The Institutes Glossary


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E

The maximum amount an insurer will pay for all covered losses from a single occurrence, regardless of the number of persons injured or the number of parties claiming property damage.
The most the insurer will pay for the sum of the following arising out of a single occurrence: (1) damages for bodily injury and property damage under Coverage A and (2) medical expenses under Coverage C.
The maximum amount an insurer will pay for injury to any one person for a covered loss.
An automatic fire sprinkler system that protects high-rack storage without in-rack sprinklers by discharging large and small drops of water at a much higher rate than standard sprinklers to protect smaller areas; large drops penetrate the fire plume, while small drops dissipate heat.
An exposure unit for which an insurer has provided a full period of coverage.
The portion of written premiums that corresponds to coverage that has already been provided.
An amount that can be offset against bank fees and that is calculated by using an earnings credit rate (ECR) based on the level of deposit funds in a business checking account.
The maximum expected loss of earnings within a specific degree of confidence.
A ratio that is calculated by dividing net income by the weighted average number of common shares outstanding during the accounting period.
A process by which a company reduces its overall tax liability by moving earnings from one taxing jurisdiction, typically a high-tax jurisdiction, to another jurisdiction, typically a low-tax jurisdiction.
Equipment that clears job sites and moves, eliminates, or compresses large amounts of earth, rock, snow, debris, construction materials, and other materials.
The point on the earth’s surface directly above the earthquake focus.
The point on an earthquake fault line where the movement of the plates begins.
A nonpossessory right to use another person’s real property for a particular purpose.
Practices allowing financial institutions to allocate capital to the economic effects of risk-taking activities.
The amount of capital required by an organization to ensure solvency at a given probability level, such as 99 percent, based on the fair value of its assets minus the fair value of its liabilities.
Out-of-pocket medical expenses and lost wages.
Data regarding interest rates, asset prices, exchange rates, the Consumer Price Index, and other information about the global, the national, or a regional economy.
The change in a company’s net worth during a particular period.
Information used to evaluate changes in macro-economic information for production, distribution and consumption of goods and services with country data on labor, finance and taxation that affect risk management decisions.
A loss that can be quantified in dollars.
The amount that property is worth based on the ability of the property to produce income.
A reduction in the average cost of a product or a process as the size of a company increases.
A link in a network.
See Electronic data processing (EDP) equipment floater.
A series of bulletins developed by PAAS that provide timely information regarding education, legislation, and technology issues to premium auditors.
The rate of interest that reflects the effect of compounding more than once a year.
The study of a failure’s consequences to determine a risk event’s root cause(s).
Tests of efficiency used to measure a firm’s ability to use its resources.
The collection of securities portfolio combinations that generate the highest expected return for a given level of risk or that have the lowest risk for a given expected return.
A hypothesis that asserts that stock prices reflect the expectations of all market participants and that no individual investor has superior knowledge.
A person who was in poor but functioning health at the time of the loss, but after the loss, he or she became severely disabled and dysfunctional.
A network composed of an ego and the nodes directly connected to it.
Two opinions issued by the Emerging Issues Task Force of the Financial Accounting Standards Board (FASB), which, taken together, require an insured under a finite risk insurance plan to recognize the retained portion of losses as they are incurred for financial accounting purposes.
Willingness to purchase a product that varies significantly with price.
The voluntary act of choosing between two alternative rights or privileges.
The complete distribution of electromagnetic radiation, measured by frequency or wavelength.
The coverage form that covers the insured’s liability for loss of electronic data caused by an “electronic data incident,” which encompasses a broader range of loss-causing events than does the Electronic Data Liability endorsement.
The endorsement that modifies the CGL coverage form’s property damage definition to include loss or loss of use of electronic data resulting from physical injury to tangible property.
A policy that covers computer equipment, software, and electronic data.
A system that moves funds from one institution to another by means of electronic signals rather than the physical exchange of money or checks.
Include items subject to loss, causal forces (perils), and the financial impact of the occurrence.
Initial time period in a health insurance or disability income policy during which benefits are not paid.
The fraudulent taking of money or other personal property by one to whom that property has been entrusted.
A gesture substituted for words.
The disaster recovery plan phase in which the insured initiates a pre-loss plan.
Initial phase of a community’s participation in the National Flood Insurance Program in which property owners in flood areas can purchase limited amounts of insurance at subsidized rates.
The right of a government to seize private property for public use.
Character icons that represent emotions or actions.
A highly unpleasant mental reaction resulting from another person’s conduct, for which a court can award damages.
An injury to a person’s psyche.
An individual’s ability to recognize, understand, and distinguish among emotions and to use that information to manage thinking and behaviors and their effect on other people. Often referred to as EQ (from emotional quotient).
A probability measure that is based on actual experience through historical data or from the observation of facts.
A person hired to perform services for another under the direction and control of the other party, called the employer.
A form of compensation that workers may receive from their employers in addition to their salaries or wages.
