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Glossary of Key Terms and Initials
This glossary is made up of definitions (some very old[1]) from a range of sources that I have been given over a period of some years. – the core ones probably being Lloyd’s, CII, Hiscox, Guy Carpenter, Communicade and many of my own.
As in anything, different people can see different words in different contexts

Although there is a good cross-section of words and definitions, there is likely to be more emphasis on Reinsurance (my background).

Bold
Where a word or words are shown in bold there should be(!) a further definition of that particular word.

THIS IS DEFINITELY WORK IN PROGRESS (seems everlasting), especially towards the higher letters in the Alphabet. Any corrections, additions greatly appreciated – please Contact Me

[1] e.g. Insurance Institute of Australia (1985)

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AB INITIO – Latin for from the beginning e.g. “cancelled ab initio” e.g.The cancellation of an insurance or reinsurance contract from its beginning by an insurer or reinsurer on the basis of the misrepresentation and/or non-disclosure of material facts. The result is that the insurer/reinsurer has no liability under the contract but must repay any premium that the insured/reinsured might have received.

ABANDONMENT: Giving up the proprietary rights in insured property to the Underwriter in exchange for payment of a constructive total loss.

ACCEPTANCE: The (re)insurer’s decision to accept a participation in a (re)insurance

ACCIDENT: A fortuitous event, unforeseen and unintended.

ACCIDENT contract YEAR (Occurrence Year)
A term reflecting how a proportional treaty might be accounted – See also Portfolios. In this version there would be a Premium Portfolio in and out each year but NO Loss Portfolio. Losses stay in the year in which they occurred

See also Clean cut, Underwriting Year, Accounts Year

ACCOUNTS RECEIVABLE POLICY: An inland marine (also burglary) policy written to protect the insured from financial loss due to his inability to collect amounts owed him because of the destruction of his records.

ACCOUNTS YEAR: A term reflecting how a proportional treaty might be accounted – See also Portfolios. All premiums and claims that are booked in the quarter are included in that quarter irrespective of which year they might relate to.

ACCUMULATION: Concentration of risks that could result in many losses occurring during one event.

ACQUISITION COST: The costs to an insurer or reinsurer of obtaining its business. These costs include commissions, brokerage, premium taxes and other similar costs but do not include general administrative and operating expenses.

Reinsurers reimburse these acquisition costs to the insurer as commission under proportional treaties.

ACT OF GOD: A flood, an earthquake or other accident or event that is without any human intervention and that could not have been prevented by reasonable care or foresight but is the result of natural causes.

ACTIVE UNDERWRITER (LLOYD’S) The employee of a managing agent who has principal authority to accept insurance and reinsurance risks on behalf of the members of a syndicate.

ACTUAL CASH VALUE: The sum of money required to pay for damages or lost property, computed on the basis of replacement value less its depreciation by obsolescence or general wear.

ACTUAL TOTAL LOSS – This term derives from section 57 of the Marine Insurance Act 1906 (MIA 1906) and refers to situations in marine insurance where – (a) the subject matter of the insurance is destroyed; (b) the subject matter of the insurance is so damaged as to be no longer be capable of still being described as the thing insured; or (c) the insured is deprived of the subject matter of the insurance forever.

Section 58 of the MIA adds that where there is no news of a missing ship then after a reasonable period an actual loss may be presumed.

ACTUARIAL VALUATION The valuation of long-term (Life) or long-tail (Liability) insurance business liabilities determined by an actuary

ACTUARY: A professional person qualified to apply the laws of probability and statistical theory in insurance, reinsurance, investment, pensions and other areas.

ADDITIONAL INSURED: A person or firm or corporation other than the named insured on a policy e.g. An entity providing a mortgage, who is protected against loss by the terms of the policy.

ADJUSTMENT PREMIUM: A further premium payable after the expiry of a reinsurance contract. The adjustment will depend on the agreed Rate and Minimum and Deposit Premiums for a contract.

ADMITTED – see also Non-Admitted ADMITTED CARRIER (U.S.)
An insurance company that has received a license from the State Department of Insurance (US) to write specific lines of insurance using agreed rates and policy forms. Admitted carriers contribute to a state guarantee fund, which is used to pay for losses if an insurance carrier becomes insolvent or unable to pay the losses due to their policyholders.

