The Institutes Glossary


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A separate tax-paying entity apart from its shareholders; it pays tax on its taxable income at corporate income tax rates, and its taxable income is its gross income subject to tax less deductions allowable to corporations.
See Cost and freight (C&F).
A hollow, cylindrical, or rectangular object, usually made of steel or concrete, used to prevent water or soft soil from entering an excavation or construction under water.
The loss must be able to be calculated.
A twelve-month period beginning January 1 and ending December 31.
Medical insurance deductible an insured must meet only once during the calendar year.
A method of collecting ratemaking data that estimates both earned premiums and incurred losses by formulas from accounting records.
An option to buy a set amount of the underlying security at any time within a specified period.
The amount that the buyer of a call option has to pay the seller for the right to purchase a stock or stock index at a specified price by a specified date.
The price at which a bond or preferred stock with a call provision can be redeemed by the issuer.
A debt instrument that gives the issuer the right to pay off the bond before maturity.
A bony material that hardens into permanent bone.
Form that covers the stock in trade (inventory) of camera dealers or musical instrument dealers and similar property of others in the insured’s care, custody, or control.
A legally enforceable contract that is no longer in effect.
Termination of a policy, by either the insurer or the insured, during the policy term.
A CPCU student whose matriculation application has been approved.
Broad aspirational goals of CPCU conduct.
Management, technical abilities, and strengths of the contractor's organization to perform all work undertaken.
The amount of business an insurer is able to write, usually based on a comparison of the insurer's written premiums to its policyholders' surplus.
A formal relationship between two or more sureties that is formed to handle large projects exceeding a single surety's bonding capacity.
A leverage ratio that indicates an insurer's financial strength by relating net written premiums to policyholders' surplus.
A legal qualification that determines one's ability to enter into an enforceable contract.
The accumulated assets of a business or an owner's equity in a business.
The amount by which an asset’s selling price exceeds its purchase price.
A method of pricing securities based on the relationship between risk and return.
The planning and managing of a corporation’s long-term investments.
The process of evaluating alternative capital investment proposals in terms of the cash outlays that the proposals require and the present values of the cash inflows that the proposals are likely to generate.
Disbursements for assets that will be consumed over a relatively long period, usually over multiple accounting periods.
Gain realized from the sale or exchange of capital assets.
Stockholders' gains from profits on their stock.
The amount by which the proceeds from the sale of a capital asset are less than the adjusted cost of acquiring it.
A financial market in which long-term securities are traded.
Financial needs that must be met with cash.
A financial account used by a governmental entity for resources to acquire or develop land or buildings.
The limitation of the amount of money a company can invest in a particular year.
A balance sheet value that represents the amount of funds that a corporation’s stockholders have contributed through the purchase of stock.
A corporation’s mix of long-term debt and equity.
The difference between a stock’s purchase price and its par value.
Set per-person and per-period payments made to participating medical providers regardless of actual incurred costs or services provided.
A payment structure under which an HMO prepays its medical providers a flat amount each period (typically monthly) based on the number of members, regardless of the number of patient visits or the cost of the treatments.
Arrangement in which the insurer agrees to pay an hourly rate for the work performed on the case, but a maximum amount limits the total cost for the case.
The information preceding related classifications in the Basic Manual that forms a part of all of the classification's definition.
An insurer that insureds own and control.
An insurer formed primarily to cover the loss exposures of its parent or members.
An insurance company formed primarily to cover the loss exposures of its owner(s) or members.
A subsidiary formed to insure the loss exposures of its parent company and the parent's affiliates.
A type of fire suppression system in which carbon dioxide is stored as a liquid under pressure and is discharged as a gas through the pipes of the system to the fire site.
The loss of benefits that one spouse is entitled to receive from the other, including companionship, affection, and sexual relations resulting from the injury or death of a spouse.
A plan developed by a manager and an employee that establishes a series of progressively ambitious organizational goals for that employee and the time allotted to achieve them.
Insurance that covers loss of or damage to property while it is being shipped or stored during shipment.
Insurance that covers loss of or damage to property shipped primarily by water or, if in foreign trade, by air.
