rate: The pricing factor per unit of exposure upon which the basic premium is based. Usually stated as $x per $100.
rated insurer: An insurance company that has received a financial size and strength rating from a rating agency such as A.M. Best or Standard and Poor's.
rate making: The process of using underwriting information to calculate a premium for the exposure. See also rating methodology.
rate-on-line (ROL): The pricing for a proportional reinsurance share, e.g., a 10 percent ROL for a $2 million limit would be $200,000.
rating: Determining the amount of premium to be paid to insure or reinsure a risk. Guaranteed cost rates are fixed during the policy period. Loss sensitive rates are those that can be adjusted after the end of a policy period, based upon the insured's actual loss experience. (See also retrospective rating.)
rating experience: Computing a premium based on the loss experience of the risk itself. Essentially a comparison of actual losses with expected losses. If actual losses are lower than expected, a premium credit to the manual rate or prior-year premium results. If actual losses are greater than expected, a premium surcharge results.
rating methodology: The method used by an underwriter when calculating premiums. Principal methods are manual, experience (retrospective or prospective), burning cost, or judgment.
rebating: Returning a portion of the premium to the insured or other inducements to place business with a specific insurer. Rebating is illegal for an agent or broker. Insurers must use filed rate credits or have supporting methodology.
reciprocal: An unincorporated group of individuals or organizations (subscribers) that agree to pool risks for the purpose of paying the cost of retained losses and purchasing reinsurance. Also known as interinsurance exchanges, they are managed by an attorney-in-fact. Subscribers have contingent liability (several and proportionate) for paying the losses of the reciprocal, but if adequate capital exists, nonassessable policies may be issued. Under federal tax law, subscribers' surplus is not taxed; income is taxed when distributed.
redomiciling: Changing the insurer's domicile. Requires permission from the existing domicile and a new license to be issued. Does not require formation of a new company if the new domicile has redomestication laws allowing a license to be issued to an existing insurer.
registered agent: In the United States, the person or firm legally appointed to accept service of process. Alien insurers must appoint (by filed proxy) the insurance commissioner as their agent, in states where they do business, to assure protection of policyholder rights.
registers: See policy registers.
Regulation 114 Trust: A trust fund established to secure payment of future losses, in a format prescribed by New York State Regulation 114.
reimbursement policies: The payment provisions in the policy require the insured to first pay the loss and then be reimbursed by the insurer. In reinsurance agreements, the insurer typically pays the loss and seeks reimbursement from the insurer but some agreement may require reinsurance to be paid before the insured is reimbursed.
reinstatement: A provision in an excess of loss reinsurance contract, particularly catastrophe and clash covers, that provides for reinstatement of a limit that is reduced by the occurrence of a loss or losses. The number of times that the limit can be reinstated varies, as does the cost of the reinstatement.
reinstatement premium: A pro rata reinsurance premium is charged for the reinstatement of the amount of reinsurance coverage that was reduced as the result of a reinsurance loss payment under a catastrophe cover.
reinsurance: Insurance protection purchased by an insurance company, either for a group of policies (treaty reinsurance) or for a specific risk (facultative reinsurance).
reinsurance agreement: Agreement by which one insurance company transfers risk to another (buys reinsurance). Unlike an insurance policy, a reinsurance agreement is signed by both parties.
reinsurance assumed: The insurer accepts risk from another insurer or reinsurer.
reinsurance captive: A special purpose insurer that operates only on a fronted basis, assuming risk from a ceding company. The reinsurance captive does not issue policies directly to insureds, and typically operates on a nonadmitted basis.
reinsurance ceded: The insurer transfers its risk to another insurer or reinsurer.
reinsurance commission: 1. Percentage of premium paid to the reinsurance intermediary; a ceding company expense. Compare to ceding commissions, which are an expense to the assuming reinsurer. 2. A profit commission paid to the cedent or the intermediary by the retrocessionaire; see also contingent commission.
reinsurance confirmation: Evidence of pro rata or excess of loss reinsurance. A contract of adhesion, issued by the reinsurer confirming acceptance of risk. To be attached to the master facultative reinsurance certificate (cover note) issued by the intermediary.
reinsurance intermediary: A broker licensed to place reinsurance.
reinsurance pool: A risk financing mechanism used by insurance companies to increase their ability to underwrite specific types of risks. The insurer cedes risk to the pool under a treaty reinsurance agreement. The insurer may be a part owner of the pool and may assume a quota share of the pool risk. A captive reinsurance pool may be owned by the original insureds. Some pools are operated by states to provide capacity for hard-to-place risks.
