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Insurance glossary Print E-mail
A

Blue buildingAbandonment:  The giving up of damaged property - by an insured to the insurer - when total loss is claimed.

Ab initio:  Latin for 'from the beginning' or 'from the onset.'

Acceptance: An absolute and unqualified agreement to or approval of the terms of an offer resulting in the conclusion of  a contract.

Accident:  An unforeseen and unintended event or occurrence or an intended event which brings about unforeseen consequences.

Accident year:  Either the calendar- or accounting year in which a loss occurs.

Accommodation business:  Normally unacceptable business taken by an insurer as a goodwill gesture, in the hope that further business will materialise.

Act of God: An event that is the result of natural forces and which arises without human intervention.

Active underwriter: The individual at the Lloyds's underwriting box with (principal) authority to accept insurance and reinsurance risks on behalf of members of a syndicate.

Actual total loss: This term of the English Marine Insurance Act 1906 refers to situations in marine insurance where (a)  the subject matter of the insurance is physically destroyed; or (b) the subject matter of the insurance is so damaged as to be no longer be capable of 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 - actual loss may be presumed.

Adjustable policy: A policy where the exact extent of the value at risk cannot be known in advance (e.g. goods in transit insurance). A provisional premium is charged and adjusted at the end of each period of insurance.  

Assessor:  See LOSS ADJUSTER

Adjustment premium: An additional (or return) premium that is payable in relation to a 'deposit premium', depending on the performance of the (insurance or reinsurance) contract.

Agent:  Someone who acts on behalf of another person (the principal), usually for reward.

Aggregate: Synonomous with "total" (the 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 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.

All risks:  A domestic / property insurance type of cover that covers any accidental loss or damage not excluded from the policy.

Appreciation: An increase in value of the property insured. 

Arbitration: An alternate means of settling disputes (often where the issue concerns the amount of a claim, and not liability) without going to court. A qualified person/s - whose appointment has been agreed upon by the parties - will hear the case and furnish them a decision.

Asset:  Property - even an incorporeal right - with commercial value.

Assurance: A term interchangeable with insurance, which is often used within Life and Marine business.

Assured: Another name for an insured, typically within a life - insured contract.

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

Attestation clause: The 'signing' clause contained in the memorandum of an agreement.

Average:  If the sum insured 1) under general insurance is 2) expressed to be “subject to average”, and 3) that insured sum is less than the actual value of the subject matter of the insurance, then 4) any claim that is agreed under the policy will be reduced proportionally such "under insurance".

Avoidance of a contract ab initio : The cancellation of an contract from its inception. Typically, retrospective in nature, and due to a misrepresentation (disclosure or non-disclosure) of material facts. The result is that the party relying on the cancellation cannot be held to the agreement, subject to return of any benefit it might have enjoyed in terms of the agreement.

 

B

 

Balance-of-third-party: The term used in South Africa for the form of motor insurance which covers the insured's liability' for: i) injury to passengers not covered in terms of the Road Accident Act 1996; and ii) damage to the property of third parties (caused by the vehicle).

Basis (of insurance) clause: A clause that makes the declarations contained in an insurance proposal form the “basis” of any contract of insurance. Such declarations are converted into warranties, with the result that if one of them is found to be untrue the insurer may disclaim 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, but where they appear 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".  

Betterment:  The value of the improvement in an insured property when it has been repaired or rebuilt following loss or damage.

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).

Blanket policy:   A policy covering several items under one sum insured.

Bordereaux: These are 'information sheets' prepared for the benefit of a carrier, that reports on blocks of premium payments made, and detail claim payments made or due from policy underwriters. Bordereaux are commonly produced on a monthly or quarterly basis, and specify cessions under reinsurance treaties.

Broker: A professional, independent agent or intermediary - representing its client - that acts as a buyer of insurance (having been mandated by a client to obtain coverage that suits them best). It is an agent of the policyholder, mandated to negotiate terms and conditions culminating in indemnity provided by an insurer.

