer will accept on a single loss exposure.
185
Surplus relief
A replenishment of policyholders surplus provided by the ceding commission paid to the primary insurer by the reinsurer.
186
Portfolio reinsurance
Reinsurance that transfers to the reinsurer liability for an entire type of insurance territory or book of business after the primary insurer has issued the policies.
187
Novation
The substitution of a third party for one of the original parties to a contract releasing the original party from rights and obligations under the contract.
188
Pro rata reinsurance
A type of reinsurance in which the primary insurer and reinsurer proportionately share the amounts of insurance policy premiums and losses (including loss adjustment expenses).
189
Flat commission
A ceding commission that is a fixed percentage of the ceded premiums.
190
Profit-sharing commission
A ceding commission that is contingent on the reinsurer realizing a predetermined percentage of excess profit on ceded loss exposures.
191
Sliding scale commission
A ceding commission based on a formula that adjusts the commission according to the profitability of the reinsurance agreement.
192
Quota share reinsurance
A type of pro rata reinsurance in which the primary insurer and the reinsurer share the amounts of insurance policy premiums and losses (including loss adjustment expenses) using a fixed percentage.
193
Catastrophe excess of loss reinsurance
A type of excess of loss reinsurance that protects the primary insurer from an accumulation of retained losses that arise from a single catastrophic event.
194
Clash cover
A type of per occurrence excess of loss reinsurance for liability loss exposures that protects the primary insurer against aggregations of losses from one occurrence that affects several insureds or several types of insurance.
195
Variable quota share treaty
A quota share reinsurance treaty in which the cession percentage retention varies based on specified predetermined criteria such as the amount of insurance needed.
196
Surplus share reinsurance
A type of pro rata reinsurance in which the policies covered are those whose amount of insurance exceeds a stipulated dollar amount or line.
197
Bordereau
A report the primary insurer provides periodically to the reinsurer that contains a history of all loss exposures reinsured under the treaty
198
Line guide
A document that provides the minimum and maximum line a primary insurer can retain on a loss exposure.
199
Excess of loss reinsurance (nonproportional reinsurance)
A type of reinsurance in which the primary insurer is indemnified for losses that exceed a specified dollar amount.
200
Attachment point
The dollar amount above which the reinsurer responds to losses.
201
Subject premium
The premium the primary insurer charges on its underlying policies and to which a rate is applied to determine the reinsurance premium.
202
Working cover
An excess of loss reinsurance agreement with a low attachment point.
203
Per risk excess of loss reinsurance
A type of excess of loss reinsurance that covers property insurance and that applies separately to each loss occurring to each risk.
204
Loss occurrence clause
A reinsurance agreement clause that defines the scope of a catastrophic occurrence for the purposes of the agreement.
205
Per policy excess of loss reinsurance
A type of excess of loss reinsurance that applies the attachment point and the reinsurance limit separately to each insurance policy issued by the primary insurer regardless of the number of losses occurring under each policy.
206
Per occurrence excess of loss reinsurance
A type of excess of loss reinsurance that applies the attachment point and reinsurance limit to the total losses arising from a single event affecting one or more of the primary insurers policies.
207
Extracontractual damages
Damages awarded to the insured as a result of the insurers improperly handling a claim.
208
Excess of policy limit loss
A loss that results when an insured sues an insurer for failing to settle a claim within the insureds policy limits when the insurer had the opportunity to do so.
209
Aggregate excess of loss reinsurance
A type of excess of loss reinsurance that covers aggregated losses that exceed the attachment point stated as a dollar amount of loss or as a loss ratio and that occur over a specified period usually one year.
210
Reinsurance program
The combination of reinsurance agreements that a primary insurer purchases to meet its reinsurance needs.
211
Accounting
The classification analysis and determination of the appropriate method of reporting the effects of the bookkeeping records in an organizations financial statements.