reinsurance recoverable: Amount of an insurer's incurred losses that will be paid by reinsurers. May require collateralization if cedent is to record the recoverable as an asset for statutory reporting purposes.
reinsurance treaty: An agreement between an assuming and ceding company to cede and assume all risks within a class. See also treaty reinsurance.
reinsurer: The company to whom risk is transferred or ceded.
reinsurer's margin: The "profit and administration" factor of the reinsurer, generally calculated on gross cession.
related risk: The risks of insureds owned by or affiliated with the owner(s) of or participant(s) in a captive.
rental captive: A captive insurance company that allows unrelated parties ("participants") to use the captive for a fee, thereby eliminating the need for formation and operation of a new company. The participant may or may not be required to contribute capital, and may or may not be a preferred shareholder in the rental captive. Provided such use is permitted in a domicile, rental captive participants may be insureds or noninsureds such as insurance agents. See also segregated cell captive.
replacement cost: The actual cost of replacing property that has been damaged or destroyed with new property of like kind and quality without regard to physical depreciation.
reporting lag: The amount of time between the occurrence of a loss and when it is reported to an insurer.
reporting policy: A policy that states premium based on the actual reported exposures. The insurer must report values to the insurer periodically.
reservation of rights: An acknowledgment by an insurer to a claimant that it has received notice of loss and so has the right to investigate it, but that by accepting the claim, the insurer has not agreed that the loss is covered by its policies.
reserve: 1. An amount set aside to cover the expected amount of loss or a fund set up as a contingency to cover future losses. Case reserves are reserves on particular claims, while supplemental reserves are for incurred but not reported (IBNR) claims. 2. The amount of premium collected but not earned, which would have to be returned if the insurance was canceled. (See also unearned premium (UEP).)
residual market loads (RMLs): A charge to an insurer for its share of losses and expenses incurred by a state's residual market pool (a mechanism for insuring "bad risks"). Also known as assigned risk charges. RMLs are assessed based on the amount of premium the insurer writes in that state. Insurers add the expense load to the premium paid by "good risks."
retention: Retained risk not deducted from policy limits for loss payment purposes but contributing to underlying limits for attachment of umbrella coverage. Also known as a self-insured retention (SIR).
retention ability: The amount of aggregate incurred losses that an insured can retain in any one financial reporting period without creating an adverse impact on cash flow or earnings.
retroactive date: In claims-made insurance, the policy inception or an earlier specified date. To be covered under the policy, the insurer must be put on notice of the claim after the retroactive date.
retroactive insurance: Providing insurance coverage for losses incurred prior to inception of the insurance period. Assumption by the insurer of an unknown amount of risk arising from incurred losses, whether known or unknown.
retrocedent: Ceding reinsurance company.
retrocession: Reinsurance of reinsurance.
retrocessionaire: Assuming company under a retrocession agreement.
retrocessional pools: Treaty reinsurance where the cedent or retrocedents are also retrocessionaires of the same treaty, with the objective of achieving improved risk distribution. The premiums and losses in the pool are retroceded based on the fraction of the total reinsurance written by each cedent. Usually a surplus share agreement.
retrospective aggregates: Transfer of a portfolio of retroactive insurance risk or self-insured balances—insuring the incurred but not reported (IBNR) and incurred but not enough (IBNE)—all risks ceded for an agreed price.
retrospective rating: Determining the final amount of premium to be paid after the close of the policy period, rather than before. A formulaic approach developed for rating workers compensation based on paid or incurred losses during and after the policy period. See also experience rating and prospective rating.
rider: An attachment to an insurance contract expanding the coverage provided by the contract. (See also endorsement.)
right of offset: A provision in a reinsurance agreement whereby balances due under a reinsurance agreement may be netted out against recoverables under the same agreement.
risk: A specific combination of exposures, perils, and hazards.
risk-based capital (RBC): A recommended amount of capital, based on an assessment of factors such as the amount of reinsurance purchased and an insurer's investment policy. May be higher or lower than the amount of capital required under a solvency ratio.
risk capital: See capital at risk.
risk concentration: The underwriting of a number of like risks, where the same or similar loss events could involve multiple subjects of insurance insured by the same insurer.
risk distribution: The sharing of loss costs between insureds in a risk pool.
risk gap: The difference between the net premium plus capital and surplus and net retained insurance or reinsurance limits.
risk index: Average losses for a homogeneous group of risks, used for risk pricing purposes.