Brokerage: a) The commission or fee paid to the broker by the insurer for placing business with them. The commission that is payable to a broker for placing an insurance or reinsurance contract with an insurer or a reinsurer. A fee for service. Although brokerage is payable by the insured as part of the gross premium, the amount of brokerage is agreed with 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. b) The term brokerage may also beused to refer to the business of a broker.

Burning costs:  A concept used in a method of calculating an insurance premium (especially in reinsurance), taking account of previous claims.

Business interruption insurance:  A class of insurance that provides cover for consequential loss arising from an insured event (e.g. loss of profits following fire damage).

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 payment of additional premium.

 

C

 

Cancellation clause: A clause in an insurance policy which permits an insurer and/or an insured to cancel the contract before it is due to expire / allows one party to cancel the contract (following due notice to the other).  The clause may provide for a return of premium in respect of the unused portion of the policy.

Carrier (of risk): An insurer, or reinsurer.

Casualty: Refers to a loss, particularly the loss of a ship (Marine).

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

Casualty business: Another term for liability insurance.

Catastrophe cover: A form of excess of loss reinsurance which protects the insurer against losses arising from major catastrophes.

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.

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 its terms (which are contained in a separate policy of insurance), or  (b) a document is issued by a coverholder which evidences insurance cover and details the terms of such cover (no policy of insurance is issued where such a certificate is issued). Certain certificates are required as a matter of law in the United Kingdom, for example for motor insurance.

Cession:  The transfer of rights, title and/or interest under a contract. (Often risk-exposure transferred under a reinsurance treaty.)

Claim: A demand made by the insured for payment after the occurrence of loss or damage covered by a policy. It term may refer to:  (a) a demand made by an insured on his insurer(s) for payment or contractual benefit under a 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 insured to be compensated for some  injury, damage or loss for which the insured is blamed.  A claim is payable under an insurance or reinsurance contract if it was 1) caused by an insured peril and 2) it is not excluded under the terms of that contract.

Claimant: The person making a claim.

Claim-free group:  The term used in motor insurance to indicate into which of the rating groups a policyholder will fall according to his claims record.

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.

Claims ratio:  See LOSS RATIO.

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.

Co-insurance: The division of risk between two or more carriers, where each is liable to the insured for a proportion of the claim. 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, or (b) where the insured acts as its own insurer for a specified proportion of the sum insured.

Co-insurer:  An insurer who shares with others in co-insurance. See LEAD INSURER.

Collective policy:    Policy issued by the leading insurer on behalf of all the insurers who share a risk by way of co-insurance.

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.

Commercial Insurance: Insurance sold to business units, and it it used to contrast insurance from personal lines. 

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

Composite insurance company:  An insurer undertaking both life and non-life business.

Comprehensive policy:   A policy covering a wide variety of perils.

Consequential loss:   A loss arising (directly) from another loss. The term is used to describe the class of business also known as LOSS OF PROFITS or BUSINESS INTERRUPTION INSURANCE.

Constructive total loss: Section 60 of the English 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.

Contingency:  An unforeseen occurrence.

Contingency fund:  Monies put aside by a company in order to pay for unexpected losses.

Contra proferentum rule: Any ambiguity in contract wordings is construed against the drafter of those wordings.

Contract:   An agreement made by two (or more) parties with the intention of creating legal obligations between them.

Contract of Insurance:  An agreement between insurer and insured whereby, in return for payment of a premium, the insurer undertakes to indemnify the insured upon the happening of a specified event. An insurace policy.

Contribution:  The principle whereby two or more insurers covering the same risk contribute proportionately to any losses. See CO-INSURANCE.

Cover: The protection provided by insurance. Insurance or reinsurance as it applies to one or more specific risk exposures.

