Glossary of Ocean Cargo Insurance Terms ALL OTHER PERILS & MISFORTUNES: Phrase in Cargo policy meaning perils

of the same nature as those described specifically in the Perils clause. ASSAILING THIEVES: Forcible taking of property but not sneak thievery. AVERAGE: Any partial loss or damage, due to insured perils. AVERAGE AGREEMENT: Document signed by cargo owners by terms of which they agree to pay any General Average contribution properly due so that cargo may be released after a General Average loss has occurred. AVERAGE CLAUSES: Clauses in Cargo policy that determine the amount of Particular Average loss recovery. AVERAGE IRRESPECTIVE OF PERCENTAGE: Broadest "with average" clause. Losses by insured perils are paid regardless of percentage. BARRATRY: Fraudulent, criminal, or wrongful act by ship's captain or crew which causes loss or damage to the ship or cargo. BILL OF LADING: Contract of carriage between shipper and steamship company which is the ship owner's receipt for the goods and is the document of title to them. CARGO WAR RISK POLICY: A separate Cargo policy covering cargo while waterborne only (except at transshipping point, which may be on land or water). Insures against war risks. CERTIFICATE OF INSURANCE OR SPECIAL POLICY: A document prepared by the insured, the producer, or the insurance company to provide evidence of insurance to the buyer or bank for an export/import shipment. The certificate contains an abstract of the more important conditions in the policy. CONSIGNEE: Individual or company to whom cargo is shipped or consigned. CTL (Constructive Total Loss): An instance in which the cost of recovering and/or repairing damaged goods would, when recovered or repaired, exceed the insured value. DECLARATION: Form filled out by assured and sent to the insurance company when reporting individual shipments coming within the terms of an Open policy. DEVIATION: A vessel's going to some other point or taking some course other than that described in the Bill of Lading. FPAAC (Free of Particular Average, American Conditions): Average clause that limits recovery of partial losses under the Perils clause to those losses directly resulting from fire, stranding, sinking, or collision of the vessel. FPAEC (Free of Particular Average, English Conditions): Same as FPAAC except that partial losses under the Perils clause are fully recover-able if the vessel has been stranded, sunk, burned, been on fire, or in collision, without requiring that the damage actually be caused by one of these perils. GENERAL AVERAGE: Loss resulting from a voluntary sacrifice of any part of the vessel or cargo, or an expenditure to safeguard the vessel and the rest of the cargo. When such a loss occurs, it is paid on a pro rata basis by the ship owner and all cargo owners. INCHMAREE CLAUSE: (So-called for a famous legal decision involving a vessel of that name.) Covers losses resulting from a latent defect in the vessel's hull or machinery and losses resulting from errors in navigation or management of the vessel by the master or crew. INVOICE: Document which shows the terms of sale; contains full description of goods, sale price, charges, discounts, etc. INSURED VALUE: Usually computed by adding the invoice cost, guaranteed freight, other costs, and insurance premium plus a percentage, commonly 10%. This usually represents landed value. JETTISON: Voluntary dumping either of cargo or of ship's material or stores overboard, to protect other property from a common danger. LANDED VALUE: Wholesale market value at destination on final day of discharge.