risk management: The process of identifying, analyzing, assessing, and controlling loss exposures; using physical and human resources to minimize the impact of loss through methods of risk reduction, risk financing, or risk avoidance.
risk pool: Multiple subjects of insurance insured or reinsured by a single insurer, where to avoid risk concentration and improve risk distribution, different combinations of exposures, perils, and hazards will be underwritten.
risk purchasing group (RPG): A group of unrelated insureds jointly purchasing liability insurance pursuant to the terms of the federal Risk Retention Act of 1986.
risk reduction: Measures to reduce the frequency or severity of losses, also known as loss control. May include engineering, fire protection, safety inspections, or claims management.
risk retention: A conscious or unconscious decision by an individual or organization not to transfer its risk of loss to another party using an insurance or noninsurance risk transfer technique.
risk retention group (RRG): An insurance company formed pursuant to the federal Risk Retention Act of 1981, which was amended in 1986 to allow insurers underwriting all types of liability risks to avoid cumbersome multistate licensing laws. An RRG must be owned by its insureds. Most RRGs are formed as captives and must be domiciled onshore, except for those grandfathered under the 1981 Act.
risk securitization: The use of a debt or equity instrument (security) to finance risk, using a risk index to value the security and/or a specified loss event as a determinant of the interest or repayment date. Risk securities are issued by a special purpose vehicle (SPV).
risk shifting: Transferring risk to an insurer to distribute the cost of losses between the members of a risk pool.
risk smoothing: Financing risk in such a way that the financial impact of incurred losses is distributed between members of the risk pool over more than one financial reporting or policy period. Also known as chronological stabilization plans.
risk tolerance: The willingness of an organization to incur risk to gain future reward. In insurance, risk tolerance may be evidenced by a willingness of the insured to increase deductibles or self-insured retentions (SIRs), but alternative risk transfer is used by insureds with low risk tolerance, i.e., a desire to reduce the uncertainty arising from purchase of commercial insurance. Compare to retention ability.
rolling policy limits: The amount of insurance stated at inception of the policy period is an aggregate limit over a multiyear period, with premium adjusted at each annual anniversary to provide a continuous multiyear limit and an extended notice period for cancellation based not on the annual anniversary but the end of the multiyear policy period.
salvage: An amount recovered by the insurer from sale or disposal of insured property following a loss.
schedule: A list of coverage or amount concerning things or people insured.
security requirements: Obligation to provide acceptable security to cover self-insurance or reinsurance liabilities. May be based on the ceding company's statutory requirement to secure nonadmitted balances or on the cedent's or regulatory authority's concern regarding the self-insured or reinsurer's credit risk. Also known as collateral.
segregated cell captive (SCC): A special purpose insurer (typically operating as a rental captive) that establishes legally segregated cells or underwriting accounts. The objective is to ensure that assets in one underwriting account may not be used to satisfy liabilities in another underwriting account, nor the general (noncellular) liabilities of the SCC. Noncellular assets may or may not be available to satisfy cellular liabilities. May also be called a segregated portfolio company (SPC), protected cell company (PCC), or a separate account company (SAC).
self-insurance: 1. Retaining risk through the maintenance of internal reserves. See also qualified self-insurer. 2. "Going bare," i.e., no purchase of insurance and no recognition of incurred losses until they are paid.
self-insurance pool: A legal entity regulated by the states that allows unrelated insureds to retain their own risks and collectively purchase claims administration services and excess insurance to meet statutory coverage requirements.
self-insured retention (SIR): 1. The amount of losses that an insured must pay before their excess insurance policy attaches. Unlike a deductible, the SIR is not a deduction from the limit paid by the insurer. The losses paid in satisfaction of the SIR must be losses that would be covered under the excess policy, in the absence of an SIR. 2. Uninsured losses—see also risk retention.
series business unit (SBU): An SBU is a self-governing and protected company formed under the umbrella of a series limited liability company (series LLC), currently permitted in Delaware. The SBU is an independent insurance company capable of issuing policies directly or policies fronted by a commercial insurer to the insured company and third parties. Each SBU has a unique business purpose and an independent tax identification number. The SBU's business purpose, taxpayer election, and coverage offerings are specified. Unlike the protected cells or segregated accounts of rent-a-captives, SBUs have greater flexibility offered by self-governance. A series business unit is protected from the financial obligations of other SBUs by Delaware statute.
service fulfillment insurance: Insurance to protect against losses arising from the requirement to perform services within a specified time period. Can be sold separately or as part of a product warranty.
