Glossary

A form of underwriting designed to be both less invasive and faster from the time of application to issue. This approach relies on more non-traditional techniques, including the use of predictive models and new data sources, to rate certain applicants. 

A specialist in the mathematics of risk, especially as relates to such insurance calculations as premiums, reserves, dividends, and insurance and annuity rates.

An amount paid by the reinsurer to the ceding company to help cover the ceding company's acquisition and other costs, especially commissions. Allowances are usually calculated as a large percentage (often 100%) of the first-year premiums reinsured and account for smaller percentages of renewal premiums reinsured.

A contract that provides for income payments to an insured at regular intervals, either for a specific period or for the lifetime of the insured, in exchange for premiums.

A transaction for which the key element is often performance of the underlying assets, more so than any mortality risk. The transaction is usually for coinsurance or funds withheld, and often involves reinsurance of annuities.  

A report by the treating physician or medical facility regarding the medical condition of a patient who applies for insurance. This is one of the most common sources of medical background information used in underwriting. 

Reinsurance arrangement whereby the ceding company and reinsurer agree that all business of a certain description will be ceded to the reinsurer. Under this arrangement, the ceding company performs underwriting decision-making within agreed-upon parameters for all business reinsured.

The provision of insurance and banking products and services through a common distribution channel and/or to the same client base.

A term generally referring to datasets so large they require specialized software tools and expertise to capture, store, or process the information. The five dimensions (“the five V’s”) of big data are Volume, Variety, Velocity, Veracity, and Value. In life and health insurance, big data can reveal more-complex patterns and trends related to mortality, morbidity, and the propensity of insurance consumers to purchase or retain protection products.

Reinsurance, including financial reinsurance, for which the primary purpose is to enhance the cedant’s capital position.  

An insurance or reinsurance entity designed to provide insurance or reinsurance coverage for risks of the entity or entities by which it is owned or with which it is affiliated.

An insurer that transfers, or cedes, risk to a reinsurer.

The insurance risk associated with a policy that is reinsured from an insurer to a reinsurer.

Demand on an insurer or reinsurer for payment under the terms of an insurance policy.

The acquisition of a block of insurance products that are discontinued but still have active policyholders.

A form of reinsurance under which the ceding company shares its premiums, death claims, surrender benefits, dividends, and policy loans with the reinsurer, and the reinsurer pays expense allowances to reimburse the ceding company for a share of its expenses.

A party to a contract requiring or offering the exchange of risk.

The risk that a party to an agreement will be unable to fulfill its contractual obligations.

Insurance that provides a guaranteed fixed sum upon diagnosis of a specified illness or condition such as cancer, heart disease or permanent total disability. The coverage can be offered on a standalone basis or as an add-on to a life policy.

An area of information technology (IT) that addresses security issues and how much, or how little, personally identifiable information can be held in a computer system or shared with third parties.   

An enterprise-wide framework used by a firm to assess all risks facing the organization, manage mitigation strategies, monitor ongoing risks, and report to interested audiences.

A form of non-proportional reinsurance in which the reinsurer  indemnifies a ceding company for losses exceeding a specified limit.

Number of deaths predicted to occur in a defined group of people.

Amount payable at the death of the insured or at the maturity of the policy.

A type of reinsurance in which the reinsurer underwrites an individual risk submitted by the ceding company for a risk that is unusual, large, highly substandard, or not covered by an automatic reinsurance treaty. Such risks are typically submitted to multiple reinsurers for competitive offers.

A form of capital-motivated reinsurance that satisfies all regulatory requirements for risk transfer and is often designed to produce very predictable reinsurer profits as a percentage of the capital provided.

Insurance policy under which the lives of a group of people, most commonly employees of a single company, are insured in accordance with the terms of one master contract.

Insurance products that are guaranteed upon application, regardless of past health conditions.  

Standards and interpretations adopted by the International Accounting Standards Board (IASB).

An applicant who represents an underwritten risk for life insurance that is higher than an underwritten risk at standard rates. An applicant can be considered “impaired” due to medical condition, hazardous activities, or other reasons.   