ADMITTED REINSURER A reinsurer who allowed to accept risk in a given territory by that territories regulator.

ADVERSE SELECTION: Selection against the (re)insurer. e.g. The tendency of to cede (give) more poor risks to a reinsurance treaty rather than good risks.

AGENCY a legal structure where a (re)insurer agrees that another organistion may accept risk, issue policies, handle claims on its behalf.

AGENT – Someone who acts for another person (the principal) usually for reward. There are four main classes of agent that may be involved in the underwriting of insurance and reinsurance risks by Lloyd’s underwriters: members’ agents, managing agents, brokers and coverholders. In addition, there are Lloyd’s agents which are independent businesses that provide surveys and loss adjusting services to managing agents, insurance companies and others on a worldwide basis. Further in some situations one underwriter may act as the agent of other underwriters (see General Underwriters’ Agreement – GUA).

AGREED VALUE POLICY – An insurance contract under which the insurer agrees to pay the insured a stated amount in the event of the total loss of the property insured without any adjustment for depreciation or appreciation. E.g.Veteran Cars, Fine Art, Marine Hull…. See also Indemnity

AGGREGATE LIMIT – Proportional Treaty (Reinsurance) – See also Event Limit An amount on money that is the Maximum that reinsurers will pay following an event.
Any amount of loss from one event that exceeds the Event Limit is known as Proportional “Spillover”

AGGREGATE EXCESS OF LOSS (REINSURANCE) – A form of excess of loss reinsurance in which the excess (Deductible)and the limit of liability are expressed as annual aggregate amounts. e.g. To pay up to $10,000,000 in the aggregate in the year in excess of $5,000,000 in the aggregate in the year. Total of all losses from the account being protected $4,000,000 – no claim on the RI. Total of all losses….$6,000,000 – $1,000,000 claim on the RI
Compare to Stop Loss (Excess of Loss Ratio) reinsurance See also – Catastrophe Aggregate X/L

AGGREGATE EXTENSION CLAUSE (AEC) – Probably the most complex concept and set of words in Reinsurance. Originally goes back to the 1950’s / 1960’s or even earlier. A variation does exist in the 2015’s but I have not seen a copy.

What follows is a very long note for a Glossary – but it is the history and evolution of the AEC and therefore worth including

Aggregate Extension Clauses (AEC)[1]
Concept
To provide cover, from reinsurers, for a number (some times a large number) of claims that arise from a “cause” such as a particular manufacturing process, or a particular faulty production batch.

The original idea was that the individual losses/claims from all policies are all related in some way to a common event or occurrence.

The individual claims on the insurances were not necessarily for large amounts; however when they were aggregated they could amount to large sums and thus present the direct insurer with a substantial financial exposure.

Aggregate Extension clauses in reinsurance have evolved since the early 1900’s in order to meet the demand of direct insurers for protection against the aggregate value/exposure of large amounts of claims, of various sizes under Products Liability policies. This in turn came about because the direct insurance market developed the concept of aggregate limits in their underlying policies via aggregate clauses.

The reinsurance market, predominantly Lloyd’s and London companies developed Aggregate Extension Clauses (AECs) in various Excess of Loss protections in order to allow the reassured to aggregate all the losses emanating from one particular assured or arising out of one occurrence or cause to be aggregated and thus go through the layers of the liability Excess of Loss programme vertically. (Subject of course to the terms and limits of the underlying policy, which may itself have an aggregate limit).

History Aggregate Limits in Insurance The origins in insurance appear to be in the US in the late 1920’s – 1930’s, known as the “Coca Cola” cases i.e. exploding bottles. An Insured, almost invariably a manufacturer, faced a large number of comparatively minor claims (e.g. personal injury or property losses) which were of a related nature, probably arising out of the same manufacturing defect.

In any particular policy year the Insured faced a large amount of individual claims, many of which might have fallen below the policy deductible, with some being within the limits of the policy on a per loss basis – lots of claims, many uncollectable under the insurance.

Thus “to be helpful” the concept of cover in the aggregate, with an annual aggregate limit under the Insurance Policy was created.