settlement lag: The time between the first report of a claim and the date the claim is closed (fully paid).
short-rate cancellation: A financial penalty incurred when the insured cancels an insurance contract prior to the expiration date of the contract. The insurer keeps a percentage of unearned premium (UEP) to cover costs.
single-owner captive: A captive with a single shareholder. May be refereed to as a "single parent" captive. The single-owner captive is not necessarily a "pure" captive since it may be used primarily to insure or reinsure nonshareholder risks. See also group captive; profit center captives.
sliding scale commission: A ceding commission that varies inversely with the loss ratio under the reinsurance agreement. The scales are not always one to one; for example, as the loss ratio decreases by 1 percent, the ceding commission might increase only 5 percent.
slip: A binder often including more than one reinsurer. At Lloyd's of London, the slip is carried from underwriter to underwriter for initialing and subscribing to a specific share of the risk.
solvency margin: The insurer's unimpaired surplus as a percent of outstanding loss reserve (OLR).
solvency ratio: The ratio of net premium written to surplus, or surplus to reserves.
sophisticated insured: An insured not requiring the same level of protection under insurance laws as an average insurance consumer. See also industrial insured.
special purpose vehicle (SPV): A bankruptcy remote company used to assume specified assets and liabilities. May be used to issue debt or equity instruments. For securitizing risk, a protected cell captive is used as the SPV, since it can first assume the risk through an insurance contract and keep assets secured from other liabilities of the captive.
special acceptance: The facultative extension of a reinsurance treaty to embrace a risk not automatically included within its terms.
special risks: Property insurance policy that insures against all perils unless they are excluded. Formerly called an "all risks" policy.
specialty risks: Term used by commercial insurers to describe unusual coverage features or types of risks they typically do not underwrite.
specific loss limit: The amount of risk retained by an insured or an insurer on a per-occurrence basis.
sponsor: The legal entity that contributes statutory capital to form a sponsored or association captive.
sponsored captive: A single-owner or group-owned rental captive, typically formed as a segregated cell company. The sponsor(s) may or may not have capital at risk. In some domiciles, the sponsor has to be an insurance or reinsurance company.
spread loss: A form of reinsurance under which premiums are paid during good years to build up a fund from which losses are recovered in bad years. This reinsurance has the effect of stabilizing a cedent's loss ratio over an extended period of time.
spread of risk: The pooling of risks from more than one source. Can be achieved by insuring in the same underwriting period either a large number of homogeneous risks or multiple insured locations or activities with noncorrelated risks.
standard premium: Premium established by using rates believed by underwriters to reflect the standard or average risk for the class, before application of retrospective rating formulas. When debits and credits based on the insured's loss history or exposure are applied, the standard premium equals the pure premium.
statement blank: See convention statement.
static risk modeling: Using specified assumptions to illustrate the financial impact of losses. A static risk model is useful to project financial results for one type of risk in a stable operating environment. Integrated risk modeling (noncorrelated risks within the same organization) may require a dynamic approach.
statutory accounting principles (SAP): Rules for insurance accounting codified by the National Association of Insurance Commissioners (NAIC) or as promulgated by a domicile as rules to be used in reporting an insurer's results to regulators.
statutory capital: The amount of capital and/or surplus required in order for an insurance company to obtain and retain a license to do business. May be stated as a minimum dollar amount or by reference to a solvency ratio or a solvency margin. See also capital.
statutory coverages: Lines of insurance required by law, such as workers compensation, auto liability, and pollution liability (for underground storage tanks and waste disposal sites).
statutory inspections: In boiler and machinery insurance, the requirement for inspection of pressure vessels as a condition of insurance. See also inspection fees.
statutory insurance: Insurance that the insured is required to buy, under a country, state, or federal law.
stock captive: A special purpose limited liability insurer that raises capital by selling shares to shareholders, and is controlled by its shareholders.
stop loss: Protection against an accumulation of losses for all or certain risks written in any one year. Retention expressed as a loss ratio or factor of underwriting income. See also aggregate stop loss.
subject of insurance: One or more units of exposure potentially involved in a single loss event.
subject policies: Policies issued by the original insurer (the "original policies") subject to the terms of a treaty reinsurance agreement.
subject premium: The amount of original policy premium to be paid under an excess of loss reinsurance agreement or subject to pro rata terms under a proportional treaty. Subject premium is a gross number, used for calculating taxes due. The amount ceded may be net (after deductions for front fees, commissions, and excise tax, if applicable).
subrogation: The right of an insurer to recover from a third party an amount paid on a loss when the third party is at fault.
