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Agent
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An intermediary appointed by an insurer to procure applications for insurance,
receiving a commission from the insurer for policies written.
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Assume
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To accept from the primary insurer or reinsurer all or a portion of the liability
underwritten by such primary insurer or reinsurer.
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Automobile liability insurance
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Insurance which is primarily concerned with the losses related to bodily injury or
property damage caused by an automobile and the resulting legal liability imposed on the insured.
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Broker
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An intermediary who negotiates policies of insurance with insurers on behalf of the insured,
receiving a commission from the insurer for placement and other services rendered.
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Casualty insurance
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Generally used to describe an area of insurance not particularly or directly concerned with
life insurance or property insurance. It is insurance which is primarily concerned with the
losses caused by injuries to third persons (in other words, persons other than the policyholder)
and the resulting legal liability imposed on the insured.
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Catastrophe reinsurance
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A form of excess of loss reinsurance that, subject to a specified limit, indemnifies the ceding
company for the amount of loss in excess of a specified retention with respect to an accumulation
of losses resulting from a covered catastrophe, such as a hurricane or hailstorm.
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Cede; cedant; ceding company
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When a party reinsures its liability with another, it "cedes" business and is referred to as
the "cedant" or "ceding company".
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Claim
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The amount demanded under a policy of insurance or reinsurance arising from the loss relating
to an insured event. A claim is also referred to as a loss.
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Claim expenses
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The expenses of settling claims, including legal and other fees and the portion of general
expenses allocated to claim settlement costs. Claim expenses are also referred to as loss adjustment expenses.
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Claims incurred
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The aggregate of all claims paid during an accounting period adjusted by the change in claims reserve
for that accounting period together with the related claim expenses. Claims incurred are also referred to as losses incurred.
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Claims ratio
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Claims incurred, net of reinsurance, expressed as a percentage of net premiums earned. Claims ratio is also referred to as loss ratio.
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Combined ratio
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A combination of the claims ratio and the expense ratio, determined in accordance with either statutory accounting
principles (SAP) or Canadian GAAP. A combined ratio below 100% generally indicates profitable underwriting prior
to the consideration of investment income. A combined ratio over 100% generally indicates unprofitable underwriting
prior to the consideration of investment income.
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Expense ratio
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The commission expense, premium tax expense and all general and administrative expenses incurred in operating the
business expressed as a percentage of net earned premiums.
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General liability insurance
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Insurance which is primarily concerned with losses caused by negligent acts and/or omissions resulting in bodily
injury and/or property damage on the premises of a business, injury resulting from the use of a product manufactured
or distributed by a business, or injury occurring in the general operation of a business.
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Gross premiums written or gross premiums
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The total premiums, net of credits and cancellations, on insurance underwritten by an insurer or reinsurer
during a specified period, before deduction of reinsurance premiums ceded.
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IBNR reserve
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Reserves for estimated claims that have been incurred by insureds but not yet reported to the insurer
including unknown future developments on claims which are known to the insurer.
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Independent agent or independent producer
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A person or firm who produces applications for insurance for an insurer either directly or through
an MGA, but is not legally affiliated to the company or the MGA, except to the extent of the agency contract.
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Liability insurance
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Insurance which serves to protect the insured from the financial consequences of damages claimed by third parties.
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Managing General Agent (MGA)
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A person or firm authorized by an insurer to transact insurance business who may have authority to bind the
insurer, issue policies, appoint producers, adjust claims and provide administrative support for the types
of insurance coverage pursuant to an agency agreement.
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Net premiums earned
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The net premiums written of an insurer relating to that portion of the term of its insurance policies which fall within a given period.
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Net premiums written or net premiums
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The total gross premiums written by an insurer for a given period less premiums ceded to reinsurers during such period.
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Non-standard automobile insurance
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Insurance provided to individuals who do not qualify for standard automobile insurance coverage because of their payment
history, driving record, place of residence, age, vehicle type or other factors, including market conditions.
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Premium tax
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A tax paid by insurance companies to state or provincial governments calculated as a percentage of gross premiums written.
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Producer
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A broker or agent from whom an insurer receives applications for insurance coverages.
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Property insurance
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Insurance which provides coverage to a person with an insurable interest in tangible property for that person's property loss, damage or loss of use.
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Provisions for unpaid claims
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Provisions or reserves established by insurers and reinsurers to reflect the estimated cost of claims payments and the related expenses
that the insurer or reinsurer will ultimately be required to pay in respect of insurance or reinsurance it has written. Provisions are
established for claims and for claim adjustment expenses. Provisions for unpaid claims are also referred to as claim or loss reserves.
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Reinsurance
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An arrangement in which an insurance company, the reinsurer, agrees to indemnify another insurance
or reinsurance company, the ceding company, against all or a portion of the insurance or reinsurance
risk underwritten by the ceding company under one or more policies.
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Risk excess of loss reinsurance
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A form of excess of loss reinsurance that covers a loss of the reinsured on a single "risk"
in excess of its retention level of the type reinsured, rather than to aggregate losses for all
covered risks, as does catastrophe excess of loss reinsurance. A "risk" in this context might
mean the insurance coverage on one building or a group of buildings or the insurance coverage
under a single policy, which the reinsured treats as a single risk.
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Statutory accounting principles (SAP)
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Recording transactions and preparing financial statements in accordance with the rules and procedures
prescribed or permitted by insurance regulatory authorities including the NAIC, which in general reflect
a liquidating, rather than going concern, concept of accounting.
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Surplus as regards to policyholders
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The amount remaining after all liabilities, including loss reserves, are subtracted from all admitted
assets as determined in accordance with SAP. Admitted assets of an insurer are assets permitted by a
jurisdiction to be taken into account in determining the insurer’s financial condition for statutory
purposes. Surplus as regards to policyholders is also referred to as statutory surplus.
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Treaty reinsurance
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The reinsurance of a specified type or category of risks defined in a reinsurance agreement
(a "treaty") between a primary insurer or other reinsured and a reinsurer. Typically, in
treaty reinsurance, the primary insurer or reinsured is obligated to offer and the reinsurer
is obligated to accept a specified portion of all such type or category of risks originally
written by the primary insurer or reinsured.
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Underwriting
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The insurer's or reinsurer's process of reviewing applications submitted for insurance coverage,
deciding whether to insure all or part of the coverage requested and determining the applicable premiums.
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Underwriting capacity
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The maximum amount that an insurance company can underwrite. The limit is generally determined by
the company's retained earnings and investment capital. Reinsurance serves to increase a company's
underwriting capacity by reducing its exposure from particular risks.
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Underwriting expenses
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The aggregate of policy acquisition costs, including commissions, and the portion of administrative,
general and other expenses attributable to underwriting operations.
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Underwriting profit
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The difference between net premiums earned and the sum of claim expenses and underwriting expenses.
Because underwriting profit excludes investment income, it is a commonly used method of evaluating
the performance of a property and casualty insurance company.
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Unearned premiums
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The net premiums written of an insurer relating to that portion of the term of its insurance
policies which fall within subsequent periods and which is deferred to such subsequent periods.
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