In order to protect the insurers exposure, they also required “aggregate” protection from their X/L reinsurers. The first variation was probably; Batches & Lots coverage. This was apparently common in the US during the 1930’s and particularly given by insurers under third party liability insurances (including products liability). Reinsurers on an excess of loss basis (particularly Lloyd’s) agreed to follow the definitions in the underlying policies of “one accident”. The reinsurance contract agreed all injuries to more than one person from a contaminated batch or lot equalled “one accident” .

If all “resultant” injuries were capable of being traced back to one contaminated or defective batch or lot then the claims could be aggregated by the insurers (subject to the limitations of the original policy) and then presented to reinsurers as aggregated claims arising from “one accident” – being the manufacture of a defective product or the contamination of a product. The number of individual occurrences (i.e. injury to each individual person/claimant) was irrelevant.

Aggregate Extension Clause (AEC) – per assured per policy year
It would appear that from the late 1940’s aggregate extension clauses were developed to provide cover on a “per assured, per policy year” basis.

This had a far reaching effect on the reinsurance market.

Up to that stage reinsurance, on an aggregate basis had been for certain classes of business, such as property damage (and products liability as above) arising out of one defective batch i.e. a per occurrence protection.

This change had the effect of changing the liability excess of loss reinsurance to a per risk protection in the aggregate each original policy year

It was this clause that provided the reinsurance protection for the Texas Cattle Feed loss – See Notes at the end.

Prior to this it had been protection to cover losses that occurred during the reinsurance contract period, where all the losses relating to one occurrence, regardless of the number of policies and assured’s involved, could be aggregated.

Aggregate Extension Clauses were normally only found in RI contracts including Third Party Liability and/or Professional Indemnity. If these formed part of a policy that gave wider cover, then the clause would invariably be drafted in such a way so as to limit the application of the AEC to solely Third Party and/or Professional Indemnity business.

There are 2 common forms of AEC, each with their own variations/modifications that have taken place over the years.

Schedule 1 is the more traditional longer form.
Schedule 2 is in a shorter form, and possibly more widely used.
What do the various parts of the AEC actually mean and what is their purpose?
Using Schedule 1, the more traditional and longer form the following various explanations (none of which are watertight!) have been put forward by a number of commentators over the years.

Regrettably these clauses are complex and seem to have various interpretations

Paragraph 1 -Limits
SCHEDULE 1
Limits
As regards liability incurred by the Reinsured for losses on risks covered on an aggregate basis, this Contract shall protect the Reinsured excess of the amounts as provided for herein in the aggregate any one such aggregate loss up to the limit of indemnity as provided for herein in all anyone such aggregate loss.

This describes the main purpose of the AEC by stating that where the Reinsured incurs liability on “risks covered on an aggregate basis” then this reinsurance contract will protect the Reinsured for the same limits etc. also in the aggregate.

What is “risks”?
Is it intended to be reference to an insured peril
i.e. a reference to cause/occurrence?
Some commentators have expressed the view that “risk” in fact means “policies and/or contracts reinsured hereby” i.e. a specific reference to the underlying policies which are protected by the reinsurance rather than the specific underlying perils.

How much can be claimed There will be an aggregate limit in the underlying insurance policy and notwithstanding any aggregation of claims arising out of an underlying aggregate policy, they are still subject to the limits of the reinsurance contract.

Paragraph 2 – Attachment
Attachment
Notwithstanding that this Contract is effected on a “losses occurring during the period” basis, all aggregate policies or contracts coming within the scope of this protection shall be covered on a “risks incepting during the period” basis. Furthermore, where an aggregate policy or contract is issued for limits relevant to an overall period greater than twelve months with an inception date during the period of this Contract then such policy or contract shall be covered hereunder for the whole of its period notwithstanding any annual re-signature. Long term policy periods with annual limits are to be treated as each annual period being a separate policy or contract with an anniversary date being regarded as the inception date. It is understood and agreed that the inception date of each declaration or” signing off” a contract shall govern its date of attachment to this Contract.

The relevant reinsurances were almost invariably on a “losses occurring during the period” basis. That presents problems when claims that can be aggregated by the underlying insured and also the direct Insurer may emanate from different dates of loss or the dates may not be available. Some of the losses will be outside the period of cover provided by the reinsurance.

