C

Cancellation - The termination of a policy before the expiry date.

 

Cancelling Return - A return of premium paid because a hull policy has been cancelled before the natural expiry date.

 

Capacity - The ability of an insurer, syndicate or market to absorb the risk.

 

Capital - Equity of shareholders of a stock insurance company. The company's capital and surplus are measured by the difference between its assets minus its liabilities. This value protects the interests of the company's policyowners in the event it develops financial problems; the policyowners' benefits are thus protected by the insurance company's capital. Shareholders' interest is second to that of policyowners.

 

Capitalization or Leverage - Measures the exposure of a company's surplus to various operating and financial practices. A highly leveraged, or poorly capitalized, company can show a high return on surplus, but might be exposed to a high risk of instability.

 

Cargo - the cost of recovery, reconditioning and forwarding would exceed the value of the goods at destination.

 

Carrier - Sometimes used to describe the insurer. Not generally used because of confusion with carriers of freight.

 

Cash Loss - A payment made outside the normal accounting procedure for treaty reinsurance.

 

Casualty - Liability or loss resulting from an accident.

 

Casualty Insurance - That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass, insurance against crime, such as robbery, burglary and forgery, boiler and machinery insurance and Aviation insurance. Many casualty companies also write surety business.

 

Catastrophe  - See disaster

 

Certificate of Insurance - A certificate that acts as proof that a policy has been issued. Usually requested by a financial institution.

 

Certificate of No Claim Bonus -  A certificate that acts as proof that a person has earned or not earned  any No Claim Bonus entitlement.

 

Ceded Reinsurance Leverage - The ratio of the reinsurance premiums ceded, plus net ceded reinsurance balances from non-US affiliates for paid losses, unpaid losses, incurred but not reported (IBNR), unearned premiums and commissions, less funds held from reinsurers, plus ceded reinsurance balances payable, to policyholders' surplus. This ratio measures the company's dependence upon the security provided by its reinsurers and its potential exposure to adjustment on such reinsurance.

 

Charterparty - Contract between shipowner and person who hires his ship or space therein, for a specific voyage or a period of time.

 

Change in Net Premiums Written (IRIS) - The annual percentage change in Net Premiums Written. A company should demonstrate its ability to support controlled business growth with quality surplus growth from strong internal capital generation.

 

Change in Policyholder Surplus (IRIS) - The percentage change in policyholder surplus from the prior year-end derived from operating earnings, investment gains, net contributed capital and other miscellaneous sources. This ratio measures a company's ability to increase policyholders' security.

 

Chartered Property and Casualty Underwriter (CPCU) - Professional designation earned after the successful completion of 10 national examinations given by the American Institute for Property and Liability Underwriters. Covers such areas of expertise as insurance, risk management, economics, finance, management, accounting, and law. Three years of work experience also are required in the insurance business or a related area.

 

Claims Ratio - The ratio of the cost of claims to earned premiums.

 

Claim - A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.

 

Class 3-6 Bonds (% of PHS) - This test measures exposure to noninvestment grade bonds as a percentage of surplus. Generally, noninvestment grade bonds carry higher default and illiquidity risks. The designation of quality classifications that coincide with different bond ratings assigned by major credit rating agencies.

 

Coinsurance - In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20% health insurance coinsurance clause, the policyholder pays for the deductible plus 20% of his covered losses. After paying 80% of losses up to a specified ceiling, the insurer starts paying 100% of losses.

 

Collection or Set - A group of items of sufficiently common type, appearance or nature that they reasonably belong together and that is devalued if one or more of the group is lost or damaged.

 

Collision - Physical impact between two or more ships or vessels used for navigation. In collision liability insurance the term does not include contact of the insured vessel with anything other than a ship or vessel.

 

Collision Insurance - Covers physical damage to the insured's automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.

 

Combined Ratio  - A combination of the claims ratio and the expense ratio.

 

Combined Ratio After Policyholder Dividends - The sum of the loss, expense and policyholder dividend ratios not reflecting investment income or income taxes. This ratio measures the company's overall underwriting profitability, and a combined ratio of less than 100 indicates an underwriting profit.

