This actuarial glossary compiles more than 400 of the most common terms you are likely to hear and may need to know during your actuarial career.
The accuracy of the information contained in this actuarial glossary has not been verified by any actuarial organisation and has been compiled in good faith to benefit the actuarial community.
Any errors contained within the actuarial glossary are unintentional and can be reported by contacting ProActuary.
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Actuarial science
The discipline that applies mathematical and statistical methods to assess risk in insurance, finance and other industries.
Actuarial notation
A set of standard mathematical symbols used in actuarial science to represent variables and operators.
Actuarial present value
The present value of future cash flows, taking into account the time value of money and the uncertainty of future events. It is used to determine the present value of an insurance company's liabilities.
Actuary
A professional who uses mathematical and statistical methods to assess risk and uncertainty in insurance, finance, and other industries.
Actuarial liability
The present value of an insurance company's future obligations to policyholders.
Actuarial gain or loss
The difference between the expected value of liabilities and the actual value of liabilities.
Actuarial assumption
An estimation of future events used in actuarial calculations, such as mortality rates and interest rates.
Actuarial cost method
A method used to determine the cost of an insurance policy, based on actuarial calculations.
Actuarial funding method
A method used to determine the amount of money needed to fund an insurance policy, based on actuarial calculations.
Actuarial valuation
The process of determining the present value of an insurance company's liabilities and assets.
Aggregate loss distribution
A statistical representation of the distribution of total losses from a group of exposures.
Aggregate loss expectancy
The expected value of total losses from a group of exposures.
Aggregate loss ratio
The ratio of total losses to total premiums for a given period.
Aggregate risk
The total risk of a group of exposures or portfolio of insurance policies.
Allocated loss adjustment expense (ALAE)
The expenses incurred in adjusting and settling claims, which are allocated to individual policies.
Alpha factor
A factor used in determining the minimum capital requirement for a reinsurance company.
American Academy of Actuaries (AAA)
A professional organization for actuaries in the United States.
Amortization
The process of spreading the cost of an intangible asset over a period of time.
Annual statement
A financial statement submitted by insurance companies to state regulators, showing their financial condition.
Asset adequacy analysis
A method used to determine whether an insurance company has enough assets to meet its future liabilities.
Asset adequacy test (AAT)
A test used to determine whether an insurance company has enough assets to meet its future liabilities.
Asset liability management (ALM)
The process of managing an insurance company's assets and liabilities to ensure that they are in balance.
Attained age
The age at which an individual reaches a specific birthday.
Automatic indexation
An automatic adjustment of a benefit or premium to keep pace with inflation.
Automatic premium loan (APL)
A feature in which an insurance policy automatically loans the policyholder the premium amount if the policy's cash value is insufficient to pay the premium.
Average claim cost
The total cost of claims divided by the number of claims.
Average loss per exposure unit (ALPEU)
The total loss divided by the number of exposure units.
Average loss ratio
The ratio of losses to earned premiums.
Average premium
The total premium divided by the number of policies.
Axioms of probability
The basic principles that define the mathematical concept of probability.
Benefit ratio
The ratio of benefits to premiums for a given period.
Benefit reserve
The present value of future benefits to be paid under a contract or policy.
Beta factor
A measure of the volatility of a stock or portfolio in relation to the overall market.
Burden of proof
The responsibility of providing evidence to support a claim or argument.
Cash flow test
A test used to determine whether an insurance company has enough cash to meet its current and future obligations.
Catastrophic loss
A loss that is large in relation to a company's capital and surplus.
Claims-made policy
A type of insurance policy in which coverage is provided for claims made during the policy period, regardless of when the incident occurred.
Claims reserve
The estimated amount of money that will be needed to pay future claims under a contract or policy.
Coinsurance
A type of insurance in which the policyholder and the insurer share the risk.
Collective risk model
A model used to calculate the probability of a loss occurring in a group or portfolio of exposures.
Commutation
The process of exchanging a stream of future payments for a lump sum payment.
Compound interest
Interest that is calculated on the original principal and on any accumulated interest.
Compound probability
The probability of two or more events occurring together.
Conditional probability
The probability of an event occurring, given that another event has occurred.
Confidence interval
A range of values within which the true value of a parameter is likely to fall, with a certain level of confidence.
Continuous compound interest
Interest that is compounded continuously, rather than periodically.
Contingent benefit
A benefit that is payable only under certain conditions.
Contingent commission
A commission paid to an insurance agent or broker that is based on the volume of business placed with a particular insurer.
Contractual liability
Liability that arises under a contract, such as an insurance policy.
Correlation
A measure of the relationship between two variables.
