Career FAQs Glossary Contact Us Claims Login
 
 
Insurance Glossary



Ab initio
Latin for from the beginning.

Accident year
The calendar or accounting year in which a loss occurs.

Accreditation
The process by which a firm may obtain registration as a Lloyd's broker.

Accredited Lloyd's broker
A Lloyd's broker.

Active Underwriter
The individual at the underwriting box with principal authority to accept insurance and reinsurance risk on behalf of the members of a syndicate.

Actual Total Loss
This term derives from section 57 of the Marine Insurance Act 1906 (MIA) and refers to situations in marine insurance where: (a) the subject matter of the insurance is destroyed (b) the subject matter of the insurance is so damaged as to be no longer be capable of still being described as the thing insured; or (c) the insured is deprived of the subject matter of the insurance forever. Section 58 of the MIA adds that where there is no news of a missing ship then after a reasonable period an actual loss may be presumed.

Adjuster
See loss adjuster.

Adjustment premium
An additional or return premium that is payable in relation to a deposit premium depending on the performance of an insurance or reinsurance contract.

Agent
Someone who acts for another person (the principal) usually for reward. There are four main classes of agent that may be involved in the underwriting of insurance and reinsurance risks by Lloyd's underwriters: members' agents, managing agents, brokers and coverholders. In addition, there are Lloyd's agents which are independent businesses that provide surveys and loss adjusting services to managing agents, insurance companies and others on a worldwide basis. Further in some situations one underwriter may act as the agent of other underwriters (see general underwriters' agreement).

Aggregate
Total (limit of indemnity, premium, retention etc).

Aggregate excess of loss reinsurance
A form of excess of loss reinsurance in which the excess and the limit of liability are expressed as annual aggregate amounts.

Agreed business plan
A syndicate business plan that has been approved by or on behalf of Lloyd's Franchise Board. No managing agent may underwrite for a syndicate without an agreed syndicate business plan. Agreed syndicate business plans may be amended with the agreement of the Franchise Board or someone acting on its behalf.

Agreed value policy
An insurance contract under which the insurer agrees to pay the insured a stated amount in the event of the total loss of the property insured without any adjustment for depreciation or appreciation.

Aligned Member
A corporate member of a syndicate that is directly or indirectly owned by the same firm that owns the managing agent of the syndicate.

All risks
A property insurance which covers any accidental loss or damage that is not specifically excluded under the policy.

Allocated Capacity
This may refer to a member's allocated capacity or syndicate allocated capacity.

Annual accounting
The reporting of syndicate results on a calendar year basis, with profit taking being restricted to earned premiums.

Annual venture
This term refers to the reconstitution of a syndicate as an annual business venture where insurance and reinsurance business is written on a year of account basis.

Appreciation
In the context of property insurance an increase in value of the property insured.

Approved person
An individual who has been approved by the Financial Services Authority (FSA) to perform a FSA controlled function for an authorised person.

Approved run-off company
A company that is permitted by Lloyd's to perform specified functions that would normally be performed by a managing agent of a run-off syndicate on behalf of that agent or a substitute agent.

Assured
Another name for an insured.

Attachment date
Another term for inception date, being the date on which an insurance or reinsurance contract comes into force.

Attorney in Fact
A person appointed by a power of attorney to act on behalf of another person. A Lloyd's attorney in fact is a representative appointed by Lloyd's to represent Lloyd's and Lloyd's underwriters in a particular country or US state. An attorney in fact may be a natural person or a company and performs a similar role to a Lloyd's General Representative.

Authorised person
A person (usually a firm) that has been approved by the Financial Services Authority (FSA) to carry on one or more FSA regulated activities.

Average
If the sum insured under non-marine insurance is expressed to be "subject to average" and that sum is less than the value of the subject matter of the insurance then any claim that is agreed under the policy will be reduced proportionately to reflect the under insurance. Section 81 of the Marine Insurance Act 1906 say that an insured shall be his own insurer as regards any under insurance. In marine insurance the term average may also refer to one of two types of loss, general average and particular average.

Avoidance of a contract ab initio
The cancellation of an insurance or reinsurance contract from its beginning by an insurer or reinsurer on the basis of the misrepresentation and/or non-disclosure of material facts. The result is that the insurer/reinsurer has no liability under the contract but must repay the premium to the insured/reassured.

Back years
See prior years.

Bailee
A person who holds the property of another person (the bailor) under a contract or agreement according to which the property held is to be returned to the bailor or delivered somewhere to his order. A bailee for reward is paid for his services.

Basis (of insurance) clause
A clause that makes the declarations contained in an insurance proposal form the "basis" of any contract of insurance that is made in consequence of the completion of that form. Such declarations are thereby converted into warranties with the result that if one of them is found to be untrue then the insurer may disclaim all liability under the relevant contract from the date of the breach, regardless as to whether the false declaration was material to the underwriting of the contract or causative of any loss. Basis of insurance clauses are not normally found in personal lines insurance contracts sold in the United Kingdom and, where they appear in other contracts, they may be qualified by the inclusion of a term in the proposal form that the declarations made in that document are true to the best of the knowledge and belief of the person making the declarations.

Beyond economic repair
Where the cost of repairing the insured property, eg a car, exceeds the market value of that property. In such circumstances the insurer will pay the insured the market value of the insured property at the date of loss, subject to the terms of the policy (assuming the insurer is not under any obligation to provide a replacement).

Binding authority
An agreement between a Lloyd's managing agent and a coverholder under which the Lloyd's managing agent delegates its authority to enter into a contract or contracts of insurance to be underwritten by the members of a syndicate.

Bordereaux
A list of premiums payable and claims paid or due which is prepared by a coverholder for a managing agent or by a reassured for its reinsurer. Bordereaux are commonly produced on a monthly or quarterly basis. They breakdown block premium payments that are made to underwriters and detail claim payments made on behalf of or due from underwriters.

Box
Each syndicate has a box in the underwriting room at Lloyd's from which business may be transacted with Lloyd's brokers. Each box comprises a couple of opposite facing benches and desks at which the underwriters employed by the managing agent of the syndicate sit, plus some stools for the visiting Lloyd's brokers to sit on. Most boxes have computer terminals as well as access to other information technology.

Broker
There are two types of broker involved in arranging insurance and reinsurance at Lloyd's: insurance brokers and reinsurance brokers. Some brokers act both as insurance brokers and reinsurance brokers.

Brokerage
The commission that is payable to a broker for placing an insurance or reinsurance contract with an insurer or a reinsurer. Compare fee for service. Although brokerage is payable by the insured as part of the gross premium the amount of brokerage is agreed by the insurer. The insured may request his broker to state the amount of his brokerage on a given placement. Similar considerations apply to reassureds under reinsurances. Sometimes the term brokerage may be used to refer the business of a broker.

Business process reform
An initiative to increase the speed and efficiency with which business is transacted at Lloyd's and also to reduce of the cost of doing business at Lloyd's. It includes the promotion of contract certainty.

Buy back
In the context of general insurance this refers to the purchase of cover in respect of an otherwise excluded peril by means of the payment of additional premium.

Byelaws
The primary rules made by the Council of Lloyd's regarding the conduct of insurance business at Lloyd's.

Cancellation clause
A clause in an insurance contract which permits an insurer and/or an insured to cancel the contract before it is due to expire. The clause may provide for a return of premium in respect of the unused portion of the policy.

Capacity
This term may refer to: (a) a member's allocated capacity (b) syndicate allocated capacity (c) the total underwriting capacity of all syndicates combined; or (d) the underwriting capacity of an insurance company or reinsurance company.

Capacity auction
A procedure which allows a member to sell his participation rights in one or more syndicates for the following year of account to one or more other members, a managing agent or a members' agent operating a MAPA by means of electronic bidding at specific times. Individual members and some corporate members buy and sell capacity through their members' agents.

Capital provider
As regards a Lloyd's syndicate, its member(s). As regards a company, its shareholders.