212
Current assets
A balance sheet asset classification that includes cash and other assets that are expected to be converted into cash sold or exchanged within the business normal operating cycle usually one year.
213
Marketable securities
An asset classification that includes temporary investments that can easily be converted into cash.
214
Receivables
An asset classification that consists of the amounts owed to a company by customers and other outsiders.
215
Inventory
An asset classification that consists of goods available for sale to customers; for a manufacturing company also includes raw materials and finished goods.
216
Prepaid expenses
An asset classification that represents the amount that has already been paid for services that have not been received or used.
217
Current liabilities
A balance sheet liability classification that includes obligations whose payments are reasonably expected to require the use of cash or the creation of other current liabilities within one year.
218
Revenue
The inflow of assets usually cash or accounts receivable resulting from the sale of products or the rendering of services to customers.
219
Unearned premium reserve
An insurer liability representing the amount of premiums received from policyholders that are not yet earned.
220
Operating ratio
A ratio that measures an insurers overall pretax operational profitability from underwriting and investment activities and is calculated by subtracting the investment income ratio from the combined ratio.
221
Investment income ratio
Net investment income divided by earned premiums for a given period.
222
Surplus note
A type of unsecured debt instrument issued only by insurers that has characteristics of both conventional equity and debt securities and is classified as policyholders surplus rather than as a liability on the insurers statutory balance sheet.
223
Authorized reinsurer
A reinsurer that is authorized to do business in the primary insurers state of domicile.
224
Unauthorized reinsurer
A reinsurer that is not licensed or otherwise authorized to do business in the primary insurers state of domicile.
225
Certified reinsurer
An unauthorized reinsurer that meets certain qualifications and is approved by the state insurance regulator of the ceding companys state of domicile.
226
Current ratio
A liquidity ratio that indicates the companys ability to meet its short-term financial obligations; calculated by dividing current assets by current liabilities.
227
Cash and receivables to premiums payable ratio
A liquidity ratio that measures the intermediarys ability to pay premiums that are due to insurers.
228
Premiums receivable to premiums payable ratio
A liquidity ratio that measures how quickly premiums are collected from insureds and remitted to insurers.
229
Total debt to total assets ratio
A leverage ratio that shows the extent to which a companys assets are financed by debt; uses balance sheet data and is calculated by dividing total liabilities by total assets.
230
Debt to equity ratio
A leverage ratio that measures the extent to which a company is financed using borrowings rather than its own funds (owners equity).
231
Net profit margin
A profitability ratio that measures the percentage of sales remaining after deducting all expenses that indicates how effective an insurer is at cost control uses income statement data and is calculated by dividing net income after taxes by sales.
232
Return on assets (ROA) ratio
A profitability ratio that shows how well a company has used its resources by comparing net income to the assets invested to generate that income.
233
Return on equity (ROE) ratio
A profitability ratio expressed as a percentage by dividing a companys net income by its net worth (book value). Depending on the context net worth is sometimes called shareholders equity owners equity or policyholders surplus.
234
Revenue per employee ratio
A productivity ratio that compares total revenue to total number of employees.
235
Total expense per employee ratio
A productivity ratio that compares total expenses to the total number of employees.
236
Pro forma income statement
An income statement that projects anticipated revenues expenses and income.
237
Profit cycle
A recurring increase and decrease in profits usually regarding a single organization or industry.
238
Reunderwriting
The process of analyzing the characteristics of policies within a portfolio and the trends of those characteristics.
239
Capital
The accumulated assets of a business or an owners equity in a business.
240
Cash flow
Cash inflow minus cash outflow
241
Supply
In insurance the aggregate willingness of all insurers to assume risk at a given time.
242
Surplus relief
A flow of funds into an insurers policyholders surplus when policyholders surplus has been reduced by the insurers rapid growth in written premiums.
243
Elastic demand
Willingness to purchase a product that varies significantly with price.
244
Inelastic demand
Willingness to purchase a product that does not tend to respond to a change in price.
