A
AAL
Annual Average Loss. Expected loss per year for a defined catastrophe layer or treaty. Foundational metric in property cat reinsurance pricing.
Abandonment
The relinquishment of insured property by the insured to the carrier as part of a total loss claim, particularly in marine and property contexts.
Acceptance
The carrier's agreement to provide coverage on the terms of an offer or application. Distinct from a quote, which is an offer pending acceptance.
Accident year
The accounting period in which the underlying loss event occurred, regardless of when the claim is reported. Contrast with policy year and report year.
ACORD
Association for Cooperative Operations Research and Development. The U.S. insurance standards body that develops application forms and data interchange standards.
ACORD 125
Commercial Insurance Application, Applicant Section. The cover application that captures named insured, locations, and prior insurance information.
ACORD 126
Commercial General Liability Section. Captures GL-specific exposure data, products and operations description, and coverage selection.
ACORD 130
Workers Compensation Application. Captures payroll by class code, OSHA history, and prior carrier experience.
ACORD 137
Commercial Auto Section. Captures vehicle schedule, driver information, and radius of operations.
ACORD 140
Property Section. Captures location-specific COPE data, values by category, and coverage selection.
ACORD 25
Certificate of Insurance form. Evidence of coverage provided to third parties such as lenders and contractual counterparties.
Additional insured
A party other than the named insured granted insured status under the policy, typically through endorsement.
Adjuster
The carrier representative responsible for investigating and settling claims. May be employed by the carrier or operate as an independent contractor.
Admitted carrier
A carrier licensed to write business in a given state. Subject to that state's filing, rate, and form requirements.
ADR
Alternative Dispute Resolution. Mediation, arbitration, or other non-litigation processes for resolving claims.
Adverse development
An increase in incurred losses on prior accident years, indicating that initial reserves were inadequate.
Aggregate limit
The maximum the carrier will pay across all claims during the policy period, separate from per-occurrence limits.
Aggregate stop-loss
Reinsurance that responds when total losses for the year exceed a defined threshold. Provides protection against frequency.
ALAE
Allocated Loss Adjustment Expense. Defense counsel fees, expert fees, and other expenses tied directly to a specific claim.
Alien insurer
A non-U.S.-domiciled carrier. Eligibility for U.S. business is governed by NAIC IID listing and state-level admission processes.
Annual statement
Comprehensive financial report filed by every U.S. carrier with every state where it is licensed.
Antitrust exemption
The McCarran-Ferguson exemption of insurance activities from federal antitrust law to the extent regulated by states.
Appetite
The defined risks a carrier is willing to write, expressed by industry, geography, line of business, premium size, and limit preferences.
Application
The formal document submitted by the broker or insured requesting coverage. Typically the ACORD form set for U.S. commercial.
Arbitration
Binding dispute resolution process used in commercial insurance and reinsurance contracts. Common in treaty disputes.
Assumption
The reinsurer's acceptance of risk through cession. The economic counterpart to ceding.
Attachment point
The dollar amount above which excess or reinsurance coverage applies. The retention sits below the attachment point.
Auditable premium
Premium for lines (typically WC and GL) where the final premium is determined by actual exposure measured at policy expiration through audit.
Auto liability
Coverage for bodily injury and property damage caused by operation of a covered auto. Includes commercial auto and trucking exposures.
AUW
Assistant Underwriter or Associate Underwriter. Underwriter trainee or junior position.
B
Bad faith
Cause of action for unfair claim handling that exposes the carrier to consequential damages, attorney's fees, and (in some states) punitive damages.
BBR
Builders Risk. Coverage for property under construction.
Beneficiary
The party entitled to receive proceeds from a policy under defined circumstances.
Berne Union
International association of public and private credit and political risk insurers.
BI
Business Interruption. Lost income and continuing expense following a covered property loss.
Binder
Temporary evidence of coverage issued by the carrier prior to final policy issuance.
Binding authority
Delegated authority to bind risks on behalf of a carrier within defined parameters. Typically held by an MGA or binding broker.
Bordereau
Periodic per-risk or aggregate report from a cedant to a reinsurer detailing premium and losses ceded.