Carrier (of risk)
An insurer or reinsurer.

Cash call
A request for funds made by a managing agent to members of a syndicate.

Casualty
Refers to a loss, particularly the loss of a ship.

Casualty book
A book which stands in the centre of the underwriting room and which records details of vessels which are or are likely to become total losses. The entries are made a by Lloyd's waiter using a quill pen.

Casualty business
Another term for liability insurance.

Cedant
A syndicate or company that transfers a risk exposure under a reinsurance contract.

Cedant's line
The retention under a surplus lines treaty.

Cede
To transfer a risk exposure under a reinsurance contract.

Central accounting
A facility is that is operated by the Corporation of Lloyd's whereby sums due to and from individual Lloyd's brokers and syndicates are processed centrally and their accounts debited and credited on a net basis regularly. Urgent one off payments may be made more quickly.

Central Fund
See New Central Fund.

CentreWrite Limited
A subsidiary of the Society that is permitted to underwrite run-off reinsurance contracts for syndicates in run-off and estate protection reinsurance for Names.

Certificate of insurance
Depending on the context this term may refer to: (a) A document which evidences the existence of insurance cover but which does not detail all its terms which are contained in a separate policy of insurance. Certain certificates are required as a matter of law in the United Kingdom, for example for motor insurance. (b) A document that is issued by a coverholder which evidences the existence of insurance cover and details the terms of such cover. No policy of insurance is issued where such a certificate is issued.

Cession
A particular risk exposure that is transferred under a reinsurance treaty.

Claim
Depending on the context this term may refer to: (a) a demand made by a policyholder on his insurer(s) for payment or some other contractual benefit under an insurance policy; (b) a demand made by an insurer on its reinsurer(s) to be paid under a reinsurance contract; or (c) a demand made by a third party on a policyholder to be compensated for some injury, damage or loss for which the third party blames the policyholder. A claim is payable under an insurance or reinsurance contract if it is caused by an insured peril and it is not excluded under the terms of that contract.

Claimant
The person making a claim.

Claims made policy
A policy which only pays claims that are notified to the insurer during a specified period.

Claims notification clause
A clause in an insurance or reinsurance contract which sets out the procedure that the insured or reassured must follow in order to make a claim under the contract. Such clauses frequently provide for prompt notification of claims and events which may gives to claims in the future.

Classes of business
The Lloyd's market underwrites five main classes of insurance and reinsurance business: marine, non-marine, motor, aviation and term life insurance. The market rules that previously prevented marine underwriters writing more than one class of business have been abolished. However, the premiums and claims relating to term life insurance must be kept separate from those relating to other classes of business and the rules of the Financial Services Authority (FSA) prohibit a syndicate writing both general insurance and long term insurance as defined by the FSA. Term life may constitute long term insurance.

Closed Year
A year of account that has been closed into another year of account by means of a reinsurance to close contract. Historically most Lloyd's syndicates have operated a three year underwriting account according to which the profit or loss of an underwriting account is determined by the managing agent 36 months after the beginning of that account which is always the start of a calendar year. According to this system the normal closure date of the 2009 year of account (which commenced on 1 January 2009) was 31 December 2011, with the calculation of the reinsurance to close as at that date being finalised in or about February/March 2012.

Coinsurance
This may refer to either of the following situations: (a) Where two or more insurers underwrite the same risk with several liability such that each insurer is not bound to follow the decisions of any co-insurer unless it has agreed to do so. (b) Where the insured acts as its own insurer for a specified proportion of the sum insured.

Combined ratio
The claims and expenses of an insurer/reinsurer for a given period divided by its premium for the same period. It is normally expressed as a percentage with any figure in excess of 100% signifying a technical underwriting loss.

Coming into line
A biannual procedure currently undertaken in June and November each year which requires members to demonstrate that they have sufficient eligible assets to meet their current underwriting liabilities and to support future underwriting before they may underwrite for the next following year of account.

Commercial lines
Insurance which is sold to firms. This term is used in contrast to personal lines.

Commutation
The termination of a reinsurance contract by agreement of the parties on the basis of one or more lump sum payments by the reinsurer which extinguish its liability under the contract. The payment made by the reinsurer commonly relates to incurred losses under the contract.

Constructive total loss
Section 60 of the Marine Insurance Act 1906 states that, subject to any policy provision, a constructive total loss arises where the subject matter of an insurance is reasonably abandoned to the insurer by the insured on account of its actual total loss appearing unavoidable or because it could not be preserved from actual total loss without an expenditure that would exceed its value. The term is sometimes used to refer to insured property, e.g. a car, which is damaged beyond economic repair.

Contract certainty
Refers to the situation where the terms of an insurance or reinsurance contract are agreed before the inception date of the contract rather than being negotiated afterwards.

Conversion arrangement
A scheme sponsored by a members' agent which allows an individual member to switch from underwriting on an unlimited liability basis to underwriting on a limited liability basis.

Coordinating agent
A members' agent who is appointed by a member who has more than one member's agent to co-ordinate the administration of the member's affairs at Lloyd's.

Corporate member
A member of the Society which is a body corporate (including for the avoidance of doubt limited liability partnerships) or a Scottish limited partnership.

Corporate member syndicate
A syndicate with a single corporate member as its only member.

Corporation of Lloyd's
The executive of the Council of Lloyd's, Lloyd's Franchise Board and their respective committees. The Corporation does not underwrite insurance or reinsurance itself but provides the licences and other facilities that enable business to be underwritten on a worldwide basis by managing agents acting on behalf of members.

Council of Lloyd's
The Council of Lloyd's was constituted as the governing body of Lloyd's by Lloyd's Act 1982. It currently comprises 6 external members, 6 working members and 6 nominated members and is empowered to make byelaws governing the conduct of insurance business at Lloyd's. Since 2003 the Council has acted by Lloyd's Franchise Board as regards the development and direction of the implementation of the commercial policy of the Lloyd's franchise and the direction and regulation of the business of insurance of Lloyd's.

Cover
Insurance or reinsurance as it applies to one or more specific risk exposures.

Cover note
A document issued by a broker pending the issue of a policy which confirms the arrangement of cover for the named insured/reassured. Motor insurance cover notes that are issued in the United Kingdom (which incorporate a certificate of insurance) are usually of short duration.

Coverholder
A company or partnership authorised by a managing agent to enter into a contract or contracts of insurance to be underwritten by the members of a syndicate managed by it, in accordance with the terms of a binding authority.

Declinature
The refusal of an insurer or reinsurer to offer terms of cover.

Dedicated vehicle
A corporate member that only participates on one or more syndicates that are managed by the same managing agent or group of managing agents. The term is often used interchangeably with the expression aligned member.

Deductible
The amount that is deducted from some or all claims arising under an insurance or reinsurance contract. The practical effect is the same as an excess: the insured or reassured must bear a proportion of the relevant loss. If that loss is less than the amount of deductible/excess then the insured or reassured must bear all of the loss (unless there is other insurance in place to cover the deductible). An increase in deductible should result in a reduction in premium.

De-emption
Where a managing agent reduces the underwriting capacity of a syndicate, for example when it expects to write less business in future. The participations of the members of the syndicate are reduced proportionately.

Deposit premium
A premium that is payable at the inception (start) of an insurance or reinsurance contract and in respect of which an adjustment premium (usually an additional premium) is due depending on the performance of the contract including, possibly, the amount of the business that is ceded thereunder. Compare minimum premium.

Depreciation
The decrease in the value of an item due to age, use or wear and tear. Such devaluation is not covered under a contract of indemnity. However an insurer may agree to provide cover on "a new for old" basis which represents a modification of the principle of indemnity and avoids the need to determine rates and amounts of deprecation when settling claims.

Deterioration in reserves
Where the reserves of an insurer or reinsurer for prior years are insufficient to meet the estimated liabilities of one or more loss exposures and therefore require to be increased.