Cost of insurance
The cost of providing insurance coverage, including expenses and profit.
Credibility
A measure of the reliability of a data set or the likelihood that a claim or loss will occur.
Credit risk
The risk that an insurer will not be able to pay its claims or meet its other financial obligations.
Cross-subsidization
The practice of using the premiums from one group of policyholders to subsidize the costs of another group.
Current assumption
An assumption that is based on current conditions or expectations.
Current ratio
A measure of a company's liquidity, calculated as the ratio of current assets to current liabilities.
Deductible
A specified dollar amount of loss that the policyholder must pay before insurance coverage begins.
Deferred annuity
An annuity contract under which payments begin at a specified future date.
Defined benefit plan
A retirement plan in which the benefit is specified in advance.
Defined contribution plan
A retirement plan in which the benefit depends on the contributions made and the investment returns earned.
Delayed annuity
An annuity that begins at a specified future date.
Depreciation
A decrease in the value of an asset over time.
Development period
The period of time over which an insurer expects to pay claims.
Disability income insurance
Insurance that provides benefits to a policyholder who becomes disabled and is unable to work.
Discount rate
The rate of interest used to calculate the present value of future cash flows.
Diversification
The spreading of risk over a variety of investments or exposures.
Duration
A measure of the time required to recoup the cost of an investment.
Earned premium
The portion of a premium that has been earned by the insurer, based on the time elapsed since the policy was issued.
Effective interest rate
The rate of interest that is actually earned on an investment.
Efficiency ratio
A measure of a company's operating efficiency, calculated as the ratio of expenses to revenues.
Embedded option
An option that is included in a financial contract.
Equity capital
The funds that are provided by the owners of a company.
Event set
The set of all possible outcomes of an experiment or random process.
Excess of loss reinsurance
A type of reinsurance in which the reinsurer assumes a portion of the risk above a specified threshold.
Expected value
The average value of a random variable, calculated as the sum of the product of each possible outcome and its probability.
Experience rating
The process of setting premiums based on the insurer's own claims experience.
Exposure unit
A unit of measurement for the amount of risk that is assumed by an insurer.
Fair premium
A premium that is sufficient to cover the insurer's expected costs and provide a reasonable profit.
Financial statement
A report of a company's financial condition, including income statement, balance sheet, and statement of cash flows.
Financial statement analysis
The process of analyzing a company's financial statements to assess its financial condition and performance.
Financial reporting
The process of providing financial information to shareholders, regulators, and other stakeholders.
Financial risk
The risk that a company will be unable to meet its financial obligations.
First-order model
A model that is linear in the parameters and does not involve interactions between variables.
Flexible premium annuity
An annuity contract under which the policyholder can vary the premium payments.
Flexible premium life insurance
A life insurance policy under which the policyholder can vary
Fluctuation reserve
A reserve that is established to cover fluctuations in the value of assets or liabilities.
Frequency
The number of occurrences of an event in a given period of time.
Gambling
The act of risking money or other valuable things on an event with an uncertain outcome.
Gamma factor
A measure of the rate of change of an option's delta with respect to the underlying asset's price.
General account
An account maintained by an insurer to hold assets that are not segregated for specific policyholders or contracts.
General liability insurance
Insurance that covers a company's legal liability for bodily injury or property damage caused to others.
Genetics
The study of inherited traits and characteristics.
Going concern value
The value of a company as a going concern, as opposed to its liquidation value.
Goodwill
The value of a company's reputation and customer base.
Group annuity
An annuity that is issued to a group of individuals, rather than to an individual.
Group insurance
Insurance that is issued to a group of individuals, rather than to an individual.
Guaranteed insurability option
A rider that allows the policyholder to purchase additional coverage at specified future dates without providing evidence of insurability.
Hazard
A condition or event that increases the likelihood of a loss.
Hazard rate
The rate at which the probability of a loss increases with time.
Health savings account (HSA)
A savings account that is used to pay for medical expenses and is paired with a high-deductible health plan.
Hedge
A strategy that is used to reduce the risk of an investment or portfolio.
Holdback
A portion of a loss that is not paid until a later date, to ensure that all losses have been reported.
Holding company
A company that owns the stock of other companies.
Homogeneity
The property of being similar or identical.
IBNR (incurred but not reported)
Losses that have occurred but have not been reported to the insurer.
Income statement
A financial statement that shows a company's revenues, expenses, and net income for a period of time.
Incurred loss
The total amount of losses that have been paid or set aside to pay.
Indemnification
The act of compensating for a loss or damage.
Indemnity
The protection provided by an insurance policy.
