A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z


Early Warning System

A system of measuring insurers’ financial stability set up by insurance industry regulators. An example is the Insurance Regulatory Information System (IRIS), which uses financial ratios to identify insurers in need of regulatory attention.

Earned Premium

  1. That part of the premium applicable to the expired part of the policy period, including the short-rate premium on cancellation, the entire premium on the amount of loss paid under some contracts, and the entire premium on the contract on the expiration of the policy.
  2. That portion of the reinsurance premium calculated on a monthly, quarterly or annual basis which is to be retained by the reinsurer should there cession be canceled.
  3. When a premium is paid in advance for a certain time, the company is said to “earn” the premium as the time advances. For example, a policy written for three Years and paid for in advance would be one-third “earned” at the end of the first Year.

Earned Reinsurance Premium

  1. That part of the reinsurance premium applicable to the expired portion of the policies reinsured, or
  2. that portion of the reinsurance premium which is deemed earned under the reinsurance contract.

Earthquake Insurance

Covers a building and its contents, but includes a large percentage deductible on each. A special policy or Endorsement exists because earthquakes are not covered by standard homeowners or most business policies.

Economic Loss

Total financial loss resulting from the death or disability of a wage earner, or from the destruction of property. Includes the loss of earnings, medical expenses, funeral expenses, the cost of restoring or replacing property, and legal expenses. It does not include noneconomic losses, such as pain caused by an injury.

Efficacy Coverage

form of financial guaranty insurance for large industrial construction projects. Coverage guarantees that an installation (e.g., chemical plant, manufacturing facility) will perform efficiently (as represented or warranted). Coverage usually guarantees the loans used to finance the project, the repayment of which are contingent on the project meeting certain minimum production requirements.

Electronic Commerce / eCommerce

The sale of products such as insurance over the Internet.

Elimination Period

A kind of deductible or waiting period usually found in disability policies. It is counted in days from the beginning of the illness or injury.

Employee Dishonesty Coverage

Covers direct losses and damage to businesses resulting from the dishonest acts of employees. (See Fidelity Bond)

Employee Retirement Income Secrurity Act / ERISA

Federal legislation that protects employees by establishing minimum standards for private pension and welfare plans.

Employer's Liability

Part B of the Workers Compensation policy that provides coverage for lawsuits filed by injured employees who, under certain circumstances, can sue under common law. (See Exclusive Remedy)

Employment Practices Liability Coverage

Liability insurance for employers that covers wrongful termination, discrimination, or sexual harassment toward the insured’s employees or former employees.


A written form attached to an insurance policy that alters the policy’s coverage, terms, or conditions. Sometimes called a rider.

Environmental Impairment Liability Coverage

A form of insurance designed to cover losses and liabilities arising from damage to property caused by pollution.

Equipment Breakdown Insurance

see Boiler and Machinery Insurance


The corporate entity into which the general business insurance liabilities of Lloyd's Syndicates allocated to the 1992 and prior Years of Account have been reinsured.


In investments, the ownership interest of shareholders. In a corporation, stocks as opposed to bonds.

Equity Indexed Annuity

Non-traditional fixed Annuity. The specified rate of interest guarantees a fixed minimum rate of interest like traditional fixed annuities. At the same time, additional interest may be Credited to policy values based upon positive changes, if any, in an established index such as the S&P 500. The amount of additional interest depends upon the particular design of the policy. They are sold by licensed insurance agents and regulated by state insurance departments.

Errors and Omissions Clause

A provision in reinsurance agreements which is intended to neutralize any change in liability or benefits as a result of an inadvertent error by either party. To the extent possible the parties are placed in the position they would have held if the error had not occurred. Also known as Oversight.

Errors and Omissions Coverage / E&O

A Professional Liability policy covering the policyholder for negligent acts and omissions that may harm his or her clients.

Escrow Account

Funds that a lender collects to pay monthly premiums in mortgage and homeowners insurance, and sometimes to pay property taxes.

Evergreen Clause

See Letter of Credit.

Ex Gratia Payment

A payment made for which the company is not liable under the terms of its policy. Usually made in lieu of incurring greater legal expenses in defending a claim. Rarely encountered in reinsurance as the reinsurer by custom and for practical reasons follows the fortunes of the Ceding Company.

Excess And Surplus Lines

Property/casualty coverage that isn’t available from insurers licensed by the state (called admitted insurers) and must be purchased from a non-admitted carrier.