Direct business
Insurance placed with an insurer direct and not through an intermediary.

Duty of disclosure
The duty of every person seeking insurance or reinsurance to inform the insurer/reinsurer from whom a quotation for insurance/reinsurance is sought of every material fact. The duty arises when seeking new insurance/reinsurance, when seeking a variation of cover (but only as regards a change in risk where the carrier is the same as before) and at renewal (but only as regards a change in risk where the carrier is the same as before). The scope of the duty may be modified by the terms of a proposal form. Should a person seeking insurance/reinsurance fail to disclose a material fact then this may lead to the avoidance of the relevant insurance or reinsurance by the underwriter. The consequences of non-disclosure may be modified by the terms of the relevant insurance/reinsurance.

Earned premium
The proportion of premium that relates to a used period of cover.

Endorsement
A document that is attached to a slip, cover note or policy which evidences one or more changes in the terms of the insurance or reinsurance contract to which it refers.

Establishment business
See freedom of establishment.

European Union
The European Union is made up of 27 Member States: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

Ex gratia payment
A payment made by underwriters "as a favour" or "out of kindness" without an admission of liability so as to maintain goodwill.

Excess
The amount or proportion of some or all losses arising under an insurance or reinsurance contract that is the insured or reassured must bear. If the loss is less than the amount of the excess then the insured/reassured must meet the cost of it (unless there is other insurance in place to cover the excess). Compare deductible and retention. Excesses may either be compulsory or voluntary. An insured which accepts an increased excess in the form of a voluntary excess will receive a reduction in premium.

Excess of loss
A type of reinsurance that covers specified losses incurred by the reassured in excess of a stated amount (the excess) up to a higher amount, for example £5 million excess of £1 million. An excess of loss reinsurance is a form of non-proportional reinsurance.

Exclusion
A term in an insurance or reinsurance contract that excludes the insurer or reinsurer from liability for specified types of loss. An exclusion may apply throughout a policy or it may be limited to specific sections of it. In certain circumstances an exclusion may be limited or removed altogether following the payment of an additional premium.

Extended reporting period
The period after the expiry of a claims made policy in which claims under that policy must be made if they are to be covered. It may be possible for an insured to extend this period on payment of an additional premium.

External member
A member who is not a working member or a nominated member.

Facultative/obligatory treaty
A reinsurance contract which allows the reassured to select which risks of a given type are to be ceded to the reinsurer. The reinsurer is obliged to accept all the cessions made by the reassured provided they fall within the scope of the treaty.

Facultative risk
A reinsurance risk that is placed by means of separately negotiated contract as opposed to one that is ceded under a reinsurance treaty.

Fee for service
Where a broker is remunerated on the basis of a fee agreed with its client instead of brokerage. The benefit to the broker is that, subject to the terms of agreement, the fee will be payable whether or not cover is placed whereas brokerage is only payable in respect of the placement of cover.

Fidelity insurance
A type of insurance which is designed to protect a firm from losses caused by the dishonest acts of its employees.

Following underwriter
An underwriter of a syndicate or an insurance company that agrees to accept a proportion of a given risk on terms set by another underwriter called the leading underwriter.

Franchise (Lloyd's)
The Lloyd's brand, worldwide trading licences, financial strength rating, mutual security and other support services that enable members to underwrite insurance and reinsurance at Lloyd's on a global basis.

Franchise Board
See Lloyd's Franchise Board.

Franchise goal
The creation and maintenance of a commercial environment at Lloyd's in which the long term return to all capital providers is maximised.

Franchisee
A managing agent.

Franchisor
Lloyd's in the form of the Council, Franchise Board and their respective committees and executives.

Freedom of establishment
The right of an insurer located in one European Economic Area (EEA) member state to underwrite a risk located in another EEA member state by establishing a permanent presence in that EEA member state. (Please see the 'Definition of risk location' section on Crystal for clarification of the correct location for a risk.) This permanent presence can be in the form of a local branch, agency or subsidiary. At Lloyd's, a permanent presence in another EEA member state is created by having local coverholders with full binding authority agreements and a local Lloyd's General Representative. (A full binding authority agreement is one where the coverholder may enter into contracts of insurance without first consulting the syndicate.) Freedom of establishment business is that underwritten under a full binding authority where the coverholder and the risk are located in the same EEA member state outside the UK.

Freedom of services
The right to provide business services on a cross-border basis within the European Economic Area (EEA). For insurance contracts, this means that the contract can be underwritten in an EEA member state that is different from the member state where the risk is located. (Please see the 'Definition of risk location' section on Crystal for clarification of the correct location of a risk.) Freedom of services business consists of open market business written from the UK (with or without the involvement of a local intermediary), business written under a full binding authority where the coverholder is located in a different member state from where the risk is located and business that is written under a prior submit binding authority agreement. (A prior submit binding authority agreement is one where the coverholder does not have authority to enter into contracts of insurance without first consulting the syndicate that granted the binding authority).

Funds at Lloyd's
Funds of an approved form that are lodged and held in trust at Lloyd's as security for a member's underwriting activities. They comprise the members deposit, personal reserve fund and special reserve fund and may be drawn down in the event that the member's syndicate level premium trust funds are insufficient to cover his liabilities. The amount of the deposit is related to the member's premium income limit and also the nature of the underwriting account. (See risk based capital).

General average
A loss that arises from the reasonable sacrifice at a time of peril of any part of a ship or its cargo for the purpose of preserving the ship and the remainder of its cargo together with any expenditure made for the same purpose. An example of a general average loss would include jettisoning cargo to keep a ship afloat and an example of general average expenditure would include towing a stricken vessel into port. An average adjuster calculates the value of each saved interest to each interested party which is then obliged to contribute towards the general average loss or expenditure proportionately. Subject to the terms of the policy, insurance will generally only apply if the loss was incurred to avoid or in connection with the avoidance of an insured peril.

General Representative
A person appointed by Lloyd's to represent Lloyd's and Lloyd's underwriters in a particular country or territory. A General Representative may be a natural person or a company. An agreement between Lloyd's and the General Representative sets out the General Representative's duties and responsibilities.

General underwriters' agreement
An agreement between insurers and reinsurers on a subscription risk specifying the terms on which the leading underwriter shall act as the agent of the following underwriters as regards the agreement of amendments to coverage terms.

Grace period
A short period during which cover under an annual policy may be extended beyond its expiry date to allow for the payment of a renewal premium. The privilege will be lost if the insured rejects the proposed renewal terms, by his actions or words. There are no grace periods in motor or marine insurance.

Gross claims
Claims under contracts of insurance underwritten by the members of a syndicate plus internal and external claims settlement expenses less salvage or other recoveries, but before the deduction of reinsurance recoveries.

Gross line
The amount of risk that an insurer or reinsurer is carrying before taking account of any applicable reinsurance that reduces that risk.

Gross premium
Original and additional inward premiums, plus any amount in respect of administration fees or policy expenses remitted with a premium but before the deduction of outward reinsurance premiums.

Hard market
When the availability of some or all classes of insurance or reinsurances is limited relative to demand for such insurance or reinsurance resulting in increased premiums and coverage restrictions.

Hazard
Something that causes an exposure to injury, loss or damage.

Hazardous pursuits
Certain sports and activities are termed hazardous pursuits and are excluded from travel insurances although it may be possible to have them included on payment of an additional premium.

Inception
Commencement or beginning (eg of cover).

Inception date
The date on which an insurance or reinsurance contract comes into force.

Incurred but not reported (IBNR) losses
Estimated losses which an insurer or reinsurer, based on its knowledge or experience of underwriting similar contracts, believes have arisen or will arise under one or more contracts of insurance or reinsurance, but which have not been notified to an insurer or reinsurer at the time of their estimation.

Incurred losses
The aggregate of the paid and outstanding claims of an insurer or reinsurer for a year of account or some other given period of time. These losses represent known losses to an insurer or reinsurer and, subject to issues of proof of liability and the determination of the final amount payable in the case of outstanding claims, are relatively certain.