The purpose of this paragraph is to deal with this problem. The effect of paragraph 2 is to make the reinsurance contract a “risks incepting during the period” policy. However when cover is applied to risks which incept during the period, then further problems can arise. Aggregate insurances may be placed for a period greater than 12 months. This paragraph allows the contract to cover the whole of the underlying insurance period.

In the case of original long term policies, with annual limits and anniversary dates, then the inception date is deemed to be the anniversary date for each annual period. For declarations which are made off any lineslips or binders, then the applicable inception date is that of the individual declaration.

Paragraph 3 -Accumulation It is understood and agreed that policies or contracts to which such aggregate risks attach, effected directly and/or by way of reinsurance, in a series of “layers” (whether immediately excess of each other or otherwise) shall be deemed to be one aggregate risk for the purposes of this Contract provided such policies and/or contracts have inception dates during the period of this Contract. In any event of the Reinsured being involved in a loss from more than one policy and/or contract and such policies and/or contracts attach in different years, the terms of the Interlocking Clause shall be applied.

The underlying aggregate insurance policy, (or the underlying reinsurances) that provide aggregate cover, may have been placed in a series of layers, and these may incept at different times, because of the requirements of the underlying assured and their insurers. This paragraph confirms that the inception date of each layer governs its attachment. It also refers to the interlocking clause (which is the last paragraph). This is the means by which any layer whose inception date falls outside the period of the reinsurance contract can be brought into effect. A series of layers will also be protected whether they are directly excess of each other or not.

Paragraph 4 -Single Cause Single Cause Furthermore, in circumstances in which one event or occurrence or series of events or occurrences originating from one cause affects more than one policy or contract issued to different Assureds or Reassured’s, then in such circumstances, a series of policies or contracts so issued shall be deemed to constitute one aggregate risk for the purpose of this Contract, provided that each policy or contract has inception during the period of this Contract. Nevertheless, in circumstance in which the policy or policies of more than one Assured are involved in an aggregation of losses, only that part of the aggregation concerned with and originating from the one cause shall be considered as being covered by this Contract in respect of each and every loss, etc etc. In the event of the Reinsured being involved in a loss from one cause as referred to above and such loss arises from more than one policy and/or contract and such policies and/or contracts attach in different years, the terms of the interlocking clause as set out below shall be applied.

“Cause” is quite a rare word in a reinsurance contract. Far more common is -“event, loss, occurrence, catastrophe” etc.

There are problems when something happens that gives rise to numerous claims from various different assured’s, all of which can be said to have originated from one cause. A “cause” example could be a pharmaceutical drug which is subsequently found of bring about unwelcome side effects; another example would be a defective manufacturing process which inherently brings about a defect in a product which causes injury .These sort of claims are likely to form part of an original aggregate policy issued to several different assured’s and therefore the losses that arise as a result of that one cause, which are claims on various different aggregate insurances or reinsurances, can be taken together and be treated as one loss under the contract.

If there are different inception dates for each assured/reassured, then this paragraph may also be subject to the interlocking clause formula. –
Paragraph 5 -Reinsured’s Option
Notwithstanding the foregoing the Reassured, as an alternative, has the opinion to extract from an aggregate policy or contract the amount of the loss sustained by them arising from any one accident and/or series of accidents arising out of one event in order that such loss can be added to the Reinsured’s losses from accidents or series of accidents arising from the same event on other cessions provided that the loss occurs during the period of this Contract.

This enables the Reinsured, at their option, to extract from the original aggregate policy the amount/claims that relate to one specific event and add them to the amounts paid on other polices or contracts (possibly it is irrelevant whether those other policies are on an aggregate basis or not) in order to ascertain the reinsured’s overall ultimate net loss. The “event” in question must occur within the period of the reinsurance. This has the effect of converting the policy from a risks – incepting basis to a losses occurring basis.

Paragraph 6 -Pro-Rating of Losses
Pro-Rating of Losses For the purposes of paragraphs 4 and 5 of this Clause, the amount of a loss from one accident or series of accidents arising out of one event or cause on an aggregate policy or contract shall be deemed to be that percentage of the aggregate loss to the Reinsured on the original policy or contract that the total loss from the particular accident bears to the total aggregate losses to the original Assured or Reinsured on the business protected.

This is a requirement whereby the reinsured needs to calculate the amount of loss that can relate either to an individual cause (paragraph 4) or an individual event (paragraph 5).

