Six major credit agencies determine insurers’ financial strength and viability to meet claims obligations. They are A.M. Best Co.; Duff & Phelps Inc.; Fitch, Inc.; Mayday’s Investors Services; Standard & Poor’s Corp.; and Weiss Ratings, Inc. Factors considered include company earnings, capital adequacy, operating leverage, liquidity, investment performance, reinsurance programs, and management ability, integrity and experience. A high financial rating is not the same as a high consumer satisfaction rating.
An organization that gathers statistics, makes rates and/or creates policy forms and provides other services for the property and casualty insurers affiliated with the bureau.
In various property and casualty lines, a geographical grouping within which insureds are likely to share an exposure to similar risks. Grouping of insureds within a territory helps establish equitable rates for the territory.
Real Estate Investments:
Investments generally owned by life insurers that include commercial mortgage loans and real property.
Amounts owed to a business for goods or services provided.
An illegal act to refuse to lend money or issue insurance based only on geographic area.
The restoration of a lapsed life or health insurance policy to its original premium-paying status—usually after evidence of good health has been submitted and past-due premiums have been paid.
An arrangement by which one insurer transfers all or a portion of its risk under a policy or group of policies to another insurer (reinsurer). Thus reinsurance is insurance purchased by an insurance company from another insurer, to reduce risk for the original insurer.
An alternative mechanism to service those insureds who cannot obtain insurance in the voluntary market. Premiums and losses for the business that is ceded to the facility are pooled and all insurers share according to their proportion of the voluntary market.
A package type of insurance that includes coverage similar to a homeowners policy to cover the personal property of a renter or tenant in a building.
Rents or Rental Value Coverages:
Insurance against loss of the rental value of a property; protects against loss of rents resulting from an insured peril.
Replacement Cost Property Coverage:
Insurance under which the amount payable is the current replacement cost of the property new, rather than the depreciated value. Applies to the building structures (in most cases) and can apply to contents in some policies.
(1) An amount representing actual or potential liabilities kept by an insurer to cover obligations to policyholders and third-party claimants. (2) An amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund. On occasion, a reserve may be an asset, such as a reserve for taxes not yet due.
A general term describing the total of all consumers who have had difficulty purchasing insurance through normal channels. Automobile Insurance Plans, FAIR Plans, Reinsurance Facilities and Joint Underwriting Associations all service this market.
The net amount of risk retained by an insurance company for its own account or that of specified others, and not reinsured.
The reinsurance bought by reinsurers to protect their financial stability.
Rating procedure that allows adjustment of an insured’s final rate on the basis of the insured’s own loss experience.
Additional provision added to a policy by issuance of an amending document.
Chance of loss with respect to person, liability or the property of the insured. Also is used to mean “the insured.”
The need for insurance companies to be capitalized according to the inherent riskiness of the type of insurance they sell. Higher-risk types of insurance, liability as opposed to property business, generally necessitate higher levels of capital
The management of the various risks that might affect a business firm. Its purpose is to identify potential loss situations and control or reduce them through insurance, elimination of risk, or improved or additional safety practices.
Risk Retention Groups:
Insurance companies that band together as self-insurers and form an organization that is chartered and licensed as an insurer in at least one state to handle liability insurance.
The loss of property due to theft when a person is threatened with physical harm or injury.