Bought form
A policy form purchased from ISO or another bureau, vs a manuscript form drafted by the carrier.
Broker
Insurance intermediary representing the insured. Distinguished from agents, who represent the carrier.
Burning cost
Historical loss experience expressed as a ratio of losses to premium, used as one input to treaty pricing.
C
Captive
Insurance company owned by its insureds, used as an alternative to commercial market risk transfer.
Cargo
Coverage for goods in transit, by ocean, air, rail, or road.
Carrier
An insurance company. Used interchangeably with insurer.
CAT XL
Catastrophe excess of loss reinsurance. Treaty providing protection against cat events above a defined retention.
Catastrophe (Cat)
A defined large-scale event such as a hurricane, earthquake, or wildfire, typically meeting an industry severity threshold.
Cedant
The party transferring risk to a reinsurer. Usually a primary carrier; sometimes another reinsurer (retrocession).
Cede
To transfer risk through reinsurance.
Ceding commission
Commission paid by the reinsurer to the cedant on proportional treaties, reflecting the cedant's acquisition costs.
Certificate of insurance
Document evidencing coverage to a third party. ACORD 25 is the common form. The certificate does not extend or alter the underlying policy.
Cession
The act of transferring risk through reinsurance, or the amount transferred.
CGL
Commercial General Liability. The standard liability policy for commercial insureds, typically based on the ISO CG 00 01 form.
Claim
A demand for benefits or coverage under a policy.
Claimant
The party making a claim. May be the insured (first-party) or a third party.
Claims-made
A coverage trigger requiring the claim to be both made and reported during the policy period (with possible extended reporting).
Class code
A rating-class identifier used to group similar risks for premium calculation. NCCI for WC, ISO for GL.
Clearance
The carrier's process of confirming a submission is not duplicative of other underwriter activity for the same risk.
Closed claim
A claim that has been resolved. Paid is final, reserves are zero, no further development expected.
Combined ratio
Loss ratio plus expense ratio. The principal measure of underwriting profitability. Below 100% is profitable, above 100% is unprofitable.
Commission
Compensation paid by the carrier to the broker, typically as a percentage of premium.
Concurrent causation
The legal doctrine governing coverage when both covered and excluded causes contribute to a single loss. Differs by jurisdiction.
Concurrent insurance
Multiple policies covering the same risk. Allocation rules govern how loss is shared.
Conditions
Provisions in the policy that allocate responsibilities between insured and carrier. Notice, cooperation, suit limitation.
Consequential loss
Indirect loss flowing from a direct insured event, such as business interruption following property damage.
Construction class
ISO 1-6 classification of building construction (frame to fire-resistive). Drives property rating and exposure analysis.
Contingent commission
Carrier-paid supplemental compensation to brokers based on volume, growth, or loss ratio of business placed.
Contract certainty
The principle that policy wording is finalized before binding, not after. A reform driven in the London market in the 2000s.
Contractor's all-risks
Engineering insurance covering construction projects against physical loss or damage. Closely related to builders risk.
COPE
Construction, Occupancy, Protection, Exposure. Standardized property risk framework.
Cover note
Evidence of placement issued by a London market broker.
Coverage
The protection provided by the policy.
Coverage trigger
The event that activates coverage. Occurrence, claims-made, discovery.
Credibility
The actuarial weight given to an insured's own loss experience vs the class average. Increases with exposure size.
CWP
Closed Without Payment. A claim status where the claim was reported but resolved without indemnity payment.
D
D&O
Directors and Officers Liability. Covers individual directors and officers, the entity's indemnification obligations, and the entity in securities litigation.
Date of loss
The date the underlying insured event occurred. Contrast with date of report.
Decline
Carrier's refusal to quote on a submission.
Deductible
The first-dollar amount the insured pays before the policy responds. Typically applied per loss but sometimes per policy term.
Defense costs
Expenses incurred in defending the insured against a covered claim. May or may not erode the limit, depending on policy form.
Demand letter
Pre-litigation written demand by a claimant or claimant's attorney for a defined sum.
Denial
The carrier's refusal to provide coverage for a specific claim, based on policy provisions.
Diligent search
The surplus lines broker's documented effort to obtain coverage from admitted carriers before placing the risk in the surplus market.