The endorsement that modifies the CGL coverage form to cover damages because of negligent acts, errors, or omissions in administering the named insured’s employee benefits program.
Insurance that covers an employer against liability claims alleging improper advice or other errors or omissions committed while administering the employer’s employee benefit plans.
Dishonest acts committed by employees, whether identified or not, acting alone or in collusion with other persons, except a partner, with intent to cause loss to the insured and to obtain a financial benefit for the employee or someone he or she chooses.
Insurance against loss of money, securities, or other property because of an employee’s dishonest act committed with manifest intent to cause a loss to the insured and to obtain a financial benefit for the employee or another person or organization that the employee wants to receive the benefit.
The endorsement that covers an employee of the named insured while operating an auto rented in the employee’s name, but only while the employee is performing duties related to the conduct of the named insured’s business.
The orderly dispersal of authority throughout an organization to gain employee commitment to meeting or exceeding customers’ needs.
An arrangement in which a third party provides a firm with employees for a fee.
A qualified retirement plan that is funded by the employer’s stock.
Unlawful taking by an employee of money, securities, and other property to the deprivation of the insured
The commercial crime insuring agreement that covers theft of money, securities, and other property committed by the insured’s employees.
The endorsement that modifies employee theft coverage to apply on either a name schedule basis or a position schedule basis.
The endorsement that broadens the Business Auto Coverage Form to cover employees as insureds while using their own autos on the named insured's behalf.
A person who hires another person (employee) to perform services and under whose direction and control that person functions.
The difference between the worker’s wage and the contractor’s hourly rate; includes costs such as taxable and nontaxable benefits, unemployment tax, Social Security tax, and insurance costs.
Insurance that protects an employer against employee injury claims that are not covered by workers compensation laws.
A mutual insurer established by a state’s legislature to write workers compensation insurance for any qualified employer in the state.
An employer’s liability for its employees’ operation of their autos in the employer’s business.
A condition in which one person agrees to provide services for another in return for wages or some other form of consideration.
A legal doctrine under which an employer may terminate any employee at any time for any reason or for no reason.
Professional liability insurance which covers the insured organization and its directors, officers, and liability (EPL) insurance employees for employment-related claims that are specifically excluded from CGL policies.
Liability based on claims made by employees or job applicants against employers for wrongful employment practices such as harassment, discrimination, wrongful termination, violation of civil rights, and failure to enforce adequate and consistent company policies.
Insurance that covers an organization, its directors and officers, and its employees against claims alleging damages because of wrongful employment practices such as sexual harassment, wrongful termination, and unlawful discrimination.
The endorsement that eliminates coverage under the CGL coverage form for bodily injury or personal and advertising injury to a person arising out of various wrongful acts or omissions related to the person’s employment.
The distribution of authority, resources, information, and accountability to employees in an organization in order to make decisions and to solve problems.
An objective that defines the skills, knowledge, or abilities learners must achieve in order to successfully complete terminal objectives.
The process of translating a message into words.
The consequence of a failure mode on the operation, function, or status of the highest indenture level.
An ultimate customer, the user of the final product or service.
A document that amends an insurance policy.
An approach to accident causation that views accidents as energy that is released and that affects objects, including living things, in amounts or at rates that the objects cannot tolerate.
An analysis of the flows or transfers of energy within an existing or proposed system—or between a system and an environment—checking for hazardous accumulations or escapes of energy.
A contract between an accountant and a client regarding the services to be performed by the accountant and the terms of that service.
An approach to risk control that involves attack by design and location of properties and equipment to reduce the number of physical hazards.
The element of a catastrophe model that uses the information from the science component to estimate the extent of structural damage that would occur based on a simulated catastrophic event.
A phase in the life of a system when the system’s design is constructed and prototypes are tested.
The loss attributable to a subsequent peril that results from loss by an initial peril.
A financial account for government operations financed and operated similarly to private business enterprise.
An expanded liability concept requiring each member of an industry responsible for manufacturing a harmful or defective product to share liability, when a manufacturer at fault cannot be identified.
An approach to managing all of an organization's key business risks and opportunities with the intent of maximizing shareholder value. Also known as enterprise-wide risk management.
The entity (partnership or corporation) purchases life insurance on the lives of the owners; the entity uses the proceeds to purchase the deceased’s interest in the business.
Coverage extension of D&O liability policies for claims made directly against a corporation (the “entity”) for wrongful acts covered by the policy.
A buy-sell agreement to which the owners and the business entity are party and under which the business entity agrees to purchase the business interest of a deceased, disabled, or retired owner.
The second level of a top-down review of internal controls that helps ensure that management directives relative to the entire entity are in place and are being carried out.
A measure of disorder in a dataset.
A product that is brought into the U.S.

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