Excess of Loss Ratio Reinsurance

See Aggregate Excess of Loss Reinsurance.

Excess of Loss Reinsurance

  1. A contract between an insurer and a reinsurer, whereby the insurer agrees to pay a specified portion of a claim and the reinsurer to pay all or a part of the claim above that amount.
  2. Method whereby a Ceding Company pays the amount of each claim for each risk up to a limit determined in advance and the reinsurer pays the amount of the claim above that limit up to the maximum amount reinsured.
  3. A form of reinsurance under which recoveries are available when a given loss exceeds the cedant’s retention defined in the agreement.

Excess of Retention

A type of proportional reinsurance in which a Ceding Company establishes a dollar amount retention limit, and a reinsurer agrees to assume amounts over this limit, up to the reinsurer's automatic binding limit.

Excess of Time Reinsurance

Method whereby a Ceding Company pays the full benefits on a claim for a set period of time, after which the reinsurer pays the reinsured portion of the benefits. Most commonly used for disability or long-term care reinsurance.

Excess Per Risk Reinsurance

A form of Excess of Loss Reinsurance which, subject to a specified limit, indemnifies the Ceding Company against the amount of loss in excess of a specified retention for each risk involved in each occurrence.


A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.

Exclusive Agent

A captive agent, or a person who represents only one insurance company and is restricted by agreement from submitting business to any other company unless it is first rejected by the agent’s company. (See Captive agent)

Exclusive Remedy

Part of the social contract that forms the basis for Workers Compensation statutes under which employers are responsible for work-related injury and disease, regardless of whether is was the employee’s fault and in return the injured employee gives up the right to sue when the employer’s negligence causes the harm.

Expense Allowance

An amount payable to the Ceding Company by the reinsurer in lieu of actual commissions and expenses incurred by the Ceding Company. See Ceding Commission.

Expense Charge

See Risk Charge.

Expense Ratio

The percentage of premium used to pay all the costs of acquiring, writing and servicing insurance and reinsurance.


  1. The loss record of an insured or of a class of coverage.
  2. Classified statistics of events connected with insurance, of outgo, or of income, actual or estimated.
  3. What figures show to have happened in the past.Experience may be compiled on different bases to provide various means of appraisal, viz. Accident Year, Calendar Year, or Policy Year, but, for underwriting purposes, should always compare earned premium with incurred losses after the latter have been modified by an allowance for loss development and incurred but not reported losses (I.B.N.R.)

Experience Rated

A reinsurance arrangement in which the Ceding Company shares in the claims experience of reinsured benefits, typically under a formula specified in the reinsurance agreement.

Experience Rating (Loss Rating, Merit Rating)

A method of rating under which the reinsurance rate is based upon the reinsured's own experience, actual or reconstructed, rather than upon the exposure inherent in the business. See also Retrospective Rating and Prospective Rating.

Experience Refund

The portion of a reinsurance premium that is returned to the Ceding Company when claims experience is better than had been expected. See Profit Commission and Risk Charge.

Experience Refund Reinsurance

A form of reinsurance under which the premium rates are subject to an experience refund as opposed to being fixed (non-refund).


Possibility of loss.

Exposure Rating

A method of rating, usually applied to Excess of Loss Reinsurance, under which the rate is determined based on an analysis of the exposure inherent in the business to be covered and not on the loss experience the business has demonstrated in the past. Both exposure rating and loss rating can be used by the reinsurance underwriter to determine the price which is quoted.

Extended Coverage

An Endorsement added to an insurance policy, or Clause within a policy, that provides additional coverage for risks other than those in a basic policy.

Extended Replacement cost Coverage

Pays a certain amount above the policy limit to replace a damaged home, generally 120 percent or 125 percent. Similar to a guaranteed Replacement cost policy, which has no percentage limits. Most homeowner policy limits track inflation in building costs. Guaranteed and extended Replacement cost policies are designed to protect the policyholder after a major disaster when the high demand for building contractors and materials can push up the normal cost of reconstruction

Extra Contractual Obligations (ECO)

A generic term that, when used in reinsurance agreements, refers to damages awarded by a court against an insurer which are outside the provisions of the insurance policy, due to the insurer’s bad faith, fraud, or gross negligence in the handling of a claim. Examples are punitive damages and losses in excess of policy limits.