 

Commission - A fee charged by a broker or agent for services in the sale of an insurance contract.

 

Common Law - The principles of law arising from court decisions.

 

Common property  - See site.

 

Comprehensive Motor Insurance - Provides specified cover for damage to the insured vehicle as well as damage the insured vehicle may cause to the person or property of others.

 

Compromised Total Loss - An arranged settlement on a hull policy where there is no claim for actual or constructive total loss but it is impracticable to repair the vessel.

 

Commercial Lines - Refers to insurance for businesses, professionals and commercial establishments.

 

Commission - Fee paid to an agent or insurance salesperson as a percentage of the policy premium. The percentage varies widely depending on coverage, the insurer and the marketing methods.

 

Common Carrier - A business or agency that is available to the public for transportation of persons, goods or messages. Common carriers include trucking companies, bus lines and airlines.

 

Comprehensive Insurance - Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car. For example, fire damage or a cracked windshield would be covered under the comprehensive section.

 

Concurrent Periods - In hospital income protection, when a patient is confined to a hospital due to more than one injury and/or illness at the same time, benefits are paid as if the total disability resulted from only one cause.

 

Conditional Reserves - This item represents the aggregate of various reserves which, for technical reasons, are treated by companies as liabilities. Such reserves, which are similar to free resources or surplus, include unauthorized reinsurance, excess of statutory loss reserves over statement reserves, dividends to policyholders undeclared and other similar reserves established voluntarily or in compliance with statutory regulations. 

 

Contract - This term is used in hull insurance to refer to damage received when the ship hits something other than another ship or vessel. When the ship hits another ship or vessel, damage received thereby is referred to as collision and contract are perils covered by a hull policy. However whilst a hull policy usually covers collision liability does not cover collision liability, by reason of contract. 

 

Contribution - The term relates to circumstances where more than one party covers the risk. Each party is deemed to be liable for his proportion of the loss. If the assured recovered in full from one insurer, that insurer is entitled to recover from the other insurer for that part of the loss which should have been paid by the latter. The term is used in marine insurance, also, in relation to contributions paid by the assured in connection with salvage and/or general average. 

 

Contributory Value - The value on which a contribution to a general average loss or salvage award is calculated.

 

Consequential Loss  - A subsequent loss that results from the direct damage due to an insured peril.

 

Constructive Total Loss - Where the assured abandons the subject matter insured to the underwriter and claims a total loss. He can do this when an actual total loss appears to be inevitable or when he is deprived of the insured property and is unlikely to recover it or in the following circumstances. Ship- the cost of recovery and repair would exceed the insured value. 

 

Cooling off period - IRDA rules provides that you can cancel your policy within 15 days of its purchase date. 

 

Cover note - A Cover Note informs the insured that coverage is active  often interim cover 

 

Coverage - The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits are listed.

 

Convertible - Term life insurance coverage that can be converted into permanent insurance regardless of an insured's physical condition and without a medical examination. The individual cannot be denied coverage or charged an additional premium for any health problems.

 

Copayment - A predetermined, flat fee an individual pays for health-care services, in addition to what insurance covers. For example, some HMOs require a $10 copayment for each office visit, regardless of the type or level of services provided during the visit. Copayments are not usually specified by percentages.

 

Cost-of-Living Adjustment (COLA) - Automatic adjustment applied to Social Security retirement payments when the consumer price index increases at a rate of at least 3%, the first quarter of one year to the first quarter of the next year.

 

Coverage Area - The geographic region covered by travel insurance. 

 

Country Damage - Damage to baled or bagged goods (e.g. cotton) caused by excessive moisture from damp ground or exposure to weather, or by grit, dust or sand forced into the insured property by windstorm or inclement weather.

 

Current Liquidity (IRIS) - The sum of cash, unaffiliated invested assets and encumbrances on other properties to net liabilities plus ceded reinsurance balances payable, expressed as a percent. This ratio measures the proportion of liabilities covered by unencumbered cash and unaffiliated investments. If this ratio is less than 100, the company's solvency is dependent on the collectibility or marketability of premium balances and investments in affiliates. This ratio assumes the collectibility of all amounts recoverable from reinsurers on paid and unpaid losses and unearned premiums.