Indemnity bond
A bond that guarantees payment of a loss in case of default by the principal.
Index
A statistical measure of changes in a variable over time.
Indexing
The process of adjusting a variable to reflect changes in an index.
Individual annuity
An annuity that is issued to an individual.
Individual insurance
Insurance that is issued to an individual.
Individual risk
The risk associated with a specific individual or exposure.
Inflation
A sustained increase in the general price level of goods and services in an economy over a period of time.
Inflation protection
A feature of a policy or contract that provides for automatic adjustments to benefits or premiums to keep pace with inflation.
Information ratio
A measure of a portfolio's risk-adjusted performance, calculated as the excess return divided by the tracking error.
Insurable interest
A financial interest in the continued existence of an individual or property that is sufficient to justify the purchase of insurance.
Insurance
A contract in which one party (the insurer) agrees to indemnify or compensate another party (the policyholder) for a specified loss in exchange for a premium.
Insurance-linked securities (ILS)
Financial instruments that are linked to the performance of an insurance or reinsurance portfolio.
Insurance regulation
The process of supervising and controlling the business of insurance.
Insurance-to-value (ITV)
The ratio of the amount of insurance coverage to the value of the property or exposure being insured.
Interest rate risk
The risk that changes in interest rates will affect the value of an investment or liability.
Interpolation
The process of estimating a value that falls between two known values.
Investment income
The income earned from investing the assets of an insurance company.
Joint life and last survivor annuity
An annuity that pays benefits as long as either the annuitant or the annuitant's designated survivor is alive.
Joint life annuity
An annuity that pays benefits as long as either the annuitant or the annuitant's designated survivor is alive.
Joint probability
The probability that two or more events will occur together.
Joint and several liability
A legal principle under which each party is liable for the entire debt or loss.
Lapse
The termination of an insurance policy due to non-payment of premiums.
Lapse ratio
The ratio of lapsed policies to in-force policies.
Largest claim
The largest claim incurred during a specified period of time.
Largest loss
The largest loss incurred during a specified period of time.
Law of large numbers
The principle that the ratio of the number of favorable outcomes to the number of total trials approaches the probability of a favorable outcome as the number of trials increases.
Leader
A company that is at the forefront of its industry or field.
Leasehold insurance
Insurance that covers the interests of the lessee under a lease agreement.
Legal reserve
The reserve that is required by law to be maintained by an insurance company.
Liability
A legal obligation to pay a debt or compensate for a loss.
Liability insurance
Insurance that covers a policyholder's legal liability for bodily injury or property damage caused to others.
Life annuity
An annuity that pays benefits for the life of the annuitant.
Life expectancy
The average length of time that a person is expected to live.
Life insurance
Insurance that pays a benefit to the beneficiaries upon the death of the insured.
Lifetime annuity
An annuity that pays benefits for the lifetime of the annuitant.
Lifetime benefit
A benefit that is payable for the lifetime of the beneficiary.
Lifetime income option
An option that guarantees a minimum level of income for the lifetime of the annuitant.
Lifetime reserve
A reserve that is established to cover the cost of future benefits under a policy or contract.
Limit of liability
The maximum amount that an insurer will pay under a policy or contract.
Limit of indemnity
The maximum amount that an insurer will pay under a policy or contract.
Line of business
A specific type of insurance or group of related insurance products.
Loss
The reduction of value or impairment of something as a result of an event.
Loss ratio
The ratio of losses to premiums for a given period.
Loss reserve
The estimated amount of money that will be needed to pay future claims under a contract or policy.
Loss-spiral
A situation in which an insurer's losses lead to higher premiums, which in turn leads to more losses.
Loss triangle
A method of analyzing loss data that uses a triangle to show the relationship between the number of claims and the severity of losses over time.
Loss-adjustment expenses
The expenses incurred in the investigation, evaluation and adjustment of claims.
Loss-ratio
The ratio of losses and loss-adjustment expenses to premiums earned.
Loss-reserving
The process of estimating the amount of money that will be needed to pay future claims under a contract or policy.
Long-tail liability
Liability that arises from events that occurred in the past, but the claims are being reported and paid in the present or future
Loss development factor (LDF)
A factor that is used to estimate the ultimate loss for a given accident year.
Loss Development Triangles
An actuarial method to show the relationship between the number of claims and the severity of losses over time
Loss frequency
The number of claims per unit of exposure.
Loss ratio point
A measure of the difference between the loss ratio of an insurer and the average loss ratio of the market.
Loss ratio trend
The change in the loss ratio over time.
Loss severity
The average cost per claim.
Loss-of-income insurance
Insurance that provides benefits to a policyholder who becomes disabled and is unable to work.
Loss-of-use insurance
Insurance that provides benefits for loss of use of property or income.
Market capitalization
The total value of a company's outstanding shares of stock.
Market conduct examination
An examination of an insurer's compliance with laws and regulations.
Market risk
The risk that changes in market conditions will affect the value of an investment or portfolio.
Maximum loss
The largest loss that can occur in a given period of time.
Medical underwriting
The process of evaluating the health of an applicant for insurance.
Minimum capital requirement
The minimum amount of capital that a company is required to have on hand to meet its obligations.
Mortality table
A table that shows the number of deaths at each age for a given population.
Multi-line insurer
An insurer that offers more than one type of insurance.
Mutual company
A company that is owned by its policyholders.
Mutual insurer
An insurer that is owned by its policyholders.
Net asset value
The value of a company's assets minus its liabilities.
Net income
A company's income after deducting expenses.
Net loss ratio
The ratio of net losses to net premiums.
Net premium
The premium after deducting reinsurance costs and other expenses.
Net premium written
The premium after deducting reinsurance costs and other expenses.
Net present value (NPV)
The present value of a stream of future cash flows, discounted at a given rate.
No-fault insurance
Insurance that pays benefits regardless of who is at fault for an accident.
Non-admitted assets
Assets that are not included in an insurer's statutory statement.
Non-admitted insurer
An insurer that is not licensed to do business in a given state.
Non-cancelable policy
A policy that cannot be cancelled by the insurer as long as the premiums are paid.
Non-forfeiture option
An option that allows the policyholder to receive a benefit in case of a policy lapse.
Non-participating policy
A policy that does not entitle the policyholder to share in the dividends of the insurer.
Non-performing asset (NPA)
An asset that is not generating income.
Non-proportional reinsurance
A type of reinsurance in which the reinsurer's liability is not directly related to the ceding insurer's liability.
Non-renewal
The decision not to renew an insurance policy.
Non-smoker rate
The premium rate that is charged to individuals who do not smoke.
Non-standard auto
A type of automobile insurance that is designed for high-risk drivers.
Non-standard risks
Risks that are not considered to be standard risks.
Not-for-profit insurer
An insurer that does not have shareholders and does not distribute profits to its members.
Notice of cancellation
A notice that is given by an insurer when it cancels an insurance policy.
Notice of claim
A notice that is given by an insured when a loss occurs.
Notice of loss
A notice that is given by an insured when a loss occurs.
Nurse case management
The coordination of medical care for an injured or ill individual.
Occupational accident
An accident that occurs in the course of employment.
Occupational disease
A disease that is caused by exposure to hazards in the workplace.
Occupational hazard
A hazard that is associated with a particular occupation.
Occupational injury
An injury that occurs in the course of employment.
Office of insurance regulation
A government agency that regulates the insurance industry.
Offshore reinsurer
A reinsurer that is based in a country other than the one in which the risk is located.
Onshore reinsurer
A reinsurer that is based in the same country as the risk.
Open rating
A rating system in which the insurer is free to set its own rates.
Open-ended mutual fund
A mutual fund that does not have a fixed number of shares outstanding.
Operating expense ratio
The ratio of operating expenses to premiums.
Operating income
A company's income from its main operations.
Operating leverage
The degree to which a company's earnings are sensitive to changes in revenue.
Operating ratio
The ratio of operating expenses to premiums.
Option
A contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date.
Ordinary life insurance
A type of life insurance that is not endowment insurance.
Overinsurance
The condition of having insurance coverage that exceeds the value of the insured property or the maximum amount of a potential loss.
Overlay
An additional layer of insurance that is purchased to increase the overall level of coverage.
Paid-up insurance
A type of life insurance in which the policyholder no longer has to pay premiums.
Participating policy
A policy that entitles the policyholder to share in the dividends of the insurer.
Participating rate
The premium rate for a participating policy.
Partnership insurance
Insurance that covers the partnership rather than individual partners.
Pay-as-you-go
A method of financing in which current payments are used to pay current claims.
Pension
A retirement plan that provides an income to an individual after they have retired.
Pension plan
A plan that provides retirement income to an individual.
Pension-plan insurance
Insurance that guarantees the payment of benefits to the beneficiaries of a pension plan in the event of the plan sponsor's default.
Per occurrence limit
The maximum amount that an insurer will pay for a single occurrence.
Per person limit
The maximum amount that an insurer will pay for each person.
Per policy limit
The maximum amount that an insurer will pay for a single policy.
Peril
The cause of a loss.
Perils of the sea
Perils that are associated with marine transportation.
Personal accident insurance
Insurance that provides benefits for accidental injury.
Personal auto policy (PAP)
A type of automobile insurance policy that is designed for individual drivers.
Personal umbrella policy
A type of liability insurance that provides additional coverage above and beyond the limits of a primary policy.
Personal lines insurance
Insurance that is designed for individuals and families, such as home and automobile insurance.
Physical damage
Damage to property.
Policy
A contract of insurance.
Policyholder
The person or entity that owns an insurance policy.
Policyholder's surplus
The amount by which an insurer's assets exceed its liabilities.
Policyholder's dividend
A dividend that is paid to the policyholders of a mutual company.
Policyholder's dividend option
An option that allows policyholders to receive dividends in cash or to use them to purchase paid-up insurance or to reduce the premium.
Policyholder's equitable participation
The right of policyholders to participate in the surplus of a mutual company.
Policyholder's surplus
The amount by which an insurer's assets exceed its liabilities.
Policy limit
The maximum amount that an insurer will pay under a policy.
Policy year
The period of time for which a policy is in force.
Pool
A group of insurers that share the risk of a particular type of insurance.
Portfolio
A collection of investments.
Portfolio yield
The yield on a portfolio of investments.
Premium
The amount that is charged for an insurance policy.
Premium financing
The practice of borrowing money to pay insurance premiums.
Premium loading
The addition of an amount to the premium to cover the insurer's expenses.
Premium tax
A tax on insurance premiums.
Premium-to-surplus ratio
The ratio of premiums to surplus.
Prepaid group practice
A type of health maintenance organization (HMO) in which the members prepay for health care services.
Present value
The value of a future payment or series of payments, discounted to the present.
Prior approval
The process of obtaining approval from a regulatory agency before implementing a rate increase or a new product.
Pro rata
A method of allocating losses among insurers that have written coverage on the same risk.
Pro rata cancellation
A method of cancelling a policy in which the premium is returned on a pro rata basis.
Pro rata premium
A premium that is calculated on a pro rata basis.
Pro rata reinsurance
A method of sharing losses among reinsurers
Probability
The likelihood that an event will occur.
Probability distribution
A function that describes the probability of a variable taking on different values.
Probability of ruin
The probability that an insurer will become insolvent.
Product liability insurance
Insurance that covers claims arising from the sale of a product.
Professional liability insurance
Insurance that covers claims arising from professional negligence.
Profit margin
The ratio of profit to revenue.
Profit sharing
A plan in which employees share in the profits of the company.
Profit-sharing plan
A plan in which employees share in the profits of the company.
Proportional reinsurance
A type of reinsurance in which the reinsurer's liability is directly related to the ceding insurer's liability.
Provider
A health care professional or facility that provides health care services.
Provider-sponsored organization (PSO)
A type of health maintenance organization (HMO) that is owned and operated by a group of providers.
Public adjuster
A professional who represents policyholders in the claims process.
Pure endowment
An endowment that pays a benefit only if the insured is living at the end of the endowment period.
Qualified plan
A retirement plan that meets the requirements of the Internal Revenue Service (IRS) and is eligible for certain tax benefits.
Quota share reinsurance
A type of proportional reinsurance in which the reinsurer agrees to accept a specified percentage of each risk.
Rate bureau
An organization that collects and disseminates information on insurance rates.
Rate filing
A request to change insurance rates that is submitted to a state insurance department for review and approval.
Rate regulation
The process of controlling the rates that insurers can charge for insurance.
Rate stabilization reserve
A reserve that is established by an insurer to stabilize rates.
Rating bureau
An organization that collects and disseminates information on insurance rates.
Rating factor
A factor that is used to determine insurance rates.
Rating manual
A manual that contains information on how rates are determined.
Rating plan
A plan that is used to determine insurance rates.
Rating territory
A geographic area that is used to determine insurance rates.
Rating unit
A unit of exposure that is used to determine insurance rates.
Rating variable
A variable that is used to determine insurance rates.
Realized capital gain
A capital gain that is recognized when an investment is sold.
Realized investment income
Investment income that has been received.
Realized loss
A loss that is recognized when an investment is sold.
Realized return
The return that is realized on an investment.
Rear-end collision
A type of automobile accident in which one vehicle strikes the rear of another vehicle.
Reciprocal insurer
A type of mutual insurer that is owned by its policyholders and is operated through a system of reciprocal contracts.
Reclassification
The process of moving a policy from one class of business to another.
Reinsurance
Insurance that is purchased by an insurer to transfer some of its risk to another insurer.
Reinsurance agreement
A contract between an insurer and a reinsurer.
Reinsurance ceded
The portion of an insurer's risk that is transferred to a reinsurer.
Reinsurance recovery
The amount that an insurer receives from a reinsurer.
Reinsurance treaty
A contract between an insurer and a reinsurer.
Reinsurer
An insurer that provides reinsurance.
Renewal
The process of continuing an insurance policy for another policy period.
Renewal commission
A commission that is paid to an agent for renewing a policy.
Renewal rate
The rate that is charged for renewing a policy.
Renewal retention ratio
The percentage of policies that are renewed.
Renewal rights
The right to renew a policy.
Renewable term insurance
A type of term insurance that can be renewed at the end of the term.
Renewal commission
A commission that is paid to an agent for renewing a policy.
Replacement cost
The cost of replacing property without regard to depreciation.
Replacement cost coverage
Insurance that pays the cost of replacing property without regard to depreciation.
Replacement cost value
The cost of replacing property without regard to depreciation.
Replacement ratio
The ratio of replacement cost to the value of the property.
Replacement reserve
A reserve that is established to pay for the replacement of assets.
Reserve
An amount of money that is set aside to pay for future claims.
Reserve for adverse deviation
A reserve that is established to cover the possibility of actual losses being greater than the expected losses.
Reserve for losses and loss adjustment expenses
A reserve that is established to pay for claims and expenses related to claims.
Reserve for outstanding claims
A reserve that is established to pay for claims that have been reported but have not yet been paid.
Reserve for unearned premiums
A reserve that is established to pay for premiums that have been collected but have not yet been earned.
Reserve ratio
The ratio of reserves to liabilities.
Reserve release
The process of reducing a reserve because the amount set aside is no longer needed.
Reserve strengthening
The process of increasing a reserve because the amount set aside is not sufficient.
Reserve study
An analysis of an insurer's reserves.
Reserve valuation
The process of determining the appropriate amount of reserves.
Reserve-to-surplus ratio
The ratio of reserves to surplus.
Residual market
The market for insurance that is not provided by the voluntary market.
Residual market mechanism
A mechanism for providing insurance to individuals and companies that are unable to obtain coverage in the voluntary market.
Residual market plan
A plan for providing insurance to individuals and companies that are unable to obtain coverage in the voluntary market.
Residual market pool
A pool of insurers that provide insurance to individuals and companies that are unable to obtain coverage in the voluntary market.
Residual market subsidy
A subsidy that is provided to insurers that participate in the residual market.
Residual value
The value of an asset after it has been fully depreciated.
Return
The amount of money that is earned on an investment.
Return on assets (ROA)
The ratio of profit to assets.
Return on equity (ROE)
The ratio of profit to shareholder equity.
Return on investment (ROI)
The ratio of profit to investment.
Reunderwriting
The process of reviewing and adjusting an insurance policy after it has been issued.
Right of contribution
The right of an insurer to seek reimbursement from other insurers that have also insured the same risk.
Risk
The possibility of loss.
Risk-adjusted capital
Capital that is adjusted for the level of risk.
Risk-based capital (RBC)
A measure of an insurer's capital that is based on the level of risk.
Risk-based capital ratio
The ratio of risk-based capital to the minimum required capital.
Risk classification
The process of grouping risks based on their characteristics.
Risk management
The process of identifying, measuring, and controlling risk.
Risk retention
The practice of retaining a portion of a risk rather than transferring it to an insurer.
Risk-to-capital ratio
The ratio of risk to capital
Salvage
Property that is recovered after a loss.
Salvage value
The value of property that is recovered after a loss.
Schedule
A listing of items or amounts.
Schedule rating
A method of determining rates for workers' compensation insurance that takes into account the specific hazards of a particular industry.
Schedule rating plan
A plan for determining rates for workers' compensation insurance that takes into account the specific hazards of a particular industry.
Scientific selection
The process of selecting risks based on scientific methods.
Self-insurance
The practice of retaining a risk rather than transferring it to an insurer.
Self-insured retention
The amount of a loss that is retained by a self-insured entity before insurance coverage begins.
Self-insured workers' compensation fund
A fund that is established by an employer to pay for workers' compensation claims.
Self-insurer
An entity that self-insures.
Selling, general, and administrative expense (SG&A)
The expenses that are incurred in selling, promoting, and distributing a product.
Senior citizen health insurance
Insurance that is designed for senior citizens.
Separate account
An account that is used to set aside money for a specific purpose.
Service contract
A contract that provides for the repair or maintenance of property.
Service corporation
A corporation that provides services to other corporations.
Service organization
An organization that provides services to other organizations.
Settlement
The process of resolving a claim.
Settlement option
An option that allows the policyholder to receive their death benefit in a lump sum or in installment payments.
Short-term disability insurance
Insurance that provides benefits for a short period of time, usually less than two years.
Small employer health reimbursement arrangement (SEHRA)
A type of health reimbursement arrangement (HRA) that is available to small employers.
Small group market
The market for health insurance for small employers.
Special assessment
An assessment that is charged to policyholders in addition to their regular premium.
Special event insurance
Insurance that covers events such as weddings and parties.
Special form insurance
Insurance that covers all risks of physical loss, unless they are specifically excluded.
Special purpose financial insurance
Insurance that is used to transfer specific financial risks.
Specific stop-loss insurance
Insurance that provides coverage for specific losses in excess of a specified amount.
Specified disease insurance
Insurance that pays a benefit if the insured contracts a specific disease.
Split dollar life insurance
A type of life insurance in which the policyowner and the insured share the death benefit and the premiums.
Stop-loss insurance
Insurance that provides coverage for losses in excess of a specified
Stop-loss reinsurance
Reinsurance that provides coverage for losses in excess of a specified amount.
Straight life annuity
An annuity that pays a fixed amount for the life of the annuitant.
Straight life insurance
A type of life insurance that provides a death benefit for the life of the insured.
Subrogation
The process of an insurer stepping into the shoes of the insured to recover money from a third party who is liable for the loss.
Subsidiary
A company that is controlled by another company.
Surplus
The amount by which an insurer's assets exceed its liabilities.
Surplus lines
Insurance that is provided by an insurer that is not licensed by a state.
Surplus lines broker
A broker who specializes in placing surplus lines insurance.
Surplus lines insurer
An insurer that is not licensed by a state.
Surplus note
A type of bond that is issued by an insurer to raise capital.
Surplus participation
The right of policyholders to participate in the surplus of a mutual company.
Surrender charge
A charge that is imposed if a policy is surrendered before it matures.
Surrender value
The amount that a policyholder will receive if a policy is surrendered before it matures.
Takaful
A type of Islamic insurance that is based on the principles of mutual cooperation and sharing of risks.
Tax-deferred annuity
An annuity that is taxed when the money is withdrawn rather than when it is received.
Tax-qualified plan
A retirement plan that meets the requirements of the Internal Revenue Service (IRS) and is eligible for certain tax benefits.
Taxable equivalent yield
The yield that a tax-free investment would have to earn to be equivalent to a taxable investment.
Taxable event
An event that triggers a tax liability.
Taxable income
Income that is subject to taxation.
Taxable value
The value of an asset that is subject to taxation.
Taxation of insurance companies
The process of taxing insurance companies.
Tax-deferred exchange
The exchange of one asset for another without triggering a tax liability.
Tax-exempt bond
A bond that is issued by a governmental entity and the interest on which is not subject to federal income tax.
Tax-exempt trust
A trust that is exempt from taxation.
Tax-favored status
Status that is granted by the government to encourage certain activities.
Tax-free rollover
The process of rolling over money from one retirement plan to another without triggering a tax liability.
Term insurance
A type of insurance that provides coverage for a specific period of time.
Terminal illness rider
A rider that provides for an accelerated death benefit if the insured is diagnosed with a terminal illness.
Terrorism insurance
Insurance that covers losses that are caused by acts of terrorism.
Third-party administrator (TPA)
A company that administers employee benefit plans for employers.
Third-party claim
A claim that is made against an insurer by a party who is not the policyholder.
Third-party liability
Liability that is incurred by a party who is not the policyholder.
Third-party reinsurance
Reinsurance that is purchased by an insurer from another insurer.
Thrift and loan association
A type of financial institution that specializes in savings accounts and home mortgages.
Total and permanent disability (TPD) insurance
Insurance that provides a benefit if the insured becomes totally and permanently disabled.
Total disability
A disability that prevents the insured from performing any gainful occupation.
Total loss
A loss that is so severe that the property cannot be repaired or restored.
Total return
The return on an investment that includes both income and capital appreciation.
Total return swap
A type of financial contract in which one party agrees to pay the total return on an asset, including both interest and capital appreciation, to the other party in exchange for a fixed rate of interest.
Totten trust
A type of trust that is established by depositing money in a bank account and designating a beneficiary.
Trade credit insurance
Insurance that covers losses that are caused by the failure of a customer to pay their bills.
Traditional health insurance
A type of health insurance that is based on the traditional indemnity model.
Traditional long-term care insurance
A type of long-term care insurance that is based on the traditional indemnity model.
Traditional long-term care policy
A type of long-term care policy that is based on the traditional indemnity model.
Traditional long-term care rider
A rider that is added to a traditional long-term care policy.
Traditional long-term care insurance policy
A type of long-term care insurance policy that is based on the traditional indemnity model.
Traditional indemnity health plan
A type of health plan that reimburses the policyholder for their medical expenses.
Traditional indemnity long-term care plan
A type of long-term care plan that reimburses the policyholder for their long-term care expenses.
Traditional medical expense insurance
A type of medical expense insurance that is based on the traditional indemnity model.
Traditional whole life insurance
A type of whole life insurance that is based on the traditional participating whole life insurance model.
Transactional insurance
Insurance that is purchased to cover a specific transaction.
Transfer for value rule
A rule that applies to life insurance and stipulates that if a policy is transferred for valuable consideration, the death benefit will not be income tax-free to the transferee.
Transinsurance
The process of transferring insurance from one insurer to another.
Trusteed surplus
Surplus that is held in trust for policyholders.
Trustee
A person or entity that holds assets in trust for the benefit of another.
Umbrella insurance
Insurance that provides additional liability coverage above and beyond the limits of the underlying policies.
Underinsurance
A situation in which the amount of insurance is not sufficient to cover the loss.
Underwriting
The process of evaluating and selecting risks for insurance coverage.
Underwriting gain or loss
The difference between the premium income and the losses and expenses of an insurer.
Underwriting income
The income of an insurer that is derived from underwriting.
Underwriting ratio
The ratio of losses and expenses to premium income.
Underwriting year
The year in which the premiums are earned and the losses are incurred.
Unearned premium
Premium that has been collected but has not yet been earned.
Uninsured motorist coverage
Coverage that provides protection in the event that an accident is caused by an uninsured or hit-and-run driver.
Uninsurable risk
A risk that cannot be insured.
Unit-linked insurance
A type of insurance in which the death benefit is linked to the performance of a separate investment account.
Universal life insurance
A type of life insurance that provides both a death benefit and a savings component.
Universal life policy
A type of life policy that provides both a death benefit and a savings component.
Universal pension plan
A type of pension plan that covers all employees of a company.
Universal policy
A policy that provides coverage for all risks of physical loss, unless they are specifically excluded.
Unfunded liability
A liability that is not backed by assets.
Unfunded pension plan
A pension plan that does not have sufficient assets to pay for the pensions that have been promised to the employees.
Uninsured
A person who does not have insurance.
Uninsurable
A person who cannot be insured.
Unit benefit
A benefit that is based on the units of insurance that are held by the policyholder.
Unit benefit policy
A type of policy that pays a benefit based on the units of insurance that are held by the policyholder.
Unit benefit plan
A type of plan in which the benefits are based on the units of insurance that are held by the policyholder.
Unit-linked contract
A type of contract in which the death benefit is linked to the performance of a separate investment account.
Variable annuity
An annuity in which the benefit payment varies depending on the performance of an underlying investment portfolio.
Variable life insurance
A type of life insurance in which the death benefit and the premium can vary depending on the performance of an underlying investment portfolio.
Variable life policy
A type of life policy in which the death benefit and the premium can vary depending on the performance of an underlying investment portfolio.
Variable universal life insurance
A type of universal life insurance in which the death benefit and the premium
Viatical settlement
The sale of a life insurance policy by a policyholder who is terminally ill.
Waiver of premium
A provision in an insurance policy that waives the premium payments if the insured becomes disabled.
Waiver of premium rider
A rider that waives the premium payments if the insured becomes disabled.
War exclusion
A provision in an insurance policy that excludes coverage for losses that are caused by war.
War risk insurance
Insurance that covers losses that are caused by war.
Whole life insurance
A type of life insurance that provides a death benefit for the life of the insured and also has a savings component.
Whole life policy
A type of life policy that provides a death benefit for the life of the insured and also has a savings component.
With-profit policy
A type of insurance policy that participates in the profits of the insurer.
Workers' compensation
Insurance that provides benefits to employees who are injured or become ill as a result of their job.
Yield
The return on an investment, typically expressed as a percentage.
Yield curve
A graphical representation of the relationship between yields and maturities.
Yield to maturity
The rate of return on a bond if it is held to maturity.
Yield to call
The rate of return on a bond if it is called prior to maturity.
Zero-coupon bond
A bond that does not pay periodic interest, but is sold at a discount to its face value.
Zero-sum game
A situation in which one person's gain is offset by another person's loss.
Zonal rating
A method of pricing insurance where different geographic zones are assigned different rates based on the level of risk.