Interlocking Clause In the circumstances provided for in the above Aggregate Extension Clause, it is hereby understood and agreed that the amount of the excess to be retained by the Reinsured’s under this contract shall be reduced to that percentage of loss which the Reinsured’s settled losses on the original policies and/or contracts incepting during the period of this Contract bear to the total of the Reinsured’s settled losses arising out of all the policies and/or contracts contributing to the loss. The Indemnity and/or Recovery hereunder shall likewise be arrived at in the same manner .

Excess of loss contracts which provide cover on a “risks incepting” basis, or “policies issued” or on an Underwriting Year of Account basis may well face a circumstance that when a large loss occurs some settlements will be made on contracts which incept in different years of account or which attach to different underwriting years of account.

For example, a loss occurs on the 30th June 2013. This could give rise to claims on polices which incept during 2012 or during 2013 (or on underwriting years 2012 or 2013). As paragraphs 3 and 4 relate to underlying policies which have inception during the period of the reinsurance contract, it is possible, under the terms of paragraph 3, for different layers of the same original aggregate insurance policies to incept both within and outside the period of this contract. Similarly, in situations where paragraph 4 is applicable, the original insurance policies for some insured’s may incept during the period of the contract of reinsurance while others may not. The interlocking clause was introduced so that the original insured/reinsured may still only bear the equivalent of one deductible. The insured is allowed to reduce the limit and excess point of his protection for the years involved by the proportion which the total claims for each year bear to the overall total that has been presented by way of aggregation.

Schedule 2
Turning now to the clause set out in Schedule 2 this is a more modern clause, which has been revised and changed over the years. However it is shorter than the more traditional clause. Essentially paragraphs 1 to 4 of the traditional – clause are present. However, paragraph 5 (Reinsured’s Option) and paragraph 6 (Pro-Rating of Losses) have been omitted. There is no interlocking clause (probably because it was not sufficiently understood!) although in this particular example there is a paragraph that excludes stop loss reinsurances, which is not uncommon.

A simple Test to apply Consider whether the underlying policy is required to meet its obligations for indemnity on the basis, for example, of a large amount of small claims, with each claim being dealt with separately within policy limits. If the claims are required to be aggregated for the purposes of the underlying aggregate limits, then that policy is almost invariably an aggregate policy.

Similarly, if the “risk” which is covering on an aggregate basis, is a policy such as above – i.e. being a policy and/or contract covering on an aggregate basis – then the Reinsurer protects the Insurer on an aggregate basis subject to aggregate limits i.e. the insurer is entitled to aggregate all losses relevant to individual assured/policies for the purposes of aggregate limits and then promotion by the AEC.

SCHEDULE 2 As regards Liability business and Professional Indemnity business only, the following clause shall apply:-

As regards liability incurred by the Reassured for losses on risks covering on an aggregate basis, if requested by the Reassured this Reinsurance shall protect the Reassured excess of the amounts as provided for herein in the aggregate any one such aggregate loss up to the limit of Indemnity as provided for herein in all, any one such aggregate loss.

For this purpose, losses on such aggregate risks having inception dates during the period of this Reinsurance shall be deemed to be covered hereunder. The inception date applicable hereon in respect of a continuous Policy and/or Contract or of a long term Policy and/or Contract subject to re-signature or of a declaration or signing-off’ a Contract shall be the inception date of the actual period applicable for the purposes of the original Policy limits.

It is understood and agreed that Policies or Contracts, to which such aggregate risks attach, effected directly and/or by way of reinsurance, in a series of “layers” (whether immediately excess of each other or otherwise) shall be deemed to be one aggregate risk, and in the event of the aforesaid “layers” having different inception dates the inception date of the lowest layer in which the Reassured has an interest shall be deemed to be the inception date of the series of “layers” for the purposes of this reinsurance.

Furthermore, in circumstances in which one event or occurrence or series of events or occurrences, originating from one cause, affects more than one Policy or Contract issued to different Assureds or Reassured’s than in such circumstances, a series of Policies or Contracts so issued shall be deemed to constitute one aggregate risk for the purposes of this Reinsurance provided that each Original Policy or Contract has inception during the period – of this Reinsurance. Nevertheless in circumstances in which the Policy or Policies of more than one Assured are involved in an aggregation of losses, only that part of the aggregation concerned with and originating from the one cause shall be considered as being covered by this Reinsurance in respect of each and every loss.