Direct premium written (DPW)
Premium written before reinsurance ceded.
Disclosure
The insured's obligation to provide material information at application. Failure can void coverage.
DOL
Date of Loss. The date the insured event occurred.
Dollar trading
Reinsurance arrangements where the cession premium is roughly equal to expected losses. Typically inefficient for the cedant.
Domicile
The jurisdiction where a carrier is chartered. Critical for captives.
Drop-down
An excess policy responding when an underlying policy fails to respond, typically due to insolvency.
Duty to defend
The carrier's contractual obligation to provide defense costs for covered claims, separate from indemnity obligations.
E
E&O
Errors and Omissions. Professional liability coverage for occupational mistakes.
E&S
Excess and Surplus lines. Non-admitted market for risks that admitted carriers will not write.
Earned premium
The portion of premium attributable to the policy term elapsed, regardless of when collected.
ECP
Exempt Commercial Purchaser. Federal NRRA category for sophisticated insureds exempt from diligent search requirements.
ECR
Excess of Loss Reinsurance. Reinsurance attaching above a per-loss retention.
Effective date
The date coverage commences.
Endorsement
An amendment to the policy. Adds, removes, or modifies coverage.
Engineering report
A loss control or risk engineering survey of an insured location, with COPE data and risk improvement recommendations.
Enterprise risk management (ERM)
The integrated discipline of identifying, measuring, and managing risks across an organization.
EPLI
Employment Practices Liability Insurance. Covers wrongful termination, discrimination, harassment, and related employment claims.
ERISA
Employee Retirement Income Security Act. Federal statute governing employee benefit plans, with preemption of state regulation for self-funded plans.
Excess casualty
Liability coverage attaching above a primary or underlying policy.
Excess of loss
Reinsurance attaching above a per-loss or aggregate retention.
Exclusion
A policy provision removing specific perils or events from coverage.
Experience modification
A loss-history-driven multiplier applied to manual rate. Most consequential in workers compensation.
Expiration date
The date coverage ends.
Export list
State list of risks exempt from the diligent search requirement for surplus lines placement.
Exposure base
The unit of measurement that scales with risk. Payroll for WC, sales for GL, TIV for property.
Expropriation
Government seizure of insured assets. A core political risk peril.
F
Facultative
Reinsurance placed on individual risks rather than through a treaty. Used for risks outside treaty scope or beyond treaty capacity.
FEIN
Federal Employer Identification Number. Tax identifier for U.S. business entities.
Fiduciary liability
Coverage for breach of fiduciary duty under ERISA in connection with employee benefit plan administration.
Filed rate
A rate that has been submitted to and (depending on filing regime) approved by a state insurance department.
FIO
Federal Insurance Office. Treasury Department office created by Dodd-Frank to monitor the insurance industry.
First-party
Coverage for the insured's own loss (vs liability to third parties).
FNOL
First Notice of Loss. The initial reporting of a claim to the carrier.
Following form
An excess policy that adopts the terms of the underlying primary policy.
Form
The standardized policy text. Forms vary by line and may be ISO bureau forms or carrier-specific.
Free reserves
Capital available to absorb losses beyond reserves. Relevant in solvency analysis.
Fronting
An admitted carrier issues a policy on its paper and cedes the risk to a captive or other reinsurer.
I
IBNR
Incurred But Not Reported. Reserves for losses that have occurred but not yet been reported to the carrier.
IID list
NAIC International Insurers Department list of eligible alien insurers.
In force
An active policy still providing coverage.
Incurred
Paid plus reserved. Total expected ultimate cost of a claim.
Indemnity
The contractual obligation to make the insured whole for a covered loss.
Indemnity payment
The portion of claim payment that goes to the claimant or insured (vs ALAE for defense costs).
Inland marine
Coverage for property in transit on land, mobile equipment, builders risk, and certain specialty exposures.
Insolvency
The carrier's inability to pay claims as they come due.
Insured
The party named in the policy as the recipient of coverage.
ISO
Insurance Services Office. Bureau that develops policy forms and loss costs for commercial lines.
ISO PPC
Public Protection Class. ISO's 1-10 rating of public fire protection capability for a location.
