BIBF Professional Award in Insurance Management (PAIM) key terms

The chance of loss or an outcome differing from what was expected, measured as the combination of how likely an event is and how severe its impact would be.

A situation offering only the possibility of loss or no loss, with no chance of gain, such as fire damage to a building. This is the type of risk insurance is designed to handle.

A situation where outcomes may be a gain, a loss, or no change, such as investing in shares or launching a product. It is normally not insurable because the chance of gain is deliberate.

A legal and financial stake in the subject matter of insurance such that the insured benefits from its survival and suffers from its loss. It must exist when cover is taken out and, for property, at the time of loss.

The rule that a property or liability claim should restore the insured to the financial position held before the loss, no better and no worse. It prevents profit from loss and underpins subrogation.

The mutual duty on proposer and insurer to disclose all material facts and avoid misleading statements, so that the insurer can properly assess and price the risk it accepts.

Any information that would influence a prudent insurer's decision to accept a risk, set its terms, or calculate the premium. Failure to disclose it can allow the insurer to avoid or adjust the contract.

The dominant, effective cause of a loss, the one that sets the chain of events in motion without a new intervening force. Insurers apply it to decide whether a policy responds.

The insurer's right, after paying a claim, to step into the insured's shoes and recover the loss from the party responsible, preventing double recovery by the insured.

The right of an insurer that has paid a claim to recover a share from other insurers covering the same loss under the same interest, so each bears its fair proportion.

Supervision of an insurer's financial soundness, including capital adequacy, reserves, governance and risk controls, aimed at protecting policyholders and the stability of the wider market.

Rules governing how insurers and intermediaries treat customers, covering fair treatment, disclosure, complaints handling and sales practices, rather than financial soundness.

A regulatory and ethical principle requiring firms to deliver fair outcomes for customers throughout the product lifecycle, including design, marketing, advice, claims and after-sales service.

An assessment by regulators of whether directors, senior managers and key function holders have the honesty, competence, financial soundness and integrity required for their roles.

Controls requiring insurers and intermediaries to identify customers, verify beneficial ownership, monitor transactions and report suspicious activity, reducing the use of insurance products to launder criminal proceeds.

The process of identifying a client, verifying identity documents and understanding the purpose of the relationship before providing cover or accepting premium payments.

The process of evaluating a proposed risk, deciding whether to accept it, on what terms and at what price, and setting conditions that reflect the likelihood and size of potential loss.

The increased likelihood of loss caused by the attitude or behaviour of the insured, such as carelessness or deliberate damage, once cover is in place. Underwriters counter it with deductibles and conditions.

The tendency for people with higher-than-average risk to seek insurance more actively than low-risk applicants, which can distort a pooled premium unless underwriters screen and price accordingly.

Combining many independent exposures so that the premiums of the many fund the losses of the few, making individual losses more predictable in aggregate and enabling affordable cover.

The statistical principle that as the number of similar independent exposures increases, actual loss experience converges towards the expected average, improving the reliability of premium calculations.

The amount of each loss the insured must bear before the insurer pays, reducing small claims and giving the policyholder a financial reason to prevent loss. Also called an excess.

The end-to-end handling of reported losses, from notification and verification through assessment, negotiation, settlement and recovery, aiming for fair, prompt and cost-effective outcomes.

An independent specialist appointed to investigate a claim, establish the cause and value of damage, and recommend a settlement to the insurer in line with policy terms.

The residual value of damaged property recovered by the insurer after paying a total loss, which is sold or credited to reduce the net cost of the claim.

Insurance bought by an insurer to transfer part of its accepted risk to another insurer, protecting capital, smoothing results and increasing the volume of business it can write.

A proportional reinsurance arrangement in which the reinsurer accepts a fixed percentage of every risk within a defined class, sharing the same proportion of premium and losses.

The amount or proportion of risk an insurer keeps for its own account after ceding the remainder to reinsurers, whether expressed as a sum insured or a percentage.

The excess of an insurer's admissible assets over its required liabilities and capital, providing a buffer against unexpected losses and demonstrating ability to meet obligations to policyholders.

The process of estimating the funds an insurer must hold for claims already incurred but not yet settled, including reported claims and losses that have occurred but not been reported.

The liabilities an insurer recognises for its insurance obligations, comprising best-estimate reserves for claims and premiums plus a risk margin reflecting the uncertainty of those cash flows.

A measure of underwriting performance calculated by adding the loss ratio to the expense ratio. A figure below 100 percent indicates an underwriting profit before investment returns.

Incurred claims expressed as a percentage of earned premium over a period, showing how much of the premium collected is consumed by paying losses.

Underwriting expenses, such as acquisition costs and administration, expressed as a percentage of written premium, showing the cost of producing and servicing the business.

Handling a transaction automatically from submission to completion without manual re-keying, using integrated systems and rules so that routine quotes, policies and claims are processed faster and more consistently.

Older software or hardware still in use that may be costly to maintain and hard to integrate, often constraining an insurer's ability to modernise operations and use data effectively.

The accuracy, completeness and consistency of data held across systems and over time, which underpins reliable pricing, reserving, reporting and regulatory compliance.

The framework of board structures, accountability, controls and disclosure through which an insurer is directed and supervised, balancing the interests of shareholders, policyholders and regulators.

The amount and type of risk an insurer is willing to accept in pursuit of its objectives, expressed in qualitative statements and quantitative limits that guide underwriting, investment and capital decisions.

A firm-wide approach to identifying, assessing, monitoring and managing all significant risks, including insurance, market, credit, operational and strategic risks, within a single governance framework.

A governance model in which operational management owns risk, a separate risk and compliance function oversees it, and internal audit provides independent assurance to the board.

Situations where an individual's or firm's own interests, or duties to another party, could improperly influence decisions made on behalf of a client, requiring disclosure, avoidance or management.

The professional quality of honesty, consistency and adherence to ethical principles, including placing client interests appropriately and resisting pressure to act improperly.

Raising concerns, internally or with a regulator, about wrongdoing, unsafe practices or breaches of regulation observed at work, protected by law and by firm policies against retaliation.