Cover note: A document (typically) issued by a broker - pending the issue of a formal policy - which confirms the arrangement of cover on behalf of a policyholder. Motor insurance cover notes are typically issued with a short duration.

 

D

 

Damage:  Loss of an asset (including a justified expectancy) or  incurring a liability.

Cars in teh wet

Declaration:  A statement (on a proposal form) signed by the proposer, certifying the truthfulness and accuracy of the information supplied. 

Declaration Policy:  A policy requiring the insured to declare periodically the value of fluctuating items, such as stocks or goods-in-transit, to enable the insurer to adjust the premium accordingly. 

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

Deductible: An American term, referring to 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.

Delegated Authority:  The authority given to an agent of an insurer to act on its behalf in accepting risks within agreed guidelines. 

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.  An advance payment made by the insured before the actual premium has been decided. 

Depreciation: The extent to which (insured) property has diminished in value due to factors such as age, use or wear and tear. Such devaluation "loss" is not covered under a contract of indemnity. However an insurer may agree to provide cover on “a new for old” basis which replaces old items with new ones. 

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

Duty of disclosure: The duty on the parties to a contract of insurance to reveal all material facts to each other before it is concluded and prior to each renewal. 

 

E
 
Earned premium: That part of a premium relating to a completed or expired period of risk; the actual premium chargeable under an adjustable policy.The proportion of premium that relates to a used period of cover.  

Endorsement: Documentary evidence of some alteration to a policy of insurance, being a document 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. 

Escalator Clause: The clause in a policy which allows the sum insured on property to rise throughout the period of insurance in step with the assumed rate of inflation. 

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. A payment made to an insured where there is no liability under the policy. 

Exception: A peril specifically excluded from the insurance. 

Excess: That part of a loss for which the insured is liable. The amount (or proportion) of losses under an insurance contract that is the insured must bear. If the loss is less than the amount of the excess then the insured must meet the cost of it (unless there is other insurance in place to cover the excess). 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 form of insurance where the reinsurer agrees to pay the balance of any losses exceeding a stated monetary amount. 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. 

Executor: The office / person appointed to wind-up an estate. Often named in the last will of a deceased.

Expense Loading: That part of the premium which meets the policyholder's share of the insurer's administrative costs 

 

F

 

F A I S Act : Financial Advisory and Intermediary Services Act . 

F S B:  Financial Services Board - find them here.

Fire: The accidental or fortuitous ignition of something that should not be on fire. A primary class of business in commercial insurance, and one of the basic reasons fro insurance - see here for more information.

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. 

First Amount Payable: The amount payable by an insured in the event of a claim  See EXCESS.

First Loss Policy: An insurance policy where the insurer pays all losses up to a given limit. 

Fleet Insurance: A motor policy covering a group of vehicles with the premiums calculated on an experience basis. 

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. 

Fund: The common pool into which premiums for each class of insurance are paid and from which the losses are met. 

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).

 

G

 

General Insurance: Insurance which is not long-term business. See here for more information.

Good Faith: See UBERRIMAE FIDES.

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. 

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.

 

H

 

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. A physical or moral feature that affects the likelihood of a loss occurring, or has an influence on the size of the loss. 

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). 

 

I

 

IBC Insurance Broker Council - find them here.

IBNR: Acronym for  "Incurred But Not Reported"  -  claims which have occurred but are not yet reported to the insurers. Many governments require insurers to establish reserves to cover such contingincies.

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.

IISA:  Insurance Institute of South Africa - find them here.

Inception: Commencement or beginning (eg of cover). 

Inception date: The date on which an insurance or reinsurance contract comes into force. Also referred to as EFFECTIVE DATE.

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 placing of the insured in the same financial position after a loss as he was in immediately prior to the occurrence.  An insured - 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). 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. 

Indexing: A method of adjusting sums insured to provide for inflationary increases in values. 

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. 

Insurable interest:  An insured must have an insurable interest - a  recognised relationship - 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. 