supplementary employee retirement plan (SERP): A nonqualified retirement program, i.e., not subject to ERISA. Usually for highly compensated employees, allowing for deferral of income.
surety insurance: The insurer (surety) agrees to pay losses caused by a bond default. See also bond.
surplus: In a stock insurer, the amount of equity of an insurer in excess of statutory capital, earned or paid in by shareholders. In a mutual, the contributions of members or retained earnings. May or may not be part of capital at risk.
surplus debenture: a debt instrument accounted for as equity under statutory accounting rules, used when investors loan surplus to an insurer rather than posting a letter of credit. (Also referred to as a subordinated debenture.)
surplus lines broker: Licensed on a state-by-state basis to sell surplus lines. Responsible for collecting and paying the premium tax for nonadmitted business sold by a surplus lines insurer. Responsible to consumer if the surplus lines insurer defaults on claims.
surplus lines insurance: Nonadmitted insurance sold by surplus lines brokers, who are responsible for determining the financial condition of the insurer, and collecting and remitting premium taxes. Surplus lines insurers that have met certain financial strength criteria can be "white listed" by the NAIC.
surplus relief: Reinsurance or loss portfolio transfer (LPT) undertaken to allow the ceding company to comply with solvency ratios limiting the amount of loss reserves retained in proportion to equity.
surplus share: Treaty reinsurance that allows the cedent to reinsure a varying percent of risk. The cedent retains a fixed dollar amount and cedes any risk excess of that amount.
tax acceleration: Taking a tax deduction in the period an expense is incurred, rather than when it is paid in a subsequent period, resulting in an immediate temporary decrease in tax expense and a permanent increase in after-tax income, on a net present value basis, by an amount determined by the length of the acceleration period.
tax harmonization: A euphemistic term for tax increases, promoted by governments in high-tax jurisdictions, in an effort to encourage other jurisdictions to follow their taxing policies, so eliminating "tax havens" for internationally mobile businesses.
Tax Reform Act of 1984: Included two sections that increased the tax bill of an offshore captive insurer defined as a controlled foreign corporation. One section redefined income related to the insurance of U.S.-based risks as U.S.-source income instead of foreign-source income. Another section made income from the insurance of related risks in foreign countries taxable in the current year. The net effect of these two changes was to eliminate most tax advantages for an offshore single-parent captive.
Tax Reform Act of 1988: The major change imposed by this Act affected offshore group captives in that the definition of a U.S. shareholder was changed from an ownership interest of 10 percent or more to any shareholding interest.
third party: Someone other than the insured and the insurer. In liability insurance, the insurance provides defense against claims or suits brought by third parties, hence the term "third-party insurance."
third-party administrator (TPA): A licensed claims adjuster that is not an employee of the insurer or the insured. See also adjuster.
third-party risk: Insurance to protect the named insured from liability to unrelated parties.
time element loss: Loss resulting from inability to use a property. Examples are business interruption, extra expense, rental income, etc.
timing risk: Uncertainty surrounding the timing of a loss occurrence and its payout profile.
tort: A noncriminal and noncontractual wrong; a negligent action that is the proximate cause of resulting injury or harm to a third party.
transfer pricing: Payments for goods or services exchanged between affiliated companies, where the payment is not "market rate" and the intention is to transfer revenues on a pretax basis from one taxation jurisdiction to another, to earn income in the country with the lowest effective tax rate.
treaty reinsurance: An automatic or "obligatory" contract; all risks are assumed or ceded within a defined underwriting class. Usually a continuous until canceled contract.
trend analysis: Tracking incurred and paid losses over multiple time periods to determine the rate of increase or decrease in average paid claims.
trending factor: The percentage by which average paid claims increase or decrease over time.
ultimate loss: The amount of loss paid over time from a single occurrence. See also incurred loss. Funding to ultimate means establishing a reserve in the year the loss is incurred in an amount sufficient to pay the claim in full in a future period.
ultimate net loss: This term usually means the total sum that the assured, or any company as its insurer, or both, become obligated to pay either through adjudication or compromise, and usually includes hospital, medical, and funeral charges; all sums paid as salaries, wages, compensation, fees, charges, and law costs; premiums on attachment or appeal bonds; interest; expenses for doctors, lawyers, nurses, and investigators and other persons; and for litigation, settlement, adjustment, and investigation of claims and suits that are paid as a consequence of the insured loss, excluding only the salaries of the assured's or of any underlying insurer's permanent employees.