How have the Courts interpreted AEC Clauses?
Denby v Marchant (1996) Yasuda v Lloyds (1998) Appeal Court Decision (1998)
In each case the reinsured was trying to recover from reinsurers sums which they had paid out to original insureds,
“losses on risks covered on an aggregate basis”- were the original polices written on an “aggregate basis” ?

In the high court two different decisions were made – so both went to the Court of Appeal together.
“Standard clauses should be given understood meanings that should not differ unless specifically shown to differ”
Many variations of the AEC exist. It was apparently withdrawn in the mid 1980’s

The aggregate extension clause provided too wide a range of cover under a treaty for separate losses. Problems had arisen with the number of asbestos and pollution claims arising from the United States of America.

It was replaced by what was called TPX (1986), now just called a Claims Series Clause – still in use

Purpose: To more clearly define what is meant by one “occurrence” or “event”. For the purpose of this clause a Claims Series event shall be defined as a series of two or more claims arising from one specific common cause which is attributable to one design and/or specification and/or formula in products and/or services supplied by one and only one original insured (where one programme covers more than one insured all parties protected by that programme shall be seemed to be “one insured” for the purposes of this clause)

Basis of recovery hereunder Notwithstanding anything to the contrary contained within this reinsurance agreement and subject to the specific exclusions listed below and subject to the special reporting provisions set out below, it is understood and agreed with regard to policies of Public and/or Products Liability and/or Professional Indemnity that where the legal liability of one original insured is established in respect of a Claims Series Event as defined above, then for the purposes of recovery hereunder such a Claims Series event shall be seemed to be one occurrence whose date of loss shall be determined strictly on the basis set out below.

Date of Loss Claims made (insurance) Policies To apply in respect of policies and/or sections thereof issued on a claims made basis:
For the purpose of the foregoing the date of loss of such a Claims Series Event shall be deemed to be the earliest date recognised by the reinsured as being that applicable to a claim of the claims series event under the terms of the original claims made policy or policies which contributes to the ultimate net loss applicable hereto.

The applicable Reinsurance Agreement Year shall be determined as the year in which the original policy with the earliest inception date to which a claim of a Claims Series Event affects falls. This determination shall be made at the time of the reinsured first notifies the reinsurer in writing of the possibility of a Claims Series Event and shall not be subject to any further amendment.

Losses Occurring during (insurance) Policies To apply in respect of policies and/or sections thereof issued on a losses occurring basis:

For the purpose of the foregoing the date of loss of such a Claims Series Event shall be deemed to be the earliest date recognised by the reinsured as being that applicable to a claim of the Claims Series Event under the terms of the original losses occurring policy or policies which contributes to the ultimate net loss applicable hereto.

Claims Made and Losses Occurring (insurance) policies Combined To apply in respect of a combination of policies and/or sections thereof issued on a claims made basis and on a losses occurring basis:

For the purpose of the foregoing the date of loss of such a Claims Series Event shall be deemed deemed to be the date that the reinsured first notifies reinsurer in writing of the possibility of a Claims Series Event affecting reinsurers.

Exclusions In addition to the exclusions contained in the EXCLUSIONS Article the following are excluded from recovery in accordance with this clause.

a) A Claims Series Event which has been notified to any reinsurer prior to inception or rnewal of this agreement
b) Loss occurrences prior to 1^st August 2015 unless arising from policies written on a claims made on or after 1^st August 2015
c) That part of a Claims Series Event which arises from any policy issued or renewed after notification to reinsurers of such Claims Series Event
However, this provision shall not exclude further claims arising from the specific common cause already notified to the reinsurers in respect of the products which have been already put into circulation at the first renewal date of the policy after the notification subject to the overall recovery being limited to the reinsurance coverage in force at the date of loss determined strictly on the before-mentioned basis.

AGGREGATE LIMIT (See Event Limit)

AGGREGATION
The aggregate of liabilities for a single risk caused by cover being provided under a number of different reinsurance contracts

ALIGNED MEMBER (Lloyd’s) A corporate member of a syndicate that is directly or indirectly owned by the same firm that owns the managing agent of the syndicate. See also Dedicated Vehicle

ALL RISKs: Insurance against loss or damage to property arising from any fortuitous cause, except such as may be specifically excluded.