A measure of insurance in effect at a specific date.

An insurance policy that insures the life of usually one, and sometimes two or more, related individuals, rather than a group of people.  

An insurance program designed to promote improved health and customer engagement. Health tracking often relies on data from wearable devices and biometric screenings to monitor progress. Typically participants are offered premium discounts, cash rewards, or other incentives to participate.

A collection of companies and technologies seeking to streamline the insurance application and claims management processes, enhance the consumer experience, and increase competition. 

A life insurance benefit enabling the policy owner to access the cash value and/or death benefit of a policy while still living, generally when the insured faces terminal, critical, or chronic illness or disability. 

An insurance product that mitigates longevity risk by providing a stream of income for the duration of the policyholder's life.

An insurance, reinsurance, or derivative contract designed to exchange (“swap”) a fixed payment stream for a variable payment stream that is dependent on the longevity or survival of a defined group of lives. For example, the variable payment stream can be defined as the benefit payments to be paid under a defined benefit pension plan, or as the benefits paid to the annuitant under an insurance contract. The fixed payment stream would be the expected payment stream plus a margin.   

A variant on coinsurance in which the ceding company retains all the reserves, as well as assets backing reserves, and pays the reinsurer interest on the reinsurer’s share of the reserves.

A measure of the incidence of sickness or disease within a specific population group.

Actual number of deaths occurring in a defined group of people.

Removing some of the major mortality or lapse risk associated with life insurance from the client company.

The act of replacing one participating member of a contract with another, with all rights, duties and terms being transferred to the new party upon consent of all parties affected.

See coinsurance.

The totality of risks assumed by an insurer or reinsurer.

A process employing algorithms and statistics by which current or historical facts are used to create predictions about future events or behaviors.

Coverage designed for applicants who represent a better-than-average risk to an insurer.

Amount paid to insure a risk.

Insurance business relating to contracts directly between insurers and policyholders. The insurance company is directly responsible to the policyholder.

A reinsurance arrangement in which the reinsurer receives a certain percentage of each risk reinsured.

The transfer of insurance risk from an insurer, referred to as the ceding company, to a reinsurer, in conjunction with the payment of a reinsurance premium. Through reinsurance, a reinsurer ‘insures’ an insurer.   

The amount required to be carried as a liability in the financial statement of an insurer or reinsurer to provide for future commitments under outstanding policies and contracts. 

A form of reinsurance that is acceptable within Islamic law. See Takaful.

The maximum amount of risk a company will insure on one life. Any amount in excess of the retention limit must be reinsured.

A transfer of reinsurance risk from a reinsurer to another reinsurer, referred to as the retrocessionaire, in conjunction with the payment of a retrocession premium. Through retrocession, a retrocessionaire reinsures a reinsurer.

A reinsurer that reinsures another reinsurer. See Retrocession.

The structuring of financial assets as collateral against which securities can be issued to investors.

Insurance products with limited face amounts that require no or minimal underwriting.

Contracts within a stable value fund that provide a limited guarantee on a high-quality, diversified portfolio of fixed income assets. These contracts, combined with the fixed income assets, provide principal protection. While offering returns similar to short-term bond funds, these investment portfolios have similar protective qualities of money market funds.

The excess of statutory assets over statutory reserves, both of which are calculated in accordance with standards established by insurance regulators.

A form of insurance that is acceptable within Islamic law, and that is devised upon the principles of mutual advantage and group security.

A reinsurance agreement between a reinsurer and a ceding company. The three most common methods of accepting reinsurance are automatic, facultative, and facultative-obligatory. The three most common types of reinsurance treaties are YRT (yearly renewable term), coinsurance, and modified coinsurance.   

The process by which a company assesses the risk inherent in an application for insurance prior to acceptance of the policy.

The periodic calculation of reserves, the funds that insurance companies are required to hold in order to make good on all future insurance obligations.

A form of whole life insurance under which the death benefit and the cash value of the policy fluctuate according to the performance of an investment fund. Most variable life insurance policies guarantee that the death benefit will not fall below a specified minimum.