umbrella coverage: Covers losses in excess of amounts covered by other insurance policies and/or self-insured retentions; often providing broader coverage than primary policies.
unaffiliated business: Also known as unrelated or open market risk. Insurance of noncontrolled entities, i.e., insureds not in the same corporate organization (less than 50 percent ownership) or not under common management control.
unallocated loss adjustment expenses (ULAE): All external, internal, and administrative claims handling expenses, including determination of coverage, that are not included in allocated loss adjustment expenses (ALAE).
unbundling: When an insurer agrees to allow a third party to adjust claims and provide other services usually provided by the insurer such as engineering or safety inspections.
underwriter: A person with the responsibility of selecting and rating risks to insure.
underwriting: The selection of risks to be insured.
underwriting capacity: The risk retention ability of an insurer, or of the insurance industry as a whole. Determined by the amount of surplus. See also risk capital.
underwriting cash flow: Net collected premiums (net of reinsurance premiums) less losses, loss adjustment expenses (LAE), and underwriting expenses paid.
underwriting class: All risks with a specified risk profile, e.g., age, location, and occupation. Risks are classified using characteristics likely to produce the same or similar loss experience for each risk over time.
underwriting cycle: See market cycles.
underwriting expenses: All expenses for the insurer related to policy acquisition, maintenance, and general overhead of the company.
underwriting profit: Insurer profit before investment income and income taxes. See also combined ratio.
underwriting risk: Uncertainty about whether or when a loss will occur and its amount.
unearned premium reserve (UPR): The amount of unexpired premiums on policies or contracts as of a certain date (the total annual premium less the amount earned).
unimpaired surplus: A stock insurer's equity that is over and above statutory minimum capital and is not used for collateralization of assumed risk or otherwise pledged in support of the insurer's or an affiliate's business activities. For a mutual insurer, it is funds not allocated as collateral, loss, or premium reserves nor intended for distribution to members.
unrelated business income tax (UBIT): Tax paid on income earned in an affiliate. Could be paid by a tax-exempt entity as a result of receiving income earned by a profit-making entity.
unrelated risk: The source of risk is an entity or individual not under common management and control with the captive owner or user. See controlled unrelated business and unaffiliated business.
valuation clause: Policy provision that states how losses will be valued (actual cash value or replacement cost).
value of risk (VOR): The contribution to shareholder value or other stakeholder interests resulting from a risk-taking activity. Like the "captive value added" concept, VOR looks at components of the cost of risk as an investment required to further organizational objectives.
valued policy: The policy pays a predefined loss amount not related in any way to the actual incurred loss. Used mostly in life and death insurance.
values: The exposure data that must be submitted by an insurer as part of its underwriting submission, to allow for premium calculation.
vanishing premium: Policies where future premiums are paid by the buildup in cash value or the experience account of the insured. Used mostly in life insurance but can be a feature of policies of indemnity written on a finite risk basis.
variable interest entity (VIE): An affiliated or nonaffiliated entity in which a company is deemed to have a financial interest, even if such interest is not evidenced contractually. Typically used to hold or transfer tangible and intangible assets and liabilities.
vicarious liability: Responsibility for the actions of another as a result of a particular relationship, e.g., employer and employee, parent and child, business and independent contractor. Also known as contingent liability.
Voluntary Employees' Beneficiary Association (VEBA): Established by employers under the U.S. tax laws as a pretax method of funding certain employee benefits. Like a trust, once money is in a VEBA, it cannot be withdrawn, except to pay benefits.
waiver: Voluntary surrender of a right or privilege known to exist; for example, waiver of subrogation rights by the insurer in favor of the insured in a back-to-back deductible policy; waiver of the right to sue in a hold harmless clause.
wholesale broker: A broker for independent agents. Can be a managing general agent (MGA) or surplus lines broker. All business submitted to a certain insurer or for a certain type of business goes though this broker, which may have an exclusive arrangement with an insurer or a syndicate of reinsurers.
working layer: The first layer above the cedent's retention wherein moderate to heavy loss activity is expected by the cedent and reinsurer. Working layer reinsurance agreements often include adjustable features to reflect actual underwriting results.
wrap-up: Insurance for a number of unrelated insureds involved in the same subject of insurance. Used in construction projects for independent contractors.
written premium: See gross written premium (GWP).
Yellow Book: The annual reporting form for property and casualty insurers in the United States. See also convention statement. Also known as Yellow Peril, for its size and complexity, although with the advent of computerized work sheets, electronic filings, and some of the information in this text, much less of a peril than in the days of typewriters and calculators.
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