Insurance that covers cargo against many of the perils excluded by the FC&S warranty, but only while the property is afloat (subject to minor exceptions).
A wrist condition characterized by numbness, weakness, or tingling that may be caused by repetitive hand motions.
A federal statute that governs a common carrier’s liability for goods shipped in foreign trade to or from the United States by sea.
A person or organization in the business of transporting property of others.
A concept that applies when a nonrecognition provision in the tax code defers capital gains. When a capital asset is sold or exchanged, the income tax basis from the asset sold is “carried over” from the property sold or exchanged to the new property acq
Developed by the claims representative with defense counsel and includes a discovery plan, a pretrial motion plan, and a trial plan. It can be adjusted as warranted as the case proceeds.
Laws that develop out of court decisions in particular cases and establish precedents for future cases.
An estimate of the total expected payment that will satisfy the surety's performance, payment, and bid bond obligations.
A medical professional who administers cases and typically has a background in nursing, social work, physical therapy, or occupational therapy.
The reserves established by the claims department, third party adjusters, or independent adjusters for known and reported claims only; case reserves do not include future development on reported claims.
A loss reserve assigned to an individual claim.
An asset classification that includes coins, currency, checks, bank drafts, money orders, and demand deposits in commercial banks.
A liquidity ratio that measures the intermediary's ability to pay premiums that are due to insurers.
A defined benefit plan that uses hypothetical participant accounts to look like a defined contribution plan.
An accounting basis under which transactions are recorded only as cash is received or paid.
A reinsurance treaty provision that permits the primary insurer to obtain payment from the reinsurer for certain losses without having to wait until the next payment period.
An accounting record that records all payments.
The cash receipts coming in minus the cash payments going out over a set period of time.
Cash inflow minus cash outflow.
The act of monitoring and estimating the movement of cash into and out of an organization.
An accounting statement that presents the sources and amounts of cash inflows and outflows over a time period.
An asset-liability adequacy exercise that projects cash flows and analyzes amounts and timing under various assumptions.
The process of matching an investment's maturity value with the amount of expected loss payments.
A process that recognizes income in the accounting period in which it is received and recognizes expenses in the accounting period in which they are paid.
The owner may decide to give up all insurance benefits and select a cash surrender option in return for the policy’s cash value.
The monetary amount, considered to be a form of savings, that accumulates in a permanent life insurance policy.
A test that limits cash value relative to the death benefit. If a contract satisfies this test, it may be considered a life insurance contract and be subject to generally favorable life insurance tax treatment.
An underwriting approach that relies considerably on investment income to offset underwriting losses.
A check drawn by a bank on its own funds.
A professional organization of actuaries.
A type of excess of loss reinsurance that covers losses arising out of the primary insurer's underlying casualty insurance policies.
A single event that causes widespread losses.
A type of insurance-linked security that is specifically designed to transfer insurable catastrophe risk to investors.
A layer of reinsurance that provides protection for the possible, but improbable, event that would involve many bonds.
A right to sell equity (stock) at a predetermined price in the event of a catastrophic loss.
A type of excess of loss reinsurance that protects the primary insurer from an accumulation of retained losses that arise from a single catastrophic event.
A reinsurance agreement that helps the primary insurer manage a large accumulation of losses from a single event, such as a hurricane or an earthquake.
A maximum amount that a policy will pay for all property losses associated with a single occurrence.
A type of computer program that estimates losses from future potential catastrophic events.
An agreement that gives the purchaser the right to a cash payment if a specified index of catastrophe losses reaches a specified level.
A forum in which primary insurers can trade insurance risk with other insurers.
A number assigned by ISO's Property Claim Services unit to a single event that causes more than $25 million in insured damage for the purpose of tracking and aggregating losses resulting from a catastrophe.
Insurance on a fishing vessel's "catch" (i.e., the fish that the vessel has caught), added by endorsement to the vessel's hull policy.
A private meeting with the mediator away from the opposing party.
The agents that directly result in one event causing another.
The relationship between two events, where the second is brought about by the first.
The mechanism or event that provided heat and fuel for a fire.
A plaintiff’s legal grounds to sue a defendant.
The actual means by which property is damaged or destroyed.

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