Insurance Dictionary
- Sam Cornelius
- Sep 28, 2021
- 3 min read
Updated: Oct 22, 2021
A constantly updating library of insurance terms explained in plain English. If you've come across terms you'd think should be added, please leave a comment below.
A
Actuary
A specially qualified professional who utilises statistical modelling to calculate probabilities and other information to assist with pricing and insurers investments.
Additional Premium (AP)
An amount payable for an insurance policy on top of the initial price of a policy. Usually paid for changes mid-term.
Adjustable Premium
A premium which can change over time from the initially agreed premium.
Appointed Representative (AR)
An appointed representative (AR) is a person or company which undertakes regulated insurance activities but who are not directly authorised by the FCA. Instead, an AR is authorised as the agent of another person or firm who are authorised, known as their "principle", who ensure the AR conducts themselves properly.
ATE
After the Event.
B
Broker
An insurance professional who acts as on behalf of clients to help them arrange appropriate insurance and advise on coverage needs. Brokers often provide other services relating to risk management and mitigation to policyholders as well.
BTE
Before the Event.
C
Captive Insurer
An insurance company owned by and established to provide indemnity for one specific client or group of related clients. Examples of companies that have established their own captive insurer include British Petroleum (BP) who operate Jupiter Insurance.
D
D&O
Directors and Officers.
E
Excess
The first portion of any claim which is payable by the policyholder.
Excess Layer
An excess layer sits above a primary layer in an insurance "tower". If a claim is larger than the primary limit of indemnity, the excess layer will indemnify the insured for losses beyond the primary limit up to their own limit. Usually expressed as an amount excess another, such as 25m XS 25m.
E&O
Errors and Omissions.
F
Flood RE
A government back reinsurance pool established to protect insurers against the prevalent flood claims experienced in the UK.
G
Gross
The total amount - usually meaning inclusive of all fees, commissions and other costs or charges.
GWP
Gross Written Premium
H
I
IBNER
Incurred But Not Enough Reported. Used when IBNR values no longer represent the expected claims in a period. Most commonly IBNER is used due to (usually external) factors causing a sudden unexpected and temporary increase in claims frequency and/or severity.
IBNR
Incurred But Not Reported. A value used to reserve against claims which are expected during the policy period but which have not yet happened or been reported as a loss.
Indemnity
The protection against loss provided by an insurance policy. Usually, this is expressed monetary value, but can be expressed in other forms such as replacement vehicles after a breakdown.
J
K
KPI
Key Performance Indicators.
L
LEI
Legal Expenses Insurance.
Lloyds (of London)
An insurance marketplace based in the City of London. Lloyds in the world's oldest and one of the world's largest insurance marketplaces and underwrites predominantly large and/or specialist risks.
Limit of Indemnity (LOI)
The maximum amount of indemnity offered under the policy.
M
MGA
Managing General Agent. A firm (or person) who underwrites and takes on risk on behalf on another insurer, called the capacity insurer. MGA's are often specialists in niche areas and allow capacity insurer's to exploit profitable markets without employing their own team and start-up costs.
N
NCD
No Claims Discount
Net
Means exclusive of certain figures. e.g. premium net of commission would be the amount payable for the risk excluding any broker commission.
NWP
Net Written Premium
O
P
Primary Layer
The first layer of insurance in a "tower". This means that when the insured has a claim, the primary layer insurer is the first to pay up. If the claim is larger than the primary layer covers, then the claim may go into an "excess layer" provided by another insurer.
Q
R
Reinsurance
Reinsurance protects an insurer against excess losses on their written policies. It's essentially insurance for insurance companies.
Return Premium (RP)
An amount of paid premium return to the policyholder, usually following changes mid-term which lower the insured risk.
S
SME
Small to Medium Enterprises.
T
Tower
A layered policy consisting of a primary layer and one or more excess layers "stacked" atop one another to form a "tower" of continuous coverage for large claims.
U
Underwriter
An insurance professional who accepts risk on behalf of an insurer. Underwriters set the price and terms of the policy.
V
Void
Another term for cancelled.
W
Wear and Tear
The damage an object will reasonably suffer over time through normal use.
X
Y
Year of Account (YOA)
Usually meaning the 12 month period in which a risk is insured. Could also refer to the financial year, which runs April to March.
Z
Comments