Indemnity
The principle according to which a person who has suffered a loss is restored (so far as possible) to the same financial position that he was in immediately prior to the loss, subject in the case of insurance to any contractual limitation as to the amount payable (the loss may be greater than the policy limit). The application of this principle is called indemnification. Most contracts of insurance are contracts of indemnity. Life insurances and personal accident insurances are not contracts of indemnity as the payments due under those contracts for loss of life or bodily injury are not based on the principle of indemnity.

Indication
A non-binding statement by an underwriter of the likely level of premium that he would charge to underwrite a risk, subject to the provision of additional information. Compare quotation.

Individual member
A member of the Society who is an individual (as opposed to a corporate member).

Insurable interest
If an insured wishes to enforce a contract of insurance before the Courts he must have an insurable interest in the subject matter of the insurance, which is to say that he stands to benefit from its preservation and will suffer from its loss. In non-marine insurances, the insured must have insurable interest when the policy is taken out and also at the date of loss giving rise to a claim under the policy. In life insurance the insured must have insurable interest must when the policy is taken out and in marine insurance the insured must generally have insurable interest at the date of loss giving rise to a claim under the policy.

Insurance
A contract whereby an insurer promises to pay the insured a sum of money or some other benefit upon the happening of one or more uncertain events in exchange for the payment of a premium. There must be uncertainty as to whether the relevant event(s) may happen at all or, if they will occur (eg death) as to their timing.

Insurance broker
An individual or firm that acts as agent for an individual, body or firm in arranging insurance cover and in presenting claims under such cover. At present only Lloyd's brokers may arrange cover directly with or on behalf of underwriters in the underwriting room.

Insurance contract
Determines what insurance coverage is in place and determines the legal framework under which the content of an insurance policy is enforced.

Insurance intermediary
A person through whom an insurance contract is effected. It normally refers to an insurance broker and/or an agent of an insurer such as a coverholder.

Insurance policy
See policy.

Insured
A person who is insured under a contract of insurance. Where there is one insured this person may also be referred to as the policyholder.

Insured peril
A harmful event which is covered under a contract of insurance.

Insurer
A provider of insurance. If the insurance is underwritten at Lloyd's the insurer(s) will be the members of one or more syndicates. If the insurance is not underwritten at Lloyd's the insurer(s) will be one or more insurance companies. Some insurances may be underwritten by syndicates and insurance companies.

Integrated Lloyd's vehicle (ILV)
A company which owns a corporate member of a syndicate and the managing agent of that syndicate.

Intervening cause
An event that prevents a loss being attributable to another event by breaking the chain of causation. Compare proximate cause.

Investment income
That part of the income of an insurer or reinsurer that comes from the investment of premiums and reserves.

Inward reinsurance
Reinsurance that is assumed by a Lloyd's syndicate or other carrier as distinct from outward reinsurance.

Jewellers block policy
A form of property insurance that is provided to jewellers.

Jurisdiction clause
A clause in an insurance or reinsurance contract which states to which territory's courts any contractual dispute shall be referred for resolution.

Key person insurance
A policy that protects a firm from loss caused by the death or disability of a 'key person' within the company.

Large Risks
An official term used in EEA insurance regulation. The formal definition of "Large Risks" is found in the EU's 2nd Non-Life Insurance Directive (88/357). It can be summarised as meaning: (i) Risks classified as: Railway rolling stock Aircraft (including aircraft liability) Ships (sea, lake and river and canal vessels) (including liability) Goods in transit (including merchandise, baggage, and all other goods). (ii) Risks classified as Credit or Surety where the policyholder is engaged professionally in an industrial or commercial activity or in one of the liberal professions, and the risks relate to such activity. (iii) Risks classified as: Fire and natural forces Other damage to property General liability Miscellaneous financial loss in so far as the policyholder exceeds the limits of at least two of the following three criteria: - balance-sheet total: 6.2 million euros, - net turnover: 12.8 million Euros, - average number of employees during the financial year: 250. If the policyholder belongs to a group of undertakings for which consolidated accounts are drawn up, the criteria mentioned above is applied to the consolidated accounts.

Leading underwriter
The underwriter of a syndicate or insurance company who is responsible for setting the terms of an insurance or reinsurance contract that is subscribed by more than one syndicate or insurance company and who generally has primary responsibility for handling any claims arising under such a contract. Where an insurance or reinsurance contract that is underwritten by more than one syndicate Xchanging Claims Services normally acts as the representative of the following underwriters as regards the agreement of claims under the contract. In certain situations a managing agent of a following syndicate will be appointed together with Xchanging Claims Services to represent the following underwriters. However some matters require to be referred to all the following underwriters on risk and an insured may always insist that its claim is shown to each following underwriter.

Leading underwriter's agreement
An agreement that allows for certain changes to the terms of an insurance or reinsurance contract to be agreed by the leading underwriter(s) without reference to the following underwriters.

Liability insurance
An insurance which covers the insured against third party claims or, in the case of employer's liability insurance, claims by employees, subject to specified terms and conditions.

Life assurance
Another term for life insurance.

Life assured
The person whose life is insured under a life insurance.

Life insurance
A policy that pays a specified sum to beneficiaries upon the death of the life assured, or upon the assured surviving a given number of years, depending on the terms of the policy. Life insurance policies may be for fixed or indefinite term. See term life as regards fixed term policies.

Limit of indemnity
Another term for policy limit. It refers to the maximum amount payable under a policy of insurance or reinsurance, either overall or with reference to a particular section of a policy.

Line
The proportion of an insurance or reinsurance risk that is accepted by an underwriter or which an underwriter is willing to accept. When it refers to a line that is entered on a slip it is commonly expressed as a percentage of the limit of indemnity.

Lloyd's
Depending on the context this term may refer to - (a) the society of individual and corporate underwriting members that insure and reinsure risks as members of one or more syndicates. Lloyd's is not an insurance company; (b) the underwriting room in the Lloyd's Building in which managing agents underwrite insurance and reinsurance on behalf of their syndicate members. In this sense Lloyd's should be understood as a market place; or (c) the Corporation of Lloyd's which regulates and provides support services to the Lloyd's market.

Lloyd's Act 1982
The most recent of seven private Acts of Parliament that define the powers of the Society of Lloyd's. The Council of Lloyd's was made the governing body of Lloyd's under this Act.

Lloyd's Agent
A firm that is appointed to conduct or arrange surveys of ships and cargoes for Lloyd's underwriters, other insurers and commercial interests throughout the world. Many Lloyd's agents also undertake non-marine surveys, act as loss adjusters and provide information about shipping movements and losses. There are over 300 Lloyd's agents, 160 of whom have authority to settle claims on behalf of Lloyd's underwriters and insurance companies.

Lloyd's American Trust Fund
A trust fund that is maintained in the USA for the protection of holders of US dollar denominated policies which incepted between August 1939 (when the fund was established) and 31 July 1995. It is a premiums trust fund. Compare Lloyd's Dollar Trust Funds.

Lloyd's broker
A firm that is listed in the register of Lloyd's brokers maintained under the Intermediaries Byelaw which is permitted to broke insurance business at Lloyd's. A syndicate can generally only accept insurance business that has been broked or placed from or through a Lloyd's broker.

Lloyd's Canadian Trust Fund
A trust fund that is maintained in Canada for the protection of holders of insurance policies covering Canadian risks. It is a premiums trust fund.

Lloyd's Dollar Trust Funds
These funds are maintained in the USA for the protection of holders of US dollar denominated policies which incepted on or after 1 August 1995 (when the fund was established). They are premiums trust funds. Compare Lloyd's American Trust Fund.

Lloyd's Franchise Board
The board established by the Council of Lloyd's which is responsible for developing and directing the implementation of the franchise policy to create an maintain a commercial environment at Lloyd's in which the long term return to all capital providers is maximised. The Council delegates certain of its powers to the Board which may operate within limitations set by Council.