Insurance:  Insurance (or sometimes assurance) is a device for indemnifying or guaranteeing against loss or harm arising in and from specific situtaions and / or contingincies such as fire, accident, death, disablement, or the like, in consideration of payment  (the insurance premium) proportionate to the risk involved.  It constitutes indemnification by a contract / policy in which one party agrees to indemnify and / or reimburse another for loss that occurs under the terms of the contract, for the amount for which the risks were insured. It embodies a risk transfer arrangement whereby the responsibility for meeting losses/liability passes from one party (the insured) to another (the insurer) on payment of a premium. 

Insurance contract: An insurance policy.

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: A document evidencing a contract of insurance. 

Insured: A person who benefits from a contract of insurance. Not neccessarily the policyholder!

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

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. 

 

J

 

Jeweller's 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 a contractual dispute can / shall be referred for resolution. 

 

K

 

Knock For Knock Agreement:  An agreement between insurers whereby - following a collision - each pays the cost of repairs to its own insured's vehicle (only), regardless of fault, provided that the vehicles involved are all insured for accidental damage. 

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

L
 
Lapse: The termination of an insurance contract through the non-payment of the premium.
 
Leading Case : A legal case where the decision / precedent has been widely followed. 
 
Leading Insurer: The insurer who accepts a share of risk on a co-insurance agreement - often the one who first signs a broker's slip. See LEADING UNDERWRITER.
 
Leading Underwriter : The underwriter of an insurance company who is responsible for setting the terms of an insurance 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. 
 
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. 
 
Letter Of Acceptance: A letter from an insurer to a proposer indicating that his application for cover has been accepted. 
 
Liability: A claim against one's  by another. 
 
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:  See 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 risk- or policy limit. It refers to the maximum amount payable under a policy, either overall or with reference to a particular section. 
 
Limit of Liability: The maximum amount that an insurer will pay for one loss in terms of a liability 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.  It constitutes a share of insurance which is divided among two or more insurers.
 
Lloyd's: The corporation which organises the market of individual underwriters in London (but accepts business introduced by brokers from all parts of the world) and provides a full range of ancillary services. 
 
Loading: Those elements added to a premium to allow for insurer's expenses.
 
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/Assessor:   An independent, qualified person who assesses the size or value of a loss on behalf of an insurer, but who may also be employed by an insured to look after his interests in a loss settlement. 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. 
 
Loss Of Profits Insurance : See BUSINESS INTERRUPTION INSURANCE. 
 
Loss Prevention : Activities undertaken to prevent losses from occurring. 
 
Loss Ratio:  The ratio of policy claims to premiums.
 
M
 
Managing agent: A company that is permitted by Lloyd’s to manage the underwriting of a syndicate. A managing agent is an authorised person. 
 
Managing agent's 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 themanaging 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.
 
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. 
 
Market Value : The price at which an investment can be sold or bought at any specific time. 
 
Material fact :  Anything which would affect the judgement of a prudent underwriter in accepting or deciding terms for a risk. 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.
 
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: A false statement of a material fact which can be innocent or fraudulent. See DUTY OF DISCLOSURE.
 
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. 
 
Mutual Insurance Company:  An insurance company owned by its policyholders i.e. it has no shareholders. 
 
N
 
Negligence: Failing to act in what the law considers to be a reasonable manner.
Net Claim: The insurer's own share of claim payments after deduction of the amount payable by the reinsurers.
 
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-for-old: Insurance where the replacement value of the property lost or damaged is payable without deduction for depreciation.
 
O
 
Ombudsman: An impartial mediator or informal arbitrator who acts in resolving disputes between parties to a dispute in a cost effective and amicably efficient manner. 
 
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.
 
Offer: The communication of the proposed terms of a contract by one party to another.
 
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. 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 3 years before it may be closed by reinsurance. In normal circumstances a syndicate will 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. See also YEAR OF ACCOUNT.
 