MARINE EXTENSION CLAUSE: Cargo policy clause that continues coverage on goods during deviation, delay, re-shipment, and transshipment, or any other variation in normal transit beyond the assured's control. MARINE SURVEYOR: Specialist who determines the nature, extent and cause of loss and/or damage. MASTER'S PROTEST: Sworn statement by captain describing any unusual happening during the voyage. PARTICULAR AVERAGE: Partial loss sustained by goods insured. PERILS OF THE SEA: Hazards from natural forces in or about navigable waters (windstorm, rough weather, etc., but not fire, explosion, etc., which are perils on the sea). TERMS OF SALE: The following are brief descriptions of the more common Terms of Sale (fully defined in the "American Foreign Trade Definitions 1941"), setting forth the obligations of the seller and buyer. (a) FOB (Free on Board) The seller assumes charges and risk for the goods until they are loaded on board a named carrier at a named point, which may be an inland point or a port. The buyer is responsible for any loss or damage after loading on board the carrier. The buyer should specify FOB to control insurance without relying on the "other fellow". (b) FAS (Free Alongside) The seller assumes charges and risk until the goods are delivered alongside the vessel. Loss or damage from alongside the vessel is the responsibility of the buyer. (c) C&F (Cost and Freight) The seller assumes responsibility for charges and for loss or damage until the goods enter the carrier's custody or are loaded on board the vessel. The buyer is responsible for loss or damage at this point. (d) CIF (Cost, Insurance, and Freight) The seller's price includes cost of the goods, Marine insurance, and all transportation charges to the named destination point. Seller also provides War Risk insurance as obtainable in his or her market at the time of shipment, at buyer's expense (unless seller has agreed that buyer provides War Risk insurance). Seller should specify CIF to maintain maximum control of the shipment until the transaction has been completed. TERMS OR METHODS OF PAYMENT: If the insured is not paid for any reason, he/she must dispose of the goods and, therefore, still has an insurable interest. Following are the more common Terms or Methods of Payment: (a) Collection by Draft The seller bears the risk until he/she is paid. If for some reason, the buyer does not accept the shipment, the seller has the problem of disposing of the goods. By arranging the insurance, the seller can minimize the risk of loss. (b) Open Account When sales are made on an open account, the seller has financial risk similar to collecting by draft. Here again, the seller should attempt to arrange the insurance. (c) Letter of Credit In this procedure, the buyer establishes credit in U.S. money through his or her bank in favour of the seller. If the seller collects by this means, the letter of credit often stipulates that he/she arrange the insurance. VALUATION CLAUSE: Provides basis for determining insured value of a shipment under the Open Cargo policy. WAR RISK: Insurance against loss or damage to property as a result of war risks. WAREHOUSE TO WAREHOUSE: An export/import policy clause that provides protection from the shipper's ware-house and during ordinary course of transit to the consignee's warehouse.

is for Auld Enemy In Scotland the English are sometimes referred to as the Auld Enemy, especially nowadays in relation to sporting events. The phrase relates to the long and bitter conflict between the two countries which thankfully now is demonstrated only on the sports fields.

Abandonment In Marine insurance this is the right of an insured to abandon lost or damaged property and still claim full settlement from an insurer subject to certain restrictions. Accidents In insurance terms, events that are not deliberately caused by the insured and that are not inevitable. Thus, if you deliberately cause damage by driving your car into a tree, the damage is not insured. Similarly, insurers may argue that if you carry out a large excavation in soft soil without appropriate bracing, damage to surrounding property is inevitable and you may not be able to claim any insurance. Act of God Natural occurrence such as earthquake or typhoon. These can be specifically included in most insurance policies contrary to popular opinion. Actuaries A professional usually involved in the life insurance industry, who applies mathematical theories of probabilities and statistical techniques in risk calculation. Actuaries are becoming increasingly involved in general insurance in relation to loss reserving and premium calculations. Additional Perils Sometimes called Special Perils, these may include losses caused by aircraft, explosion, earthquake, storm, tempest, flood, burst water pies, riot, strike, civil commotion, malicious damage. These are extensions that widen the scope of a basic fire insurance policy. Similar extensions may be available for other classes of insurance Adjustable Policies Often, the premium on certain policies is based upon estimates of the size of the risk. For example turnover, gross profit or average stock value on your premises over the next twelve months. Under an adjustable policy, these estimates can be adjusted appropriately, upwards or downwards, at the end of the period of insurance, when the actual figures are available. Advance Profits Insurance Business Interruption insurance arranged in advance of the commencement of the insureds business usually in conjunction with a construction all risks insurance. Cover guards against the potential of a delay in putting a plant into operation, caused by loss or damage affecting the buildings or key items of machinery during construction, erection or testing and commissioning. This type of insurance is expensive and difficult to arrange. It is a core competency of Trafalgar. If you are looking to invest substantially in a business expansion, contact us now. Agents An insurance salesman linked specifically to a single insurance company.policies on behalf of insurers. Agents often obtain their clients from friends and relatives and therefore tend to have a personal knowledge of the client. Unlike insurance brokers, they rarely have high levels of professional expertise or access to worldwide markets. They also represent insurers and not their clients and can do little to assist in the event of a major claim. Aggregate Limits An aggregate total limit on claims during a policy period, which applies in addition to a limit per claim. Often this applies to liability and medical policies. Aircraft Damage See Additional Peril under a Fire policy. Covers not only the unlikely prospect of a plane crashing into your building, but also damage caused by articles falling from aircraft. All Risks A misleading name for an insurance policy, which provides wide cover but does contain a number of exclusions. The term All Risks should not be taken too literally and in some jurisdictions the term is no longer used. This cover is often used for valuable items such as jewellery and other readily portable items. In Marine Cargo Insurance Institute Cargo Clauses (All Risks) has been replaced by a new easier to understand wording known as Institute Cargo Clauses (ICC) A Arbitration Clause This clause is often found in the Conditions of property insurance policies. Any dispute between insurer and insured in agreeing on the amount or quantum of a claim can be referred to independent arbiters. Most arbitration clauses only apply to dispute over quantum, not to disputes over liability. Arbitration is usually faster and cheaper than going through the Courts. Architects, Surveyors and Consulting Engineers Fees Professional fees arising from repairing or reinstating damaged buildings are not always automatically covered by insurance policies. This is an extension to cover such costs in respect of building and machinery. Average Average has several meanings in the insurance industry.