L
Layer
A defined band of coverage in an insurance program (primary, first excess, second excess, etc.).
LCM
Loss Cost Multiplier. Carrier-specific multiplier applied to bureau loss costs to derive a usable filed rate.
Limit
The maximum the carrier will pay under the policy.
Lloyd's
The London insurance and reinsurance market organized as a market of syndicates.
LMA
Lloyd's Market Association. Trade association for Lloyd's syndicates.
LOI
Limit of Indemnity. Used in some specialty contexts as the policy maximum.
London market
Lloyd's plus the London company market. The dominant specialty insurance and reinsurance market globally.
Long-tail
A line of business where claims develop over many years from incident date. WC, professional liability, environmental.
Loss
An insured event causing covered damage or liability.
Loss adjustment expense (LAE)
Costs of investigating and settling claims. Includes ALAE and ULAE.
Loss cost
The actuarial estimate of expected losses per unit of exposure.
Loss ratio
Losses divided by earned premium. Component of combined ratio.
Loss run
Historical claim ledger from a prior carrier listing claims, status, and financial summary.
M
Manual rate
Filed published rate per unit of exposure for a defined class of business.
Manuscript wording
Policy language drafted specifically for a single placement, vs bureau or carrier-standard forms.
Marine
Coverage of property and liability exposures in shipping and waterborne commerce.
McCarran-Ferguson
1945 federal statute preserving state primacy in insurance regulation.
Med mal
Medical Malpractice. Professional liability for healthcare providers.
MGA
Managing General Agent. Holds binding authority delegated by a carrier within defined parameters.
MGU
Managing General Underwriter. Distinct from MGA; typically holds underwriting authority on a single line or program.
MIGA
Multilateral Investment Guarantee Agency. World Bank Group political risk insurer.
MRC
Market Reform Contract. The standardized slip format used in the London market.
N
NAIC
National Association of Insurance Commissioners. Coordinating body for state insurance regulation.
Named insured
The party named in the policy declarations as the principal insured.
Named perils
Coverage form listing specific perils covered (vs all-risk forms).
NCCI
National Council on Compensation Insurance. Develops loss costs and class plans for workers compensation.
Net retained
The portion of risk a carrier holds on its own account after reinsurance cessions.
NIPR
National Insurance Producer Registry. NAIC-administered platform for producer licensing.
Non-admitted
A carrier not licensed in a state. May still write surplus lines business if eligible.
Notice
The insured's communication of a claim or potential claim to the carrier. Timely notice is typically a policy condition.
NRRA
Nonadmitted and Reinsurance Reform Act of 2010. Federal reform of surplus lines taxation and broker licensing.
Nuclear verdict
A jury verdict of $10M or more, increasingly common in trucking, premises liability, and product liability cases.
P
Paid loss
Cumulative cash paid to date on a claim.
PCC
Protected Cell Company. A captive structure with multiple legally segregated cells.
Per-occurrence
A limit or retention applied separately to each loss event.
Per-risk
A limit or retention applied separately to each insured risk.
Personal injury
Specific coverage in CGL Coverage B for offenses such as defamation, false arrest, malicious prosecution.
Phase I assessment
Environmental site review identifying potential historical contamination.
Pier
Premium Inception End-of-Risk. London market term for full premium charge with no premium return on early termination.
PML
Probable Maximum Loss. Estimated worst-credible loss for a defined event scenario.
Policy
The contract of insurance.
Policy period
The duration during which coverage applies.
Policy year
The accounting period in which the policy was effective.
Pollution exclusion
CGL exclusion for pollution-related liability. Triggered the development of separate environmental coverage.
PPC
ISO Public Protection Class.
Premium
The amount charged for coverage. Typically expressed as an annual amount.
Premium audit
Reconciliation of actual exposure against estimated exposure for variable-exposure lines (WC, GL).
Premium base
The unit on which premium is calculated. Sales, payroll, TIV.
PRI
Political Risk Insurance.
Primary
First-layer coverage that responds before any excess. Provides the defense obligation in most liability programs.
Prior approval
Filing regime requiring state approval before a rate or form may be used.