Lloyd's market
This term may refer to the place where business is transacted between managing agents and Lloyd's brokers, or to the syndicates that provide cover at Lloyd's.

Lloyd's Market Board
The committee of the Council of Lloyd's that was formerly responsible for the development and growth of Lloyd's worldwide business. It was abolished in 2002 in anticipation of the transfer of its responsibilities to Lloyd's Franchise Board.

Lloyd's Policy Signing Office Ltd
Lloyd's Policy Signing Office used to be part of the Corporation of Lloyd's. Following its incorporation it is now part of the Xchanging group of companies.

Lloyd's Regulatory Board
The committee of the Council of Lloyd's that was formerly responsible for the regulation of the Lloyd's market. It was abolished in 2002 in anticipation of the transfer of its responsibilities to Lloyd's Franchise Board.

Lloyd's solvency test
A test that is undertaken annually to ensure that members of the Society have sufficient eligible assets to meet their underwriting liabilities. The test is undertaken at member level and also on an aggregate basis for all members taking in account the centrally held assets of the Society such as the New Central Fund. Any member that fails the solvency test at member level will be required to provide additional funds or cease underwriting. The centrally held assets of the Society must be sufficient to cover any shortfall of assets at member level.

Lloyd's underwriters
This term may variously refer to - (a) the professional underwriters who are employed by managing agents to underwrite insurance and reinsurance business on behalf of the members of the syndicates that those agents manage. (b) the members of one or more syndicates that underwrite a particular policy; or (b) all members (of the Society) collectively.

Lloyd's waiter
A liveried member of Lloyd's staff.

LMP slip
A standard form slip that managing agents must use to underwrite insurance at Lloyd's except (a) if the insured requires some other slip to be used; or (b) the slip relates to motor business, personal lines including motor business or term life business and the slip will not be processed by LPSO Ltd. For further information visit www.lmp2001.com. Please note: Lloyd's accepts no responsibility for the content of external sites.

Long tail (risk)
This refers to a type of insurance where claims may be made many years after the period of the insurance has expired. Liability insurance is an example of long tail business. The opposite of long tail business is short tail business.

Loss
This term generally refers to some injury, harm, damage or financial deteriment that a person sustains. Losses may be insured or uninsured. Whether a loss is covered by a policy or certificate of insurance depends on the terms of that document and local law.

Loss adjuster
A person who is appointed to investigate the circumstances of a claim under an insurance policy and to advise on the amount that is payable to the policyholder in order to settle that claim. Loss adjusters are generally appointed by underwriters but sometimes policyholders appoint their own loss adjusters to negotiate claims on their behalf.

Loss event
The event which causes a loss, for example a fire or hurricane.

Managing agent
An underwriting agent which has permission from Lloyd's to manage a syndicate and carry on underwriting and other functions for a member.

Managing agents agreement
A standard form agreement between a member and the managing agent of a syndicate on which the member participates which sets out the powers of the managing agent and the obligations of the managing agent and the member towards one another. There are two forms of managing agent's agreement: the managing agent's agreement (general), which applies to every member that has a members' agent and the managing agent's agreement (corporate) which applies to every member that does not have a members' agent. Copies of current versions of these agreements are annexed to the Agency Agreements Byelaw.

Mandataire General
The title used by a Lloyd's General Representative in certain countries, predominantly those that are French speaking.

Market agreement
An agreement between all the underwriters in a certain section of the Lloyd's market.

Mass risks
An official term used in EEA insurance regulation. It means any risk that is not a 'large risk'. See large risks.

Material fact
This refers to any fact which would influence the judgment of a prudent underwriter in deciding whether to accept an insurance/reinsurance risk and the terms on which he would be willing to grant cover. See duty of disclosure.

Material representation
A statement that is made to an underwriter during the negotiation of cover or the amendment or renewal of cover which would have influenced the judgment of a prudent underwriter in deciding whether to accept an insurance/reinsurance risk and the terms on which he would be willing to grant cover.

Means
The minimum level of wealth that a member must demonstrate he, she or it has in order to underwrite at Lloyd's. The means of all members must be held in approved form and must be maintained in value so long as the member has actual or potential outstanding underwriting liabilities.

Member (of the Society)
A person (either individual or corporate) admitted to membership of the Society.

Members' agent
An underwriting agent which has permission from Lloyd's to be appointed by a member to provide services and perform duties of the same kind and nature as those set out in the standard members' agent's agreement. These services and duties include advising the member on which syndicates he should participate, the level of participation on such syndicates and liaising with the member's managing agents.

Members' agent Pooling Arrangement (MAPA)
An arrangement operated by a members' agent whereby a number of members combine pool some or all of their underwriting capacity thus enabling them to participate in a wider range of syndicates than would otherwise be the case.

Members' agent's agreement
A standard form of contract between a member and his member's agent, which sets out the services, duties, powers and remuneration of the member's agent and obligations of the member. The terms of the contract with the exception of the amount of the members' agent's remuneration are set by the Council of Lloyd's. A copy of the current versions of the members' agent's agreement is annexed to the Agency Agreements Byelaw.

Member's allocated capacity
That part of overall premium limit of a member that is allotted to a particular syndicate for a given year of account. It represents the amount of premium that the Member may accept in respect of that syndicate for that year of account.

Minimum premium
The minimum amount that is payable to an insurer or reinsurer as a premium in respect of a insurance or, more commonly, reinsurance contract which provides for a deposit premium. The minimum premium may be the same as the deposit premium or a different figure.

Misrepresentation (of risk)
A misstatement of fact that is made by the insured or his broker to an underwriter during the negotiation of the placement, amendment or renewal of cover which causes the underwriter to grant, amend or renew cover on an incorrect basis of fact. If the misrepresentation is material the underwriter may avoid the contract on the basis that the insured has breached his duty of utmost good faith. Compare duty of disclosure.

Mixed syndicate
A syndicate which is made up of Names and/or MAPAs and corporate members.

Moral hazard
Those personal characteristics of a prospective insured or its employees or associates that may increase the probability or size of an insurance loss.

Name
An individual member underwriting with unlimited liability. Since 6 March 2003 no person has been admitted as a new member to underwrite on an unlimited liability basis.

Nameco
A company that is a corporate member whose members consist of a single individual or a group of connected individuals or their nominees. Many Namecos were formed by Names who wished to cease underwriting on an unlimited liability basis.

Net claims
Gross claims less reinsurance recoveries.

Net premium
The amount of the premium that is left after the subtraction of some or all permitted deductions such as brokerage and (for certain types of business) profit commission.

New Central Fund
The fund held, managed and applied by the Society pursuant to the New Central Fund Byelaw (No. 23 of 1996).

Nominated member
A member of the Council of Lloyd's who is not an external member or a working member and whose appointment has been approved by the Governor of the Bank of England.

Non-disclosure (of a material fact)
See duty of disclosure.

Non-proportional reinsurance
A type of reinsurance in which the reinsurer does not share similar proportions of the premiums earned and the claims incurred by the reassured plus certain associated expenses. Compare proportional reinsurance. Excess of loss reinsurance is an example of non-proportional reinsurance.

Open market basis
See open market business.

Open market business
Insurance business that may be offered to and placed with any managing agent that is willing to underwrite it on behalf of its managed syndicate. It excludes business that is underwritten pursuant to a binding authority.

Open market correspondent
A firm that produces business to a Lloyd's broker for placement on an open market basis. Lloyd's requires that firms in certain overseas territories must be approved or registered by its attorney in fact or general representative before they can produce business to one or more sponsoring Lloyd's brokers for placement on an open market basis.

