BIBF Professional Award for Specialist Insurance Practitioner flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Insurable interest

A pecuniary or legally recognised relationship between the insured and the subject matter of insurance. Without it, the contract is unenforceable, and recovery is limited to the extent of the interest.

Proximate cause

The dominant and effective cause of a loss, determined by assessing which peril set the others in motion. It decides whether the loss falls within the policy's insured perils.

Moral hazard

The risk that an insured's dishonest intent or character increases the likelihood or size of a claim. Underwriters manage it through investigation, conditions and claim scrutiny.

Utmost good faith

The mutual duty requiring the insured to make a fair presentation of the risk and the insurer to act in good faith in underwriting and claims handling.

Contra proferentem

A rule of contractual interpretation under which ambiguous policy wording is construed against the party that drafted it, usually the insurer.

Subrogation

The insurer's right, after paying an indemnity, to step into the insured's shoes and pursue recovery from the third party responsible for the loss.

Contribution

The right of one insurer to recover a proportionate share from other insurers covering the same interest, peril and period, preventing double recovery by the insured.

Warranty in insurance

A policy term that must be complied with exactly. Breach discharges the insurer from liability, often automatically from the date of breach.

Risk-based capital

A solvency framework requiring insurers to hold capital proportionate to the risks they run, including underwriting, market, credit and operational risk.

Customer due diligence

Anti-money laundering procedures requiring identification and verification of customers, beneficial owners and the purpose of the business relationship.

Senior manager regime

A regulatory framework allocating prescribed responsibilities to named senior individuals, making them personally accountable for the areas they control.

Technical premium

The risk-based price comprising expected loss cost, expenses, cost of capital and profit margin, with loadings for volatility and uncertainty.

Combined ratio

The sum of the loss ratio and expense ratio. A figure above 100% indicates that underwriting is running at a loss before investment income.

Binding authority

A written agreement allowing an intermediary or underwriter to accept risks on an insurer's behalf within defined limits, terms and referral requirements.

Average condition

A policy condition applying where the sum insured is less than the value at risk, reducing the claim payment in the same proportion as the underinsurance.

IBNR reserves

Incurred but not reported reserves. Estimates for losses that have occurred but are not yet notified or fully recorded, projected using actuarial development methods.

Salvage

Damaged property or residual value that transfers to the insurer after an indemnity is paid, with any disposal proceeds reducing the net claim cost.

Gross profit

Turnover less raw materials, consumable supplies and other variable costs. It is the standard measure of insurable loss under business interruption cover.

Indemnity period

The maximum period, starting at the date of damage, over which business interruption loss is measured and paid, subject to the sum insured.

Reinstatement basis

A property settlement basis paying the cost of rebuilding or replacing with new property of equivalent type, rather than the depreciated market value.

Claims-made policy

A liability policy responding to claims first made and notified during the policy period, regardless of when the underlying act occurred.

Retroactive date

The date on a claims-made policy before which acts or omissions are excluded from cover, defining how far back protection extends.

General average

A maritime principle requiring cargo and ship interests to contribute proportionately to a voluntary sacrifice or expenditure made to save the adventure.

Institute Cargo Clauses C

Restricted named-perils cover for cargo, narrower than B and A, responding to major casualties such as fire, explosion, grounding, collision and sacrifice.

Constructive total loss

A loss where the subject matter is not destroyed but the cost of recovery and repair exceeds its insured value, allowing a total loss claim.

Silent cyber

Unintended cyber exposure arising within traditional property and liability policies that neither expressly cover nor exclude cyber-related loss.

Contractors' all risks

A construction policy covering works, plant, equipment and third-party liability during the construction period, including specified testing and maintenance extensions.

Quota share treaty

A proportional reinsurance arrangement in which the reinsurer accepts a fixed percentage of every risk's premium and loss within the treaty scope.

Excess of loss treaty

A non-proportional reinsurance arrangement in which the reinsurer pays losses above the cedant's retention up to the limit of the layer.

Follow the settlements

A reinsurance clause binding the reinsurer to the cedant's good-faith claim settlements, provided they fall within the terms of the original policies.

Unearned premium reserve

The portion of written premium relating to the unexpired part of the policy term, held as a liability and released as the cover is earned.

Client money segregation

A regulatory requirement to hold premium and claim funds in separate trust accounts, reconciled regularly to protect clients if the firm fails.