Producer
Insurance broker or agent. Specifically refers to the licensed individual or firm placing business.
Producing broker
The retail broker holding the relationship with the insured, regardless of any wholesale broker in the chain.
Professional liability
Coverage for claims arising from professional services.
Profit commission
Reinsurance feature returning a portion of underwriting profit to the cedant.
Property
Coverage for damage to real and personal property.
Proportional reinsurance
Reinsurance where premium and losses are shared in fixed proportion.
Punitive damages
Damages awarded to punish defendants beyond compensating the plaintiff. Coverage for punitives is restricted in many jurisdictions.
R
Rate
The price per unit of exposure.
Rate-on-line
Premium divided by layer limit. Comparison metric in property cat reinsurance.
RBC
Risk-Based Capital. Standardized capital adequacy framework used by U.S. state regulators.
Reinstatement
In excess reinsurance, the restoration of exhausted limit for additional events. Typically requires reinstatement premium.
Reinsurance
Insurance for insurers. Risk transfer from a primary carrier to a reinsurance carrier.
Renewal
Continuation of an in-force policy at expiration, typically for a new policy period.
Reopen
A previously closed claim reactivated due to new developments.
Report year
The accounting period in which the claim was reported, regardless of when the underlying event occurred.
Reservation of rights
Carrier letter preserving the right to deny coverage while continuing investigation or defense.
Reserves
Carrier's estimate of remaining payments on open claims.
Retention
The amount the insured (or cedant) retains before insurance (or reinsurance) responds.
Retrocession
Reinsurance of reinsurance. The reinsurer transfers risk to another reinsurer.
Risk-Based Capital
Statutory capital adequacy methodology.
ROR
Reservation of Rights.
RRG
Risk Retention Group. Federally chartered group captive for liability coverage.
Run-off
Period after a policy expires during which claims may still be reported and resolved.
S
Salvage
Property recovered after a total loss settlement, available to the carrier for resale.
SAP
Statutory Accounting Principles. Insurance-specific accounting framework used in U.S. financial reporting.
Schedule
A list of items covered under a policy. Common in property (SOV) and inland marine.
Schedule mod
Judgment-driven rate modifier within filed bounds.
SERFF
System for Electronic Rate and Form Filing. NAIC platform for state rate and form filings.
Settlement
Resolution of a claim through agreed payment.
Severity
The size of an individual claim, vs frequency which is the count of claims.
SIR
Self-Insured Retention. The amount the insured pays before insurance responds, typically on liability lines.
Slip
London market document containing the proposed terms of placement, walked around the market for subscription.
Soft market
Period of falling premiums and broadening terms.
Solvency
The carrier's financial capacity to meet obligations.
SOV
Schedule of Values. List of insured locations and their values for property coverage.
Specialty lines
Lines of business outside the standard P&C coverages, requiring specialized underwriting expertise.
Stamping office
State-level surplus lines compliance authority that reviews policies for compliance and applies stamping fees.
Statement of values
See SOV.
Subjectivity
A condition the carrier requires to be cleared before binding (loss runs, security control attestation, inspection).
Submission
The package of documents submitted by a broker to a carrier requesting coverage.
Subrogation
Carrier's right to recover from a third party responsible for a loss after paying the insured.
Surety
Three-party guarantee where a surety guarantees performance of a principal to an obligee.
Surplus
Capital and free assets in excess of liabilities. The buffer that absorbs losses.
Surplus lines
Non-admitted market for risks that admitted carriers will not write.
Syndicate
A capital provider at Lloyd's that participates in writing risks through the Lloyd's market.
T
Tail
The period after a policy expires during which claims may still be reported. Long-tail lines have extended tails.
Tail coverage
Endorsement extending the reporting period for claims-made policies after expiration.
Term
The duration of a policy.
Territory
Geographic rating area within a state.
TIV
Total Insured Value. Sum of building, contents, and BI values for a property location.
Treaty
Standing reinsurance arrangement covering a defined class of business for a defined period.
TRIA
Terrorism Risk Insurance Act. Federal reinsurance backstop for terrorism losses.
Triage
Carrier's process of routing submissions to the appropriate underwriting path or declining.
Trigger
The event that activates coverage.