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SALVAGE.
1
SCHEDULE.
1
SECONDARY MARKET.
1
SECURITIES AND EXCHANGE COMMISSION / SEC.
2
SECURITIES OUTSTANDING.
2
SECURITIZATION OF INSURANCE RISK.
2
SELF-INSURANCE.
2
SEVERITY.
2
SEWER BACK-UP COVERAGE.
2
SHARED MARKET.
2
SINGLE PREMIUM ANNUITY.
3
SOFT MARKET.
3
SOLVENCY.
3
SPREAD OF RISK.
3
STACKING.
3
STATUTORY ACCOUNTING PRINCIPLES / SAP.
3
STOCK INSURANCE COMPANY.
4
STRUCTURED SETTLEMENT.
4
SUBROGATION.
4
SUPERFUND.
4
SURETY BOND.
4
SURPLUS.
4
SURPLUS LINES.
4
SURRENDER CHARGE.
5
SWAPS.
5
Damaged property
an insurer takes over to reduce its loss after paying a claim.
Insurers receive salvage rights over property on which they have
paid claims, such as badly-damaged cars. Insurers that paid claims
on cargoes lost at sea now have the right to recover sunken
treasures. Salvage charges are the costs associated with recovering
that property.
A list of
individual items or groups of items that are covered under one
policy or a listing of specific benefits, charges, credits, assets
or other defined items.
Market for
previously issued and outstanding securities.
The organization
that oversees publicly-held insurance companies. Those companies
make periodic financial disclosures to the SEC, including an annual
financial statement (or 10K), and a quarterly financial statement
(or 10-Q). Companies must also disclose any material events and
other information about their stock.
Stock held by
shareholders.
Using the capital
markets to expand and diversify the assumption of insurance risk.
The issuance of bonds or notes to third-party investors directly or
indirectly by an insurance or reinsurance company or a pooling
entity as a means of raising money to cover risks. (See Catastrophe
bonds)
The concept of
assuming a financial risk oneself, instead of paying an insurance
company to take it on. Every policyholder is a self-insurer in terms
of paying a deductible and co-payments. Large firms often
self-insure frequent, small losses such as damage to their fleet of
vehicles or minor workplace injuries. However, to protect injured
employees state laws set out requirements for the assumption of
workers compensation programs. Self-insurance also refers to
employers who assume all or part of the responsibility for paying
the health insurance claims of their employees. Firms that self
insure for health claims are exempt from state insurance laws
mandating the illnesses that group health insurers must cover.
Size of a loss.
One of the criteria used in calculating premiums rates.
An optional part
of homeowners insurance that covers sewers.
See Residual
market
An annuity that
is paid in full upon purchase.
An environment
where insurance is plentiful and sold at a lower cost, also known as
a buyers’ market. (See Property/casualty insurance cycle)
Insurance
companies’ ability to pay the claims of policyholders. Regulations
to promote solvency include minimum capital and surplus
requirements, statutory accounting conventions, limits to insurance
company investment and corporate activities, financial ratio tests,
and financial data disclosure.
The selling of
insurance in multiple areas to multiple policyholders to minimize
the danger that all policyholders will have losses at the same time.
Companies are more likely to insure perils that offer a good spread
of risk. Flood insurance is an example of a poor spread of risk
because the people most likely to buy it are the people close to
rivers and other bodies of water that flood. (See Adverse selection)
Practice that
increases the money available to pay auto liability claims. In
states where this practice is permitted by law, courts may allow
policyholders who have several cars insured under a single policy,
or multiple vehicles insured under different policies, to add up the
limit of liability available for each vehicle.
More conservative
standards than under GAAP accounting rules, they are imposed by
state laws that emphasize the present solvency of insurance
companies. SAP helps ensure that the company will have sufficient
funds readily available to meet all anticipated insurance
obligations by recognizing liabilities earlier or at a higher value
than GAAP and assets later or at a lower value. For example, SAP
requires that selling expenses be recorded immediately rather than
amortized over the life of the policy. (See GAAP accounting;
Admitted assets)
An insurance
company owned by its stockholders who share in profits through
earnings distributions and increases in stock value.
Legal agreement
to pay a designated person, usually someone who has been injured, a
specified sum of money in periodic payments, usually for his or her
lifetime, instead of in a single lump sum payment. (See Annuity)
The legal process
by which an insurance company, after paying a loss, seeks to recover
the amount of the loss from another party who is legally liable for
it.
A federal law
enacted in 1980 to initiate cleanup of the nation’s abandoned
hazardous waste dump sites and to respond to accidents that release
hazardous substances into the environment. The law is officially
called the Comprehensive Environmental Response, Compensation, and
Liability Act.
A contract
guaranteeing the performance of a specific obligation. Simply put,
it is a three-party agreement under which one party, the surety
company, answers to a second party, the owner, creditor or
“obligee,” for a third party’s debts, default or nonperformance.
Contractors are often required to purchase surety bonds if they are
working on public projects. The surety company becomes responsible
for carrying out the work or paying for the loss up to the bond
“penalty” if the contractor fails to perform.
The remainder
after an insurer’s liabilities are subtracted from its assets. The
financial cushion that protects policyholders in case of
unexpectedly high claims. (See Capital; Risk-based capital)
Property/casualty
insurance coverage that isn’t available from insurers licensed in
the state, called admitted companies, and must be purchased from a
non-admitted carrier. Examples include risks of an unusual nature
that require greater flexibility in policy terms and conditions than
exist in standard forms or where the highest rates allowed by state
regulators are considered inadequate by admitted companies. Laws
governing surplus lines vary by state.
A charge for
withdrawals from an annuity contract before a designated surrender
charge period, usually from five to seven years.
The simultaneous
buying, selling or exchange of one security for another among
investors to change maturities in a bond portfolio, for example, or
because investment goals have changed.
Glossary of Insurance Terms
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