A-Share Variable Annuity
Accelerated Death Benefits
A life insurance policy option that provides policy proceeds to insured individuals over their lifetimes, in the event of a terminal illness. This is in lieu of a traditional policy that pays beneficiaries after the insured’s death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.
Accident And Health Insurance
Coverage for accidental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses, and catastrophic care, with limits.
Underwriting results allocated back to the given twelve-month accounting period when the losses occurred, regardless of when the losses are actually reported, booked, or paid. Compare with Calendar Year of Experience and Underwriting Year of Experience. See Stop Loss.
All expenses directly related to acquiring insurance or reinsurance accounts, i.e., commissions paid to agents, brokerage fees paid to brokers, and expenses associated with marketing, underwriting, contract insurance and premium collection.
Active Life Reserves
See Benefit Reserves
A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation. (See Replacement cost)
Actual to Expected (A/E)
Relationship of the actual performance of a contract compared to pricing. May be used for premium, claims, persistency, commissions, etc.
Actual to Plan (A/P)
Relationship of the actual performance of a contract compared to operating plan for the year. May be used for premium, claims, persistency, commissions, etc.
Actual to Tabular (A/T)
Relationship of the actual performance compared to a specific table, typically an industry-based table. Used almost exclusively for benefit studies (mortality, morbidity, lapse).
An insurance professional skilled in the analysis, evaluation, and management of statistical information. Evaluates insurance firms’ reserves, determines rates and rating methods, and determines other business and financial risks.
Additional Living Expenses
Extra charges covered by homeowners policies over and above the policyholder's customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered Peril that makes the home temporarily uninhabitable.
An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.
Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company’s financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and Receivables for which payment can be reasonably anticipated, are included in admitted assets. (See Assets)
An insurance company licensed and authorized to do business in a particular state.
A company is “admitted” when it has been licensed and accepted by appropriate insurance governmental authorities of a state or country. In determining its financial condition a ceding insurer is allowed to take Credit for the unearned premiums and unpaid claims on the risks reinsured if the reinsurance is placed in an admitted reinsurance company.
The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal government but sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders.
Reinsurance coverage provided internally among a group of insurers with some common ownership interests.
Selling insurance through groups such as professional and business associations.
Companies that market and sell products via independent agents.
Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission, and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.
Agent of record (AOR)
Agent recognized by an insurer as its agent for a specific insured, usually formalized by an AOR letter, signed by the insured. An AOR is important when more than one agent attempts to solicit insurance from a specific insured for the same insurer
A form of Stop Loss reinsurance under which the reinsurer pays a portion of the claims represented by a loss ratio in excess of a specified loss ratio. For example, "20% in excess of 110%" will result in claims between 110% and 130% of premium being paid by the reinsurer. Also known as Loss Ratio Coverage.
A form of Excess of Loss Reinsurance which indemnifies the Ceding Company against the amount by which all of the Ceding Company's losses incurred during a specific period (usually 12 months) exceed either (1) a predetermined dollar amount or (2) a percentage of the company's Subject Premiums (loss ratio) for the specific period. This type of contract is also commonly referred to as "Stop Loss" reinsurance or "excess of loss ratio" reinsurance.
The maximum sum of recoveries payable under those reinsurance agreements that provide an overall maximum loss limitation.
An additional retention kept by the Ceding Company of losses otherwise recoverable from the reinsurer. Only after the aggregate retention is exceeded can the Ceding Company recover from the reinsurer.
Alien Insurance Company
An insurance company incorporated under the laws of a foreign country, as opposed to a foreign insurance company that does business in states outside its own.
Property insurance that is usually bought in conjunction with Fire Insurance; it includes wind, water damage, and vandalism coverage.
A method of allocating automatic reinsurance among several reinsurers, using the first letter of the insured's last name. For example, last names beginning with letters A - L go to reinsurer #1.
Alternative Dispute Resolution/ ADR
Alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.
Mechanisms used to fund self-insurance. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance, are also a form of self-insurance.
Amount At Risk
See Net Amount At Risk.
Annual Annuity Contract Fee
Covers the cost of administering an Annuity contract.
Summary of an insurer’s or reinsurer’s financial operations for a particular Year, including a balance sheet. It is filed with the state insurance department of each jurisdiction in which the company is licensed to conduct business.
The person(s) who receives the income from an Annuity contract. Usually the owner of the contract or his or her spouse.
The conversion of the account balance of a Deferred Annuity contract to income payments.
A life insurance product that pays periodic income benefits for a specific period of time or over the course of the Annuitant’s lifetime. There are two basic types of annuities: deferred and immediate: Deferred annuities allow assets to grow tax deferred over time before being converted to payments to the Annuitant. Immediate annuities allow payments to begin within about a Year of purchase.
