CPCU 540 - independent subject foundations flashcards
CPCU 540 - independent subject foundations · Build recall with a focused review session.
30 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Exposure
- A person, asset, activity or financial interest subject to a possible loss, which must be identified before treatment alternatives are compared.
- Loss frequency
- The number or rate of loss events over a defined exposure and period, distinct from the size of each loss.
- Loss severity
- The monetary or other defined magnitude of an event’s consequences, requiring a consistent unit and scope when observations are compared.
- Risk retention
- Keeping specified financial consequences within the organization or household rather than transferring those consequences through an external contract.
- Risk transfer
- Allocation of specified financial consequences to another party under an arrangement, with residual contractual and counterparty risks potentially remaining.
- Deductible
- An amount of covered loss retained by the policyholder under the contract’s stated calculation, which must not be assumed identical across products.
- Policy limit
- A contractual upper boundary on specified payments or coverage, applied using the actual wording, aggregation period and relevant sublimits.
- Exclusion
- Contract wording removing a specified circumstance or cause from coverage, subject to the actual policy and applicable legal interpretation.
- Endorsement
- A contractual amendment that can alter a policy’s terms, so coverage analysis must read it together with the relevant base wording.
- Underwriting
- Evaluation of a proposed exposure and the terms on which protection may be offered, using appropriate information and applicable constraints.
- Premium
- The contractual amount charged for defined insurance protection, distinct from a guaranteed investment return or the amount payable for every loss.
- Claim
- A request for a benefit or payment arising from an alleged insured event, requiring examination of coverage and supporting evidence.
- Indemnity
- A principle relating some insurance payments to a covered financial loss, whose operation and exceptions depend on product and law.
- Subrogation
- A concept concerning an insurer’s pursuit of certain recovery rights after payment, dependent on the actual contract and applicable law.
- Reinsurance
- A separate arrangement transferring specified insurer exposure to another insurer, without automatically releasing the original policyholder obligation.
- Proportional reinsurance
- An arrangement allocating specified premiums and losses in agreed proportions, with the contract defining the exact scope and calculation.
- Excess-of-loss layer
- A specified loss interval above an attachment amount and subject to a limit, rather than automatic cover of every consequence.
- Earned premium
- The premium amount attributed to expired coverage under a specified accounting model, distinct from the entire premium written or cash received.
- Claims reserve
- An estimate of obligations associated with claims under a defined measurement framework, rather than necessarily an equivalent dedicated cash asset.
- Combined ratio
- A measure combining defined loss and expense ratios to analyze underwriting, whose components and denominators must be checked before calculation.
- Provision for doubtful debts
- Estimated amount of receivables expected to be irrecoverable, charged to profit or loss and deducted from trade receivables in the statement of financial position.
- Bad debt written off
- A receivable removed as irrecoverable under the applicable model. The entry may use an existing allowance or an expense, so do not automatically charge an amount a second time.
- Drawings
- Cash, goods or other assets taken from the business by the owner for personal use, deducted from capital rather than treated as an expense of the business.
- Debenture
- A debt instrument issued by an entity, creating borrowing rather than ordinary equity. Maturity, security, interest terms and measurement depend on the instrument and applicable accounting model.
- Share premium
- In a supplied par-value share model, the amount received above nominal share value, credited separately within equity. It is not customer sales revenue; legal distribution restrictions require local verification.
- Bonus issue
- Free shares issued to existing shareholders by capitalising reserves such as share premium or retained earnings, increasing share capital without raising new cash.
- Manufacturing account
- Account calculating cost of goods produced: direct materials consumed, direct labour, direct expenses and production overheads, adjusted for work in progress, with the result transferred to the trading account.
- Work in progress
- Partly completed units or unfinished production at the period end, valued at cost and deducted from total manufacturing cost so only finished output is transferred to the trading account.
- Depreciation
- Systematic allocation of the depreciable cost of a non-current asset over its useful life, reflecting consumption of economic benefit rather than a fall in market value.
- Reducing balance method
- Depreciation method charging a fixed percentage on the asset's net book value each year, giving higher charges early in the asset's life and a declining charge thereafter.