Open year of account
A year of account of a syndicate which has not been closed by reinsurance to close. There are two types of open year of account; naturally open years of account and run-off accounts. Syndicates are required to keep each year of account open for a minimum of three years before it may be closed by reinsurance to close. In normal circumstances a syndicate will therefore have three naturally open years of account at any point in time: the third year of one year of account, the second year of the following year of account; and the first year of the next year of account. Thus in 2005 the 2003 year of account is in its third year, the 2004 year of account is in its second year and the 2005 year of account is in its first year. Where the liabilities attaching to a particular year of account of a syndicate (including any prior year of account closed into that year) cannot be quantified after three years then that year of account will be left open until such time as a reinsurance to close may be effected or all the liabilities attaching to that year of account are extinguished.

Order
This may refer to - (a) the communication by a broker to an underwriter of a client's acceptance of his quotation; or (b) the amount of the sum insured that is covered by a particular slip where more than one slip is used to arrange cover.

Outwards reinsurance
The reinsurance of a syndicate or of an insurance company as distinct from inwards reinsurance.

Overall premium limit (or overall premium income limit) (OPL)
In relation to a member, the limit for the time being prescribed on the amount of insurance business which is to be underwritten on his behalf from time to time, such limit being expressed as the maximum permissible amount of his premium income allocable to any year of account.

Overriding commission
A commission that is paid by a reinsurer to the reassured to cover the latter's overheads in administering the reinsurance.

Overwriting
Where a syndicate exceeds its allocated capacity. Depending on the scale of the problem the managing agent of the syndicate may be required to cease underwriting some or all new business and the members may be required to make available additional funds at Lloyd's to cover the overwriting.

Particular average
A partial loss of a ship or cargo which is caused by an insured peril and which is not a general average loss. The term partial loss may be used instead.

Peril
A harmful event which may be covered under a contract of insurance or reinsurance as an insured peril or excluded from it.

Personal accident insurance
A type of insurance which provides for the payment of specified sums in the event that the insured suffers some bodily injury as a result of an accident.

Personal lines insurance
Insurance which is sold to individual consumers such as buildings, contents and travel insurance. This term is used in contrast to commercial lines.

Personal reserve fund
A reserve of cash or investments held on behalf of a member and comprising part of his funds at Lloyd's. The reserve, which is held within the premiums trust fund of the member, may be built up by setting aside a proportion of past profits or by the setting aside of funds from other sources. It is separate from any special reserve fund the member may have.

Placement (of cover)
Where a broker effects an insurance or reinsurance contract with underwriters on behalf of its client.

Placing broker
This term may refer to an individual broker or a broking firm that places cover directly with one or more underwriters. Compare producing broker.

Placing slip
See slip.

Policy
The wording of a contract of insurance or reinsurance.

Policy holder
The person who is insured under a contract of insurance.

Policy limit
Another term for limit of indemnity. It refers to the maximum amount payable under a policy of insurance or reinsurance, either overall or with reference to a particular section of the policy.

Pre-emption
Where a managing agent increases the underwriting capacity of a syndicate, for example when it expects to write more business in future. The participations of the members of the syndicate are increased proportionately to the extent the managing agent's pre-emption offer is taken up.

Premium
The amount charged by an insurer or reinsurer as the price of granting insurance or reinsurance cover, as stated before or after the subtraction of brokerage and other deductions.

Premiums trust fund (PTF)
The premiums and other monies that members receive in respect of their underwriting at Lloyd's are held by their managing agents in trust for them subject to the discharge of their underwriting liabilities. The premiums trust funds comprise a sterling fund, Lloyd's American Trust Fund, Lloyd's Dollar Trust Funds, Lloyd's Canadian Trust Fund and the Lloyd's Asia Trust Fund. These premiums trust funds are available to fund overseas regulatory deposits, claims, return premiums, underwriting expenses and (once a year of account has been closed) any profit that is payable to the member.

Prior years
Earlier years. This term usually refers to earlier years of account which have been closed into another year of account by reinsurance to close.

Pro rata cancellation
When an insurance contract is terminated mid-term by an insurer, the return premium will usually be calculated on a pro rata basis. For example this means that if a 12 month contract is cancelled 4 months before its expected expiry date then the insured would receive back 4/12 of its premium.

Producing broker
This term may refer to (a) the individual broker who obtains a proposal for insurance or reinsurance for the broking firm for which he works; or (b) a broking firm or individual broker that is responsible for introducing a proposal for insurance or reinsurance to another broking firm. The original producing broker will be the person who deals directly with the client. The term producing broker is often used in contrast to the term of placing broker although it is common for individual brokers and broking firms to undertake both functions.

Profit commission
A commission that is payable according to a pre-determined formula as an incentive and reward for profitable underwriting. The following are examples of profit commission: (a) the commission paid to a coverholder by a managing agent for underwriting a profitable account; (b) the commission paid by a Member to a managing agent in respect of the profitability of its syndicate in a given year of account; and (c) the commission paid by a reinsurer to an insurer in respect of a profitable reinsurance treaty.

Proportional Reinsurance
A type of reinsurance in which the reinsurer shares similar proportions of the premiums earned and the claims incurred by the reassured plus certain associated expenses. Compare non-proportional reinsurance. Quota share treaties and surplus line treaties are examples of proportional reinsurance.

Proposal form
A standard form which is prepared by an insurer and which contains a number of questions which a person seeking insurance is required to answer for the purpose of enabling the insurer to decide whether or not it is willing to grant cover and, if so, the terms on such cover. See duty of disclosure.

Proposer
A person who seeks insurance (frequently by means of completing a proposal form).

Proximate cause
An insurer will only be liable to pay a claim under an insurance contract if the loss that gives rise to the claim was proximately caused by an insured peril. This means that the loss must be directly attributed to an insured peril without any break in the chain of causation. Compareintervening cause.

Pure year of account
A year of account viewed in isolation, which is to say disregarding any prior years that may have been reinsured into by means of reinsurance to close.

Qualifying quota share (QQS) reinsurance
A quota share treaty that may be purchased by a managing agent with the permission of Lloyd's so as to increase the underwriting capacity of its managed syndicate, subject to a specified limit and subject to the treaty complying with certain terms and conditions.

Quantum
Latin for amount. Where an insured or reassured makes a claim it must first be established whether the insurer or reinsurer is legally liable to pay the claim (ie it must be shown the relevant loss is covered under the insurance or reinsurance). If the insurer or reinsurer is liable to pay the claim it must then be established how much is the insurer must pay. For example, there may be deductions for an excess, under insurance or depreciation.

Quota share treaty
A reinsurance treaty which provides that the reassured shall cede to the reinsurer a specified percentage of all the premiums that it receives in respect of a given section or all of its underwriting account for a given period in return for which the reinsurer is obliged to pay the same percentage of any claims and specified expenses arising on the reinsured account.

Quotation
A statement of the premium that an underwriter requires to underwrite an insurance/ reinsurance risk based on the information supplied by the person seeking cover, either directly or via their broker. A quotation may be conditional, eg it may be subject to the provision of further information, or not. If a quotation is accepted before it is withdrawn, then subject to the satisfaction of any conditions that may attach to the quotation, an insurance/reinsurance contract will be made. Compare indication.

Rate
The premium expressed as a percentage of the sum insured or limit of indemnity.

Recognised accountant [*]
An individual or firm entitled to act as a recognised accountant in accordance with the Audit Arrangements Byelaw (No. 7 of 1998).

Reinstatement of cover
The restoration of cover following its exhaustion as a result of a loss by payment of an additional (reinstatement) premium. Many reinsurances provide for one or more automatic reinstatement of covers.

Reinsurance
A contract under which a reinsurer agrees to pay specified types and amounts of underwriting loss incurred by an insurer or another reinsurer in return for a premium. Reinsurance serves to 'lay-off' risk. Reinsurance may be proportional or non-proportional and may take the form of a cover in respect of an individual risk exposure (see facultative risk) or cover in respect of multiple risk exposures (see treaty). Reinsurance accounts for more than half of Lloyd's total business.