Annuity Accumulation Phase or Period
The period during which the owner of a Deferred Annuity makes payments to build up assets.
Annuity Administrative Charges
Covers the cost of customer services for owners of variable annuities.
An agreement similar to an insurance policy for other insurance products such as auto insurance.
Annuity Contract Owner
Annuity Death Benefits
The guarantee that if an Annuity contract owner dies before annuitization (the switchover from the savings to the payment phase) the beneficiary will receive the value of the Annuity that is due.
Annuity Insurance Charges
Covers administrative and mortality and expense risk costs.
Annuity Investment Management Fee
The fee paid for the management of variable Annuity invested assets.
The insurance company that issues the Annuity.
Legal document providing detailed information about variable Annuity contracts. Must be offered to each prospective buyer.
Annuity Purchase Rate
The cost of an Annuity based on such factors as the age and gender of the contract owner.
Laws that prohibit companies from working as a group to set prices, restrict supplies or stop competition in the marketplace. The insurance industry is subject to state antitrust laws but has a limited exemption from federal antitrust laws. This exemption, set out in the McCarran-Ferguson Act, permits insurers to jointly develop common insurance forms and share loss data to help them price policies.
The dividing of a loss proportionately among two or more insurers that cover the same loss.
A survey to determine a property’s insurable value, or the amount of a loss.
Expenses incurred by a Ceding Company in the process of writing new or renewal business, including producer commissions. These expenses may include commissions, medical and inspection fees, and field supervision costs.
Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.
- Language providing a means of resolving differences between the reinsurer and the reinsured without litigation. Usually, each party appoints an arbiter. The two thus appointed select a third arbiter, or umpire, and a majority decision of the three becomes binding on the parties to the arbitration proceedings.
- A Clause within a reinsurance agreement providing that if the Ceding Company and the reinsurer fail to agree, then they select neutral arbitrators with the authority to bind both parties to a solution. Generally, this is in lieu of a judicial settlement.
The deliberate setting of a fire.
Bonds that represent Pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to Credit card Receivables and mortgages.
Asset / Liability Matching (ALM)
Process to test the relationship of expected asset cash flows and expected liability cash flows, in an effort to assure that proper assets are in place to fund expected liabilities. Determines the sensitivity of the assets and liabilities to movements in underlying interest rates. Duration is the key measurement, which is the percentage change in value of the asset or liability for each 100 Basis Point (bp) movement in yield curve.
Property owned, in this case by an insurance company, including stocks, bonds, and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companies from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances, and accounts receivable that are more than 90 days past due. (See Admitted assets)
Assigned Risk Plans
Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all insurers selling auto insurance in the state are assigned these drivers to insure, based on the amount of insurance they sell in the regular market. (See Residual Market)
To accept risk from a Ceding Company.
See Gross Reserves
A procedure under which one insurance company takes over or assumes the direct policy liabilities of another insurer.
Document given to a policyowner to show that another insurer is taking on all the rights and obligations under the policy.
Assumption of Liability Endorsement
A statement of coverage by the reinsurer under which payment is guaranteed to a party not in privity with the reinsurance contract.
A reinsurance agreement by which one company permanently transfers full responsibility for a block of policies to another company. This transfer is done in exchange for the assets underlying the liabilities and the right to receive future premiums; it is evidenced by an assumption certificate issued to the insured who, in some jurisdictions, has the right to refuse the change of insurers. After the transfer, the Ceding Company is no longer a party to the reinsurance agreement. While this is referred to as "reinsurance," it is actually a novation. See Novation.
A provision in many nonproportional reinsurance agreements that defines the benefits that will be paid.
In nonproportional reinsurance, an amount over which a reinsurer agrees to start paying benefits.
Auto Insurance Policy
There are basically six different types of coverages. Some may be required by law. Others are optional. They are:
- Bodily injury liability, for injuries the policyholder causes to someone else.
- Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder’s car.
- Property damage liability, for damage the policyholder causes to someone else’s property.
- Collision, for damage to the policyholder’s car from a collision.
- Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.
- Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.
Auto Insurance Premium
The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service.
Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, Years of driving and the number of miles the car is driven per Year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day – rush hour in an urban neighborhood or leisure-time driving in rural areas, for example. Some insurance companies may also use Credit history-related information. (See Insurance score)
A form of reinsurance in which the Ceding Company is obligated to cede, and the reinsurer is obligated to assume, risks which meet specific criteria based on the provisions of the reinsurance agreement and the Ceding Company's underwriting.
Automatic Acceptance Limit
Automatic Binding Limit
Automatic Facultative Binder (AFB) or Automatic Facultative Treaty
Commercial airlines hold property insurance on airplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered.