CPCU 540 - independent subject foundations key terms

A person, asset, activity or financial interest subject to a possible loss, which must be identified before treatment alternatives are compared.

The number or rate of loss events over a defined exposure and period, distinct from the size of each loss.

The monetary or other defined magnitude of an event’s consequences, requiring a consistent unit and scope when observations are compared.

Keeping specified financial consequences within the organization or household rather than transferring those consequences through an external contract.

Allocation of specified financial consequences to another party under an arrangement, with residual contractual and counterparty risks potentially remaining.

An amount of covered loss retained by the policyholder under the contract’s stated calculation, which must not be assumed identical across products.

A contractual upper boundary on specified payments or coverage, applied using the actual wording, aggregation period and relevant sublimits.

Contract wording removing a specified circumstance or cause from coverage, subject to the actual policy and applicable legal interpretation.

A contractual amendment that can alter a policy’s terms, so coverage analysis must read it together with the relevant base wording.

Evaluation of a proposed exposure and the terms on which protection may be offered, using appropriate information and applicable constraints.

The contractual amount charged for defined insurance protection, distinct from a guaranteed investment return or the amount payable for every loss.

A request for a benefit or payment arising from an alleged insured event, requiring examination of coverage and supporting evidence.

A principle relating some insurance payments to a covered financial loss, whose operation and exceptions depend on product and law.

A concept concerning an insurer’s pursuit of certain recovery rights after payment, dependent on the actual contract and applicable law.

A separate arrangement transferring specified insurer exposure to another insurer, without automatically releasing the original policyholder obligation.

An arrangement allocating specified premiums and losses in agreed proportions, with the contract defining the exact scope and calculation.

A specified loss interval above an attachment amount and subject to a limit, rather than automatic cover of every consequence.

The premium amount attributed to expired coverage under a specified accounting model, distinct from the entire premium written or cash received.

An estimate of obligations associated with claims under a defined measurement framework, rather than necessarily an equivalent dedicated cash asset.

A measure combining defined loss and expense ratios to analyze underwriting, whose components and denominators must be checked before calculation.

Estimated amount of receivables expected to be irrecoverable, charged to profit or loss and deducted from trade receivables in the statement of financial position.

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.

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.

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.

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.

Free shares issued to existing shareholders by capitalising reserves such as share premium or retained earnings, increasing share capital without raising new cash.

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.

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.

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.

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.