Reinsurance to close (RITC) [*]
A reinsurance which closes a year of account by transferring the responsibility for discharging all the liabilities that attach to that year of account (and any year of account closed into that year) plus the right to any income due to the closing year of account into an open year of account of the same or a different syndicate in return for a premium. Where a reinsurance to close is effected between members of the same syndicate the reserves of the closing year of account constitute the premium for a reinsurance to close. This premium must be equitable as between the members of the two years of account concerned which means that neither the reinsured nor the reinsuring members should expect to profit from the transaction at the time it is concluded. Where a reinsurance to close is effected between members of different syndicates the managing agent of the reinsuring members will want to make a profit from the transaction for those members and will set the reinsurance to close premium accordingly. This usually involves a loading on the reserves of the closing year of account.

Reinsurer
An underwriter of reinsurance. If the reinsurance is underwritten at Lloyd's the reinsurer(s) will be one or more syndicates. If the reinsurance is not underwritten at Lloyd's the reinsurer(s) will be one or more insurance companies. Some reinsurances may be underwritten by both syndicates and insurance companies.

Replacement
Where an insurer agrees to replace irreparably damaged or stolen goods with goods of a similar type and quality under a contract of indemnity instead of paying a cash sum to the insured.

Representation
A statement of fact or expectation. Representations made as to material facts at the time of the negotiation of the placement, amendment or renewal of cover must be true whereas representations as to a matter of expectation must be made in good faith.

Reserves
The amount of money that has been set aside by an insurer or reinsurer to meet outstanding claims, incurred but not reported losses and any associated expenses.

Retention
The amount of any loss or combination of losses that would otherwise be payable under an insurance/reinsurance contract which the insured/reassured must bear itself before the insurer or reinsurer becomes liable to make any payment under that contract. Compare deductible and excess. An insured or reassured may be able to insure its retention with another insurer/reinsurer.

Retrocedant
A reinsurer that is reinsured under a retrocession.

Retrocession
A reinsurance of a reinsurer by another reinsurer. It serves to 'lay-off' risk.

Retrocessionaire
The reinsurer under a retrocession.

Risk
This term may variously refer to - (a) the possibility of some event occurring which causes injury or loss; (b) the subject-matter of an insurance or reinsurance contract; or (c) an insured peril.

Risk based capital
The determination of a member's capital requirement according to the spread of syndicates in which he participates and the nature of business that those syndicates underwrite.

Run-off account
A year of account which has not been closed as at the date at which it would normally have been closed and which remains open.

Run-off syndicate
A syndicate with one or more run-off years of account.

Salvage
This may refer to - (a) property that is rescued from danger on land or at sea; or (b) an award that is paid to someone for voluntarily rescuing property at sea from a marine peril.

Salvage value
The estimated cash amount that would be received if damaged property were to be sold.

Service Company
A 'service company coverholder (referred to in the Code simply as a "service company")' is an approved coverholder which Lloyd's has agreed can be classified as a "service company" by reason of it being a wholly owned subsidiary of either a managing agent or of a managing agent's holding company and which is normally only authorised to enter into contracts of insurance for members of its associated syndicate and/or associated insurance companies.

Services business
See freedom of services.

Several liability
Each member underwrites for his own account and is liable accordingly for his share of all claims and expenses that are incurred by the syndicates in which he participates.

Short-rate cancellation
When an insurance contract is terminated prior to its expiry date by the insured any return premium that is payable will usually be calculated on a time on risk basis. The result is that the insured will receive less return premium than would be the case if the return premium was calculated on a pro rata basis (see pro rata cancellation).

Short-tail (risk)
A type of insurance where claims are usually made during the term of the policy or shortly after the policy has expired. Property insurance is an example of short tail business. The opposite of short tail business is long tail business.

Signed line
This refers to the amount of a given risk that an underwriter has agreed to accept. It may be the same as the underwriter's written line or, if there is signing down, a lower amount. The amount of a syndicate's signed line should be shown in a table in the policy, where one is issued.

Signing Down
Where a risk is oversubscribed, which is to say that the underwriters' written lines exceed 100% then, absent some contrary instruction, those lines will be proportionally reduced ('signed down') by the broker until they total 100%. An underwriter may insist on preserving his written line in which event the written lines of the other underwriters will be proportionally reduced until they total 100% when added to the preserved written line of the other underwriter.

Signing slip
See slip.

Slip
There are two types of underwriting slip: a placing slip and a signing slip. A placing slip is a document created by a broker that contains a summary of the terms of a proposed insurance or reinsurance contract which is then presented by the broker to selected underwriters for their consideration. Underwriters may delete, amend or add terms on a slip as they consider appropriate for the purpose of providing an indication or a quotation. A signing slip is a document that is created by a Lloyd's broker after a quotation has been accepted for the purpose of processing premiums under the contract that is evidenced by the placing slip. It is a cleaned up version of the final placing slip and shows underwriters' stamps, signed lines and underwriting references, these details being inserted by each underwriter at the request of the broker. Provided that it shows the underwriters' stamps, signed lines and underwriting references a placing slip may be used as a signing slip.

Slip policy
A signed slip which is agreed to be a policy where the insured or the reassured does not require a separate policy.

Society of Lloyd's [*]
The Society incorporated by Lloyd's Act 1871 by the name of Lloyd's.

Soft market
When the availability of some or all classes of insurance or reinsurances is high relative to demand for such insurance or reinsurance. Competition amongst insurers and reinsurers leads to downward pressure on premiums and to the availability of more extensive coverage terms. Compare hard market.

Special reserve fund
A reserve that is held on behalf of a member and comprising part of his funds at Lloyd's. The reserve, which is held within the premiums trust fund of the member, may be only built up by setting aside a proportion of past profits and funds can only be withdrawn from it in the event of the payment an overall underwriting loss or on the death or resignation of the member following the closure of all years of account in which he underwrote. It is separate from the personal reserve fund of a member.

Spread vehicle
A corporate member which participates in a number of syndicates.

Stop loss reinsurance
Also known as excess of loss ratio reinsurance. This is a form of excess of loss reinsurance which provides that the reinsurer will pay some or all of the reassured's losses in excess of a stated percentage of the reassured's premium income in respect of its whole account or a specified account, subject (usually) to an overall limit of liability which may be expressed as a percentage of the relevant premium income or an amount.

Subrogation
The right of an insurer which has paid a claim under a policy to step into the shoes of the insured so as to exercise in his name all rights he might have with regard to the recovery of the loss which was the subject of the relevant claim paid under the policy up to the amount of that paid claim. The insurer's subrogation rights may be qualified in the policy. In the context of insurance subrogation is a feature of the principle of indemnity and therefore only applies to contracts of indemnity so that it does not apply to life assurance or personal accident policies. It is intended to prevent an insured recovering more than the indemnity he receives under his insurance (where that represents the full amount of his loss) and enables his insurer to recover or reduce its loss.

Subscriber
A person that bids for underwriting capacity in a capacity auction.

Substitute agent [*]
A person or body appointed in accordance with part K of the Underwriting Byelaw.

Sum insured
The maximum amount that an insurer will pay under a contract of insurance. The expression is usually used in the context of property and life insurance where (subject to the premium cost) the insured determines the amount of cover to be purchased.

Sunrise clause
A clause that provides retroactive cover in respect of losses occurring before the inception of a (re) insurance contract.

Sunset clause
A clause which restricts cover to claims notified during the period from the inception of a (re) insurance contract to a specified date after the expiry of that contract.

Surplus lines insurance
These are insurance risks that have been certified by a local broker as having been declined by a prescribed number (usually three or four) of licensed insurers in a given state in the United States of America and which therefore be underwritten as 'surplus lines'.

Surplus lines insurer
An insurer that underwrites surplus lines insurance in the US. Lloyd's underwriters are surplus lines insurers in all jurisdictions of the US, except Kentucky and the US Virgin Islands.

