FCIP F560 key terms

The documented limit within which an underwriter may accept, modify, or decline a risk without escalating to a supervisor, usually stated as premium, exposure, or risk-class boundaries.

The tendency for applicants with higher-than-average expected losses to seek or retain coverage more actively than lower-risk applicants, which can distort a pooled book unless pricing and screening respond.

The added loss potential created when insurance reduces an insured's incentive to prevent or control a loss, addressed through deductibles, coinsurance, exclusions, and claims investigation.

The underwriting process of evaluating individual submissions against appetite and pricing standards so that accepted business supports the insurer's target loss ratio and capital position.

The amount of each covered loss the insured absorbs before the insurer pays, which reduces small claims volume and shares loss exposure between insured and insurer.

A property policy provision requiring the insured to carry limits at a stated percentage of value; failure to comply reduces recovery in proportion to the shortfall.

A loss settlement basis equal to replacement cost less physical depreciation, reflecting the pre-loss value of damaged property rather than the cost to buy new items.

A formal sworn statement from the insured detailing the date, cause, and amount of loss, submitted within a policy-required period and used to document the claim file.

The insurer's right, after paying a claim, to pursue recovery from the party legally responsible for the loss, standing in the insured's shoes to the extent of the payment.

Damaged property or residual value the insurer takes ownership of after settling a total loss, which is sold to offset claim cost and reduce net loss.

An agreement under which the reinsurer automatically accepts a defined share of every risk the ceding insurer writes that falls within the treaty's stated scope and limits.

Reinsurance arranged risk by risk, with the reinsurer free to accept or decline each submission, typically used for exposures exceeding treaty capacity or outside treaty terms.

The portion of loss or exposure an insurer keeps for its own account after reinsurance, a key input to capital needs and volatility tolerance.

An allowance paid by the reinsurer to the ceding insurer to cover acquisition and administrative costs on ceded business, often expressed as a percentage of ceded premium.

A reinsurance structure that reimburses the ceding insurer for aggregate catastrophe losses above a stated retention, protecting surplus against single-event or annual accumulation shock.

An estimate of the largest loss a property portfolio is likely to sustain from a defined event scenario, used to size catastrophe reinsurance and capital buffers.

Incurred losses and loss adjustment expenses divided by earned premium for a period, a core indicator of pricing adequacy and underwriting performance.

The sum of the loss ratio and expense ratio; a result below 100 percent indicates an underwriting profit before investment income is considered.

Underwriting expenses, including commissions and general overhead, divided by written or earned premium, measuring the cost of acquiring and servicing business.

The total cost of losses attributable to a period, combining paid amounts and changes in outstanding case and incurred-but-not-reported reserves.

A liability estimate for claims that have occurred but are not yet reported, or are reported but not sufficiently developed, established using actuarial projection methods.

A claim-specific estimate of the remaining cost to settle a known reported claim, set by adjusters and revised as investigation and development proceed.

A reserving technique that projects ultimate losses by applying historical development factors to cumulative paid or incurred losses at successive maturity ages.

A tabular arrangement of cumulative losses by accident period and maturity age, used to observe reporting and settlement patterns before projecting ultimates.

The condition in which premium levels are expected to cover projected losses, expenses, and a fair return on capital over the policy period.

The submission of proposed rates and supporting actuarial justification to a regulator, subject to prior approval or file-and-use rules depending on the jurisdiction.

Supervision of an insurer's financial condition through minimum capital, reserve adequacy, and reporting requirements intended to ensure obligations can be met as they fall due.

A regulatory capital standard that scales required surplus to the insurer's mix and level of underwriting, credit, and asset risk rather than to premium volume alone.

The amount of capital an insurer determines it needs to absorb unexpected losses at a chosen confidence level and time horizon, independent of regulatory formulas.

A board-approved articulation of the types and amounts of risk the organization is willing to accept in pursuing its strategy, guiding limits and decision-making.

A firm-wide discipline for identifying, measuring, monitoring, and responding to risks across underwriting, investments, operations, and strategy in an integrated manner.

A governance model separating operational management, independent risk and compliance oversight, and internal audit assurance to create clear accountability for controls.

An internal control that divides incompatible tasks, such as claims approval and payment disbursement, among different people to reduce error and fraud risk.

The legal obligation of directors, officers, and agents to act in the best interest of the insurer or client with loyalty, care, and good faith.

The standards governing how insurers and producers treat customers in sales, underwriting, claims, and complaints, examined by regulators for fair dealing.

Prohibited claim behaviors such as unreasonable delay, failure to investigate, or offering substantially less than owed, defined in state unfair trade practice statutes.

Coverage placed with non-admitted insurers for risks that admitted carriers decline or cannot write, subject to state eligibility and diligent-search rules.

A licensed insurer owned by a non-insurance parent to finance that parent's retained risks, often providing coverage unavailable or costly in the commercial market.