ALTERNATIVE RISK TRANSFER (ART) A generic description of non-traditional insurance or reinsurance protection mainly offered by financial markets and banking institutions.

– See also Insurance Linked Securities, Catastrophe Bonds, Industry Loss Warranties, Finite Reinsurance

ALWAYS OPEN A term used on reinsurance slips indicating that unless cancelled by either party, the proposed contract will remain current.

ANNUAL ACCOUNTING (Lloyd’s) The reporting of Lloyd’s Syndicate results on a calendar year basis with profit taking being restricted to earned premiums.

ANNUAL AGGREGATE LIMIT In non-proportional (X/L) the amount forming the limit of the reinsurance cover for the aggregate of all losses affecting that contract in the year.

ANNUAL VENTURE The system used for running a Lloyd’s syndicate under which each ‘year of account’ is treated separately. Members own capacity on a syndicate for a specific ‘year of account’ and the results are finally declared when the year is closed by the RITC (Reinsurance to Close) mechanism, usually after three years.

ANY ONE RISK COVER (Reinsurance) A type of working cover normalIy on an excess of loss basis designed to protect the cedant‘s liability on an individual risk. This arrangement is usually subject to an aggregate limit in order to limit the reinsurers’ catastrophe exposure.

APPRECIATION – In the context of property insurance an increase in value of the property insured.

APPROVED PERSON – An individual who has been approved by the Regulator to perform a Regulator Controlled function.

APPROVED RUN-OFF COMPANY (Lloyd’s) – A company that is permitted by Lloyd’s to perform specified functions that would normally be performed by a managing agent of a run-off syndicate on behalf of that agent or a substitute agent.

ARBITRATION CLAUSE A clause that provides for a means of resolving a dispute without litigation (going through the courts) by Arbitration. Usually both parties appoint an Arbitrator, with the two chosen choosing a third (Umpire).

ART See Alternative Risk Transfer

AS EXPIRY Expression used where it is proposed that an insurance should be renewed at its prior period’s terms.

AS ORIGINAL A term used in reinsurance to denote that the reinsurance is on the same Conditions as the Original insurance. Handle with care. Under English Law this phrase will NOT automatically carry forward Law, Jurisdiction and/or Arbitration for the Original Insurance. If you know what you want in the reinsurance- specify it clearly.

ASSIGNMENT: The passing of beneficial rights from one party to another.

ASSIGNED RISK: (US) A risk which underwriters do not care to insure, but because of state law or otherwise, the insured must be protected and the insurance is therefore handled through the state and assigned to companies.

ASSUME Accept all or part of a risk

ASSUMED LIABILITY: Liability which would not rest upon a person except that he has accepted responsibility by contract expressed or implied. This is also known as Contractual Liability.

ASSUMPTION CERTIFICATE See “Cut through Clause”.

ASSURED – Another name for an insured. Traditionally Assured, Assurance has been used for Life business (it is “assured” (certain) we are going to die. Insurance being used for non-life. However the Marine Insurance Act MIA (1906) refers to Assurance as well..

ATTACHMENT DATE – Another term for inception date, being the date on which an insurance or reinsurance contract comes into force.

ATTORNEY IN FACT (Lloyd’s)- A representative of the Society in certain overseas territories.

AUTOMOBILE FLEET POLICY: A commercial automobile policy covering a number (often five or more) automobiles.

AVERAGE a) The arithmetical mean b) Non-Marine Insurance If the sum insured under non-marine insurance is expressed to be “subject to average” and that sum insured is less than the value of the subject matter of the insurance then any claim that is agreed under the policy should be reduced proportionately to reflect the under insurance. e.g SI $1,000,000 – Actual Value $2,000,000 Claim $50,000 Settlement 1,000,000/2,000,000 x 50,000 = $25,000 c) Marine Insurance The term average refers to one of two types of loss – see General Average and Particular Average.

AVERAGE ADJUSTER One who assesses and apportions losses in Marine Insurance, notably General Average losses

[1] Based on “The Legal Pivot” – Francis Maoke (date unknown)

A only

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