Surplus treaty or surplus lines treaty
A type of reinsurance under which bands of cover known as lines are granted above a given retention which is referred to as the cedant's line. Each line is of equivalent size and the capacity of the treaty is expressed as a multiple of the cedant's line so that with a retention of £2 million, a three line treaty would provide reinsurance cover of £6 million (£2 million X 3) excess of £2 million. The reinsurer receives an equivalent proportion of the full risk premium. A surplus treaty is a form of proportional reinsurance.

Surrender
The termination of a life insurance policy while the life assured is still alive in return for a cash sum.

Syndicate [*]
A member or group of members underwriting insurance business at Lloyd's through the agency of a managing agent or a substitute agent to which a syndicate number is assigned by the Council. Except where it is expressly otherwise provided the several groups of members to which in different years a particular syndicate number is assigned by or under the authority of the Council shall be treated as the same syndicate, notwithstanding that they may not comprise the same members with the same individual participations.

Syndicate allocated capacity [*]
In relation to a syndicate, the aggregate of the member's syndicate premium limits of all the members for the time being of the syndicate.

Syndicate business forecast
A statement of the expected range of results of each open year of account of a syndicate that is submitted to Lloyd's by its managing agent in mid year together with the managing agent's expectations for the next year of account.

Syndicate business plan
A plan of the underwriting of a given syndicate for a given year of account that is prepared by the managing agent of a syndicate and submitted to Lloyd's for approval in advance of the commencement of underwriting for that year of account.

Syndicate number
The unique identifying number assigned to a syndicate by the Council of Lloyd's.

Syndicate pseudonym
A series of letters used to identify a syndicate which together with its number are contained in the underwriting stamp of the syndicate.

Syndicate reinsurance
The reinsurance of a syndicate by one or more reinsurers. Such reinsurance can only be arranged by a Lloyd's broker.

Syndicate stamp
This term may refer to - (a) a document which lists the names of the members of a syndicate for a given year of account and the amount of each member's overall premium limit that is allocated to that syndicate; (b) the syndicate allocated capacity of a syndicate; or (c) the underwriting stamp of a syndicate.

Tenderer
A member that seeks to sell some or all of his underwriting capacity in a capacity auction.

Term life insurance
A life insurance policy that pays the sum insured only if the life assured dies within the period of the policy which is for a fixed period.

Terms of business agreement TOBA
Each Lloyd's broker that wishes to do business with a managing agent must enter into an agreement with the managing agent which records the general terms and conditions on which business will be conducted between them.

Third party
Someone other than the insured or his insurer who has suffered injury or loss.

Third party liability
The liability that an insured has to a third party.

Total loss
Where the subject matter of an insurance is lost, destroyed or damaged beyond repair.

Treaty
A reinsurance contract under which the reassured agrees to offer and the reinsurer agrees to accept all risks of certain size within a defined class.

Uberrima fides
Latin for utmost good faith.

Unaligned member
A member that is either (a) not affiliated to the managing agent of a particular syndicate; or (b) not affiliated to any managing agent.

Under insurance
Where the sum insured does not represent the true value of the property insured. See average for an explanation of the consequences of under insurance.

Underwrite
This term may refer to (a) The process of evaluating, defining and pricing insurance and reinsurance risks including where appropriate the rejection of such risks. (b) The acceptance of the obligation to pay or indemnify the insured or reassured under a contract of insurance or reinsurance.

Underwriter
Depending on the context this term may refer to: (a) the individual who is responsible for underwriting a particular insurance or reinsurance contract and who is either an employee of a managing agent, an insurance company or reinsurance company or an employee of a coverholder or any similar underwriting agent. (b) an individual member or company that insures or reinsures a risk.

Underwriters
Depending on the context this term may refer to: (a) the employees of managing agents, insurance companies and reinsurance companies and their respective underwriting agents that underwrite insurance or reinsurance risks; (b) the members or other carriers that underwrite a particular contract of insurance or reinsurance; (c) members collectively; or (d) insurers and reinsurers collectively.

Underwriting agent [*]
A managing agent or a members' agent.

Underwriting capacity
Depending on the context this term may refer to: (a) a member's allocated capacity (b) syndicate allocated capacity, with or without the addition of cover from qualifying quota share reinsurance; (c) the total underwriting capacity of all syndicates combined, with or without the addition of cover from qualifying quota share reinsurance; or (d) the underwriting capacity of an insurance company or a reinsurance company. Underwriting stamp The stamp that is applied to a slip by an underwriter to signify his acceptance of a risk. It shows the number and pseudonym of the syndicate or the name of the (re)insurance company for whom the underwriter acts and has a space for his underwriting reference to be inserted. The underwriter will insert his line on a slip next to his underwriting stamp.

Unearned premium
The proportion of premium that relates to the unused period of cover.

Utmost good faith
Contracts of insurance and reinsurance are contracts of utmost good faith. In the event that either party fails to observe utmost good faith towards the other in regard to the negotiation of cover then the other party may avoid the contract. The duty of utmost good faith requires each party to inform the other all material facts during the negotiation of the placement, renewal or alteration of cover. An insured has a separate duty of good faith when making a claim under an insurance policy.

Valued policy
See agreed value policy.

Void policy
A contract which has no legal effect and is therefore unenforceable in a court of law. For example, an insurance contract where the policyholder does not have an insurable interest.

Voidable contract
A contract which may be voided at the option of either party. For example, an insurer may avoid a policy from inception for the misrepresentation or non-disclosure of material facts during the negotiation of the placement, renewal or alteration of cover. A insurer may also avoid a policy from the date of the presentation of a fraudulent claim.

War and civil war risks exclusion agreement
An agreement between Lloyd's underwriters and non-marine insurance companies that they will not cover certain war and civil war risks on land.

War risk waterborne agreement
A marine market agreement whereby underwriters will only cover goods against war risks whilst they are on the vessel subject to a time limit after arrival at the port of destination. There is reduced cover for offloading and transhipment at the port of destination.

Warranty
Where an insured or reassured promises that something will or will not be done during the period of cover or that a particular state of affairs exists or does not exist at the inception of cover. If the promise is untrue or is not kept then the insurer/reinsurer may disclaim all liability under the policy from the date of the breach, regardless as to whether the false declaration was material to the underwriting of the contract or causative of any loss.

Wear and tear
The amount deducted from a claims payment in recognition of the depreciation of the property insured through usage of it over time. Where cover is provided on a 'new for old basis' ie where the insurer agrees to replace an old item with a similar new one, no such deduction is made.

Working member
A member who occupies himself principally with the conduct of business at Lloyd's by a Lloyd's broker or underwriting agent, or a member who has retired but who immediately before his retirement occupied himself in this way.

Written line
The amount of a risk that an underwriter is willing to accept on behalf of the members of the syndicate or company for which he underwrites. This is commonly expressed as a percentage of the sum insured which is written on the broker's placing slip. If, on completion of the broking exercise, the written lines exceed 100% then, absent some contrary instruction, they will be signed down by the broker, which is to say they will be reduced proportionately so that they total 100%.

Xchanging
An outsource provider of policy, premium and claims processing services to the Lloyd's market and others. These services are delivered via its operating subsidiaries, Ins-Sure Services and Xchanging claims services.

Year of account
The year in which an insurance or reinsurance contract that is underwritten by a syndicate is allocated for accounting purposes and into which all premiums and claims arising in respect of that contract are payable. Insurance or reinsurance contracts are generally allocated to years of account according to the calendar year of their inception date so that a contract that commences in 2005 will normally be allocated to the 2005 year of account. Historically syndicates have operated a three year accounting system which means that each calendar is normally left open for two further years before a profit or loss is determined. A year of account is normally closed by reinsurance to close at the end of 36 months. Compare open year of account and run-off account.

*Lloyd's.com
 
 


 
Home    |    About Us    |    Offerings    |    Claims Mitigation    |    Claims Checklist   |    Newsroom    |    Career    |      FAQs      |      Insurance Forms      |      Glossary      |      Contact Us