In Marine insurance, average means loss and particular average means partial loss. See also General Average. If a policy is subject to average, then, if the sum insured at the time of a loss is less than the actual value of the property insured, then the amount of claimed under the policy will be reduced in proportion to the underinsurance. In mathematical terms: Loss x Sum Insured Value at risk

Allowable Claim =

If you do not insure for the full values at risk, then you may not be able to obtain a full settlement of any loss. See also First Loss.

is for Bawbee Originally a Scottish coin worth sixpence, a bawby later came to mean a halfpenny, a coin long since fallen into disuse. Now the word means any small amount of money, especially in any term implying miserliness or shortage of cash.

Bailees Liability Bailees Liability insurance covers the bailees legal liability for loss, destruction or damage to property whilst in the bailees care. As an example, clothes being cleaned are under the temporary control of the bailee (laundry). The bailor (owner) expects the clothes to be returned in good condition. If the clothes are stolen from the cleaners, the bailees Liability insurance would cover the liability of the laundry for the loss. Bankers Blanket Bond A wide form of insurance for Banks, which covers Theft and Fidelity risks. Bloodstock Insurance Livestock insurance for horses kept for racing and breeding purposes providing life and health cover. Boilers and Pressure Plant Cover Boilers and other vessels such as economisers, super-heaters and steam piping are subject to internal pressure and can explode or collapse. A boiler policy can cover explosion and collapse or be extended to cover any type of breakdown. Cover is often extended to cover damage to surrounding property and third party liability arising from explosion or collapse. Bonds These are a guarantee issued by a bank or insurance company that an individual or company will meet various obligations. Under a construction contract a contractor may be required to obtain: A bid bond. - This will protect the developer against the failure of the contractor to proceed with a project at his bid price. Prepayment bond. This guarantees any advance payment made by the developer for the contractors mobilisation. Performance bond. This guarantees that the contractor carries out the project properly and the developer will be compensated for any breach of contract. Retention bond. Often a developer will retain a small amount from the contract price for a period to ensure that any defects in the project discovered after completion are corrected in a timely manner. This can adversely effect the contractors liquidity. A retention bond will guarantee that any corrective work is carried out and allow the developer to settle in full with the contractor immediately the project is complete. Other bonds may also be required in business, such as customs bond. Book Debts Insurance Also known as Accounts Receivable insurance, this covers any debit balances that you are unable to collect because the books have been destroyed. Backup records obviate the need for this cover. Broker In insurance, a professional intermediary representing the clients interests, not the interests of the insurance company. The professional standards of insurance brokers varies from country to country and from firm to firm. For truly professional advice, some research regarding their levels of expertise and experience may be necessary. Trafalgar is among the largest insurance brokers in Thailand and can offer truly professional advice to clients on a wide spectrum of risk related issues. Builders Risks A marine policy that covers a ship during construction until possession passes to owners. Burglary An outdated legal term refering to theft involving forcible or violent entry to or exit from the premises.

Bursting or Overflowing of Water Tanks, Apparatus and Pipes See Additional Peril under a fire policy. This covers damage resulting from a plumbing accident but does not strictly cover the cost of repairing the burst tank or pipe. Often household insurers will settle a claim in full, including the damage to the tank or pipe. Business An insurance policy covering a business will only provide cover in respect of the businesses described in the policy. Business Interruption Insurance See also Consequential Loss or Loss of Profits insurance. This insurance is intended to maintain the profit from your business at budgeted levels even though revenue may be adversely effected an insured catastrophe. For example, if a factory is badly damaged in a fire, the owner may expect insurers to pay the cost of replacing the building and equipment. However, work may take 12 months or more to complete and during this period, the factory will not be able to continue production and will produce no revenue. Costs such as payroll, etc may well continue and shareholders will still wish to receive a dividend from their investment. A business interruption policy will ensure that ongoing expenses are paid and profits are maintained. Correctly setting up a business interruption policy can be complicated. Premiums will vary greatly with the ability of a business to function after a loss has occurred. Professional advice from Trafalgar is essential to ensure appropriate protection and competitive premiums Business Travel Insurance Travel insurance, provides companies and their employees with a variety of covers raging from damage to baggage, loss of deposits on flights and hotels, liability, loss of cash, tickets or passports to the cost of further airfares to send a replacement if an executive travelling abroad falls ill.

