The Business Glossary · Insurance

Admitted insurer: an insurer holding a certificate of authority in a state, filing its rates and forms there and covered by the state's guaranty association (Excess & Surplus Lines).
Agency captive: a captive insurer owned or controlled by insurance agencies or brokerages that insures only risks placed through them (Who Carries the Risk).
Attorney-in-fact: the company that runs a reciprocal exchange under powers of attorney its subscribers sign, paid a fee on written premium and bearing none of the underwriting risk (Who Carries the Risk).
Binding authority: delegated permission for an agent, MGA or coverholder to bind coverage for an insurer within written guidelines (classes, states, limits, policy period, premium volume) (MGAs, Programs & Fronting).
Bordereau: the periodic report of every policy transaction or claim from the party that did the work (an MGA, coverholder or ceding insurer) to the party that bears the risk, reconciled to policies and cash (MGAs, Programs & Fronting).
Capacity provider: a reinsurer, collateralized fund or other capital source that takes the risk a fronting carrier or MGA program cedes (MGAs, Programs & Fronting).
Captive: an insurer owned by the businesses whose risks it insures; pure, association, industrial insured, agency and sponsored captives are the main kinds (Who Carries the Risk).
Chain of Security: Lloyd's three layers of policyholder protection: syndicate assets held in trust, members' funds at Lloyd's and the Central Fund (Who Carries the Risk).
Closed block: the participating policies in force when a mutual life insurer converts to stock, run with allocated assets for their dividends alone (Who Carries the Risk).
Combined ratio: the loss and LAE ratio plus the expense ratio; below 100% means an underwriting profit before investment income (How Insurers Make Money).
Coverage: one insuring agreement on a policy version and risk, with its limits, deductibles, premium and forms (The Insurance Business).
Coverholder: a firm with delegated authority to bind insurance on behalf of Lloyd's syndicates (Who Carries the Risk).
Demutualization: a mutual insurer's conversion to a stock company, exchanging members' interests for consideration equal to statutory surplus under a plan approved by members and the regulator (Who Carries the Risk).
Earned premium: the part of written premium for coverage already provided, pro rata by time unless the earning rule says otherwise (How Insurers Make Money).
Excess profits law: a state statute that caps an insurer's underwriting profit on a line over a review period and returns the excess to policyholders, as Florida does for motor vehicle insurance (How Insurers Make Money).
Expense ratio: underwriting expenses over written premium (How Insurers Make Money).
Extraordinary dividend: an insurer's dividend to its shareholders that, with the prior twelve months', exceeds a statutory threshold (in Iowa, the greater of 10% of surplus or prior-year net income) and needs regulator non-disapproval (Who Carries the Risk).
Float: money an insurer holds for others, chiefly unearned premium and loss reserves, invested until it is paid out (How Insurers Make Money).
Fraternal benefit society: a society operating under a lodge system that insures its members, tax-exempt under 26 USC 501(c)(8) (Who Carries the Risk).
Fronting carrier: a licensed insurer that issues policies for an MGA's program and cedes most or all of the risk to capacity providers for a fee, while staying liable to policyholders (MGAs, Programs & Fronting).
Fronting fee: what a fronting carrier keeps for lending its licenses, filings and balance sheet, usually a percentage of ceded premium (MGAs, Programs & Fronting).
Hybrid fronting: fronting in which the issuing carrier keeps a meaningful share of the risk rather than ceding nearly all of it (MGAs, Programs & Fronting).
Insurer authority: an insurer's certificate of authority or surplus lines eligibility in one state, for named lines, effective-dated (The Insurance Business).
Intercompany pooling: an arrangement in which insurers in a group cede their business to a lead company and take back fixed shares of the pool (Who Carries the Risk).
Loss ratio: losses incurred over earned premium (How Insurers Make Money).
Managing agent (Lloyd's): a company that runs one or more Lloyd's syndicates for their members and employs the underwriters (Who Carries the Risk).
Managing general agent (MGA): under the NAIC model act, an agent that manages an insurer's business and underwrites premium of at least 5% of the insurer's surplus while settling claims over $10,000 or negotiating reinsurance; in industry use, any agency with delegated underwriting authority (MGAs, Programs & Fronting).
Market share snapshot: a sourced, immutable figure for an entity's premium and share by statement line, geography and data year (The Insurance Landscape).
Mutual holding company: a holding company owned by a former mutual's policyholders that must hold a majority of the voting shares of the stock insurer it became (Who Carries the Risk).
Mutual insurer: an insurer owned by its policyholders as members, with no shareholders, which may return surplus as policyholder dividends (Who Carries the Risk).
NAIC group code: the NAIC's identifier for a group of affiliated insurers, under which market share is reported (The Insurance Landscape).
Named insured: the party who owns a P&C policy and to whom notices are sent (The Insurance Business).
Net writings leverage: net premiums written over policyholders' surplus, NAIC's name for the industry's premium-to-surplus ratio (How Insurers Make Money).
Policy transaction: a change to a policy (new business, endorsement, cancellation, reinstatement, renewal, nonrenewal, audit, rewrite) with its effective date, processed time and written premium change; the only way a policy changes (The Insurance Business).
Policy version: the policy as of an effective date range, produced by a policy transaction, with effective and recorded time (Endorsements, Renewals & the Policy Transaction Model).
Policyholder dividend: surplus a mutual or participating insurer returns to policyholders, declared each year and never guaranteed (Who Carries the Risk).
Policyholders' surplus: an insurer's statutory capital, assets less liabilities on the statutory balance sheet (How Insurers Make Money).
Premium entry: a written premium, tax, fee or surcharge amount from one policy transaction, with its earning window, from which earned and unearned premium are derived (The Insurance Business).
Premium-to-surplus ratio: net premiums written over policyholders' surplus, a measure of underwriting leverage (How Insurers Make Money).
Pro rata: returning or charging premium in proportion to the time remaining or covered (How Insurers Make Money).
Program administrator: an agency that underwrites and administers a defined program (a class of business, states and product) on an insurer's paper (MGAs, Programs & Fronting).
Protected cell: a pool of an insurer's assets and liabilities segregated by statute from the rest of the company, so the cell's assets pay only the cell's liabilities (Who Carries the Risk).
Reciprocal exchange: an unincorporated association whose subscribers exchange insurance with one another through an attorney-in-fact (Who Carries the Risk).
Reserve leverage: loss and LAE reserves over policyholders' surplus (How Insurers Make Money).
Risk: a thing or exposure insured, typed by line (vehicle, driver, dwelling, location, class code exposure, insured life, covered product) (The Insurance Business).
Risk retention group (RRG): a liability insurer owned by its insureds, chartered in one state under the Liability Risk Retention Act and able to write members in every state without guaranty fund protection (Who Carries the Risk).
Statement line: the annual statement's line of business code (04 homeowners, 16 workers' compensation, 17.1 other liability and so on) that industry figures are reported by (The Insurance Landscape).
Stock insurer: an insurer owned by shareholders, usually through a holding company (Who Carries the Risk).
Surplus lines insurer: a non-admitted insurer eligible to write risks placed through a licensed surplus lines broker, on its own rates and forms, without guaranty fund coverage (Excess & Surplus Lines).
Syndicate: one or more Lloyd's members providing capital and accepting risks for a year of account, run by a managing agent (Who Carries the Risk).
Underlying combined ratio: a combined ratio that excludes catastrophe losses and prior-year reserve development, each on the reporting company's own definition (How Insurers Make Money).
Underwriting cycle: the alternation of hard markets (rising prices, tighter capacity) and soft markets (competition, falling prices) in underwriting results (How Insurers Make Money).
Unearned premium reserve: the liability for written premium not yet earned (How Insurers Make Money).
Written premium: the premium recorded when a policy transaction is processed, for the coverage it adds or removes (How Insurers Make Money).