Operative Clause: The clause in a policy which sets out the circumstances in which the insurers will make claim payments.
 
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.
 
Outstanding Claims Reserves:  The funds put aside by insurers to cover claims that have been incurred but not yet paid.
 
Outstanding Losses:  Claims not yet paid where estimated figures are used in the insurer accounts. 
 
Outwards reinsurance: The reinsurance of a syndicate or of an insurance company as distinct from inwards reinsurance.
 
Overall premium limit (OPL): In relation to a Lloyd's 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.
 
P
 
P P R:  Policyholder Protection Rules - find them here.
 
Package Policy: A policy into which several different types of insurance have been combined. 
 
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. A contingency or fortuitous happening which could cause losses.
 
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: Written evidence of the terms of an insurance contract. The memorandum of the agreement.
 
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.
 
Policyholder: The owner of a policy - it might also be the insured.
 
Pooling: The basis of insurance whereby premium contributions are funded and used to pay losses. 
 
Preamble Clause: The clause in a policy which sets out the essential elements of the contract.
 
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. The money paid by the insured to the insurer for cover as provided in the policy. 
 
Premium Rate: The price per unit of insurance.
 
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.
 
Prescription: The term specified in the Prescription Act during which legal action is required to be taken; usually three (3) years from the date that the cause of action arose. See TIME BARRING.
 
Principal: A person instructing an agent to act on his behalf. 
 
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.
 
Pro Rata Premium: The premium based on the length of time for which the insurer was actually on risk. 
 
Probability: The chance of an event occurring. 
 
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.
 
Professional Reinsurer: A reinsurance company not transacting any direct insurance business. 
 
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. Reinsurance where reinsurers take a given proportion of the direct insurer premiums and losses. 
 
Proposal Form: An application for insurance which seeks to obtain from the proposer all the information relating to the risk. 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:  The individual or organisation seeking insurance (frequently by means of completing a proposal form). 
 
Proviso: A policy condition whose observance is essential for the enforcement of the contract. 
 
Proximate cause: The direct cause of a loss uninterrupted by any other event. 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. Compare INTERVENING CAUSE. 
 
Q
 
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: Proportional reinsurance where the reinsurer accepts a fixed percentage of every risk written by the ceding company. 
 
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 the reinsurer is obliged to pay the same percentage of any claims. 
 
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. 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.
 
R
 
Rate: The premium expressed as a percentage of the sum insured or limit of indemnity.  The sum charged (per unit of exposure) by which the premium is calculated. 
 
Rated Up:  The term applied to insurance where the premium is higher than usual. 
 
Regular driver: The person whom typically drives a specific vehicle, or more frequently than any other person over the course of a relevant period. 
 
Reinstatement: The 'making good' of damaged property; the restoration of the sum insured in terms of the policy.
 
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. 
 
Reinstatement Of Sum Insured :  The restoration of the sum insured after it has been reduced through the payment of a claim. 
 
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. 
 
Reinsured: An insurer who effects and is entitled to be indemnified under a contract of reinsurance. 
 
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. 
 
Reinsurer:  An insurer or reinsurance company which accepts contracts of reinsurance. 
 
Renewal:  The process for continuing an insurance for a further period after the first or current period of cover has ended. 
 
Renewal Notice: The notice issued by a short term insurer to remind a policyholder that his contract will shortly terminate. 
 
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. See REINSTATEMENT and NEW FOR OLD.
 
Replacement Cost: The value of property as indicated by the current purchase price of a similar article. 
 
Representation: A statement of fact, or an 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.
 
Repudiation: The rejection of a claim for indemnity under a valid policy for example due to the terms and conditions of the policy having not been complied with, or for example where the insured has committed a breach of the insurance contract. 
 
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. 
 
Retention Limit: The maximum liability which an insurer wishes to keep for his own account in respect of a particular risk.
 
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. It's eiother a situation which cannot be controlled or perfectly foreseen, or the subject matter of an insurance contract. 
 
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. 
 
Risk Management: The business discipline applied by large commercial and industrial organisation to manage those risks which can cause losses.
 
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.
 
S
 
S A I A:  South African Insurance Association - find them here.
 
S A F S I A:  South African Financial Services Intermediaries Association - find them here.
 
S A S R I A: South African Special Risks Insurance Association - find them here.
 
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. It constitutes whatever is recovered of an insured item or part of it, on which a claim has been paid. The remains of damaged property or recovered property which will be retained by the insurer in the event of the payment of the total loss. The salvage becomes the property of the insurer once it has settled the insured’s claim. See SUBROGATION.
 
Salvage value: The estimated cash amount that would be received if damaged property were to be sold. 
 
Schedule: The list of personal details of the insured and the subject matter of the insurance in a policy. 
 
Self-Insurance:  Insurance which a business organisation finances internally by establishing a fund to meet losses. 
 
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 Term Insurance : Insurance that operates on a year to year basis and which may be terminated by the insurer or the insured. 
 
Short- Period Rate: The rate of premium applied to insurances in force for periods of less than twelve months and which is higher proportionately than the annual rate. 
 
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. It constitutes a form submitted by a broker to underwriter,  containing particulars of the risk proposed for insurance. 
 
Slip policy: A signed slip which is agreed to be a policy where the insured or the reassured does not require a separate policy. 
 
Solvency Margin: The minimum size of shareholders' funds required by the supervisory authorities. 
 
Special Perils: Extra risks added to a policy to give cover not provided in terms of the basis wording; the term usually applies to storm, water, wind and impact damage added to a fire policy. 
 
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. 
 
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. A form of reinsurance used as a means of limiting aggregate net losses on a particular class of business in any one year of account. 
 
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 ife 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.  The right of one party to stand in a place of another and take up the latter's legal rights against a third party. See SALVAGE.
 
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. It is the monetary limit of the insurer's liability under a policy. 
 
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: That part of the sum insured which the insurer does not retain and consequently reinsures. 
 
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 single corporate member or a group of members to which a unique identifying number has been assigned by the Council of Lloyd’s and which underwrites insurance and/or reinsurance at Lloyd’s through the agency of a managing agent. The constitution of a syndicate may vary from year either in terms of the number of its members or the levels of their respective participation in it.
 
T
 
Time-barring:  Differs from the statutory prescription period of 3 years specified in the Prescription Act and is actually a term of the insurance contract which requires the insured to take legal action against an insured in the event of a repudiated claim within a certain period (usually 90 days). In this regard it is also to be remembered that in terms of the Policyholder Protection Rules (P P R) the insured is afforded a further 90 day recourse period. See PRESCRIPTION.
 
V
 
Valued policy: A contract in which the insurers agree to pay the sum stated in the event of total loss without the usual allowance for depreciation or appreciation. 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. An insurer may also avoid a policy from the date of the presentation of a fraudulent claim. 
 
Valuations: A list of property with values allocated to each item, as the basis of an insurance model.
 
VESA Approved: Usually reference to types of security devices that are approved/required by the Insurer and which complies with certain minimum specifications. For example reference to VESA level 4 alarm or immobiliser requires that level of VESA approved security devices which have been fitted by a VESA approved installation outlet and in respect of which the insured can provide a VESA-approved certificate. See VSS APPROVED.
 
VSS Approved: Usually reference to types of security devices that are approved/required by the Insurer and which complies with certain minimum specifications. For example reference to VESA level 4 alarm or immobiliser requires that level of VESA approved security devices which have been fitted by a VESA approved installation outlet and in respect of which the insured can provide a VESA-approved certificate. See VESA APPROVED.
 
W
 
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. A warranty is a condition, which must be complied with  - literally - in every respect.
 
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. 

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%. 
 
Y
 
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. See also OPEN YEAR OF ACCOUNT.
 

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