C is for Caber In Scottish highland games, a heavy section of trimmed tree trunk is thrown so that it
lands away from the thrower on its heavy end. The tree trunk is known as a caber and the sport is known as tossing the caber. Cancellation With a few exceptions, notable construction insurance policies, insurers have the right to cancel a policy at any time. If they do so they must give the period of notice required stated in the policy and refund a pro-rata premium. If the insured cancels, then insurers may charge short period rates which will cost considerably more. Captive This is an in-house insurance company used by a corporation to insure the risks of the parent company. There may be significant tax advantages in locating a captive off-shore or the parent company may experience difficulty with the traditional insurance markets reluctance to underwrite certain hazardous types of risk. Cargo This is usually covered under a Marine Insurance policy, whether for domestic or international journeys, by sea, air or land. There are three internationally recognised types of cover, known as Institute Cargo Clauses A, B and C. These have replaced three old covers with antiquated wordings known as All Risks, With Average (WA) and Free of Particular Average (FPA). Certificate of Insurance A piece of paper not to be confused with an insurance policy. It is issued mainly to comply with certain statutory requirements as evidence of cover. A certificate is issued to motor vehicle owners and also to employers under Workmans Compensation laws. Another type of certificate can be issued under a Marine Cargo Open Cover as evidence that Cargo insurance has indeed been arranged. Chartered Insurance Institute The UK based insurance education body, which also operates through world-wide affiliates. This is the main professional examining body for the insurance industry outside the USA. Insurance personnel who have passed their insurance examinations can qualify as Associates or Fellows of the Institute. Co-Insurance In many British-type insurance markets, co-insurance means the sharing of one insurance policy between two or more insurers. Usually, this entails each insurer paying directly to the insured their respective share of the loss. In other words, the insured has an insurance contract with more than one insurer. This arrangement is cumbersome to administer and is used only on very large risks. Collision Damage Waiver Cover that can be purchased by someone renting a car where the rental company waives any right to recover the amount of damage to the car from the individual regardless of fault. Computer Insurance A relatively new type of insurance specially geared to cover delicate and high value computer equipment. Cover is usually on an All Risks basis and can be extended to include the costs of reinstating data, and business interruption cover such as increased costs of working, or loss of revenue/gross profit.

Computer Systems Records Cover for these is often not available under basic Fire and Burglary policies. You can either extend your cover specifically to protect such records or, alternatively take out a special Computer insurance. Condominium Insurance A special policy taken out by owners or management corporations designed to cover the buildings of a condominium, sometimes carrying other benefits, such as Liability insurance for the management corporation or committee, plus Errors and Omissions cover. Consequential Loss An alternative name for Business Interruption or Loss of Profits insurance. Constructive Total Loss Partial loss of such significance that the cost of restoring damaged property would exceed its value after restoration. For example, a car is so badly damaged by fire that repairing it would cost more than the repaired vehicle would be worth. Contingent Liability This is where a liability is incurred by a business for acts other than those of its own employees. If an independent contractor is hired to carry out some work, then the business may be held liable for the negligent acts of the contractor if the contractor is acting under the direction or control of an employee of the business. Contract of Indemnity Property insurance that restores the insured to his original financial condition after suffering a loss. The idea is that the insured cannot profit by his misfortune. Personal Accident insurance, where a pre-agreed lump sum payment is made, is not a Contract of Indemnity. Contractors All Risks Sometimes called Contract Works Insurance, this is an insurance policy which covers contract works, such as new buildings in the course of construction, and engineering projects, on an All Risks basis. This policy would usually include Public Liability cover as well. It is often arranged in the joint names of the principal and the contractors. Contribution Where someone is holding two or more insurance policies covering the same interest in the same property for the same peril, and if the policies are contracts of indemnity, then the law does not allow the insured to recover a loss under both policies and so make a profit out of the misfortune he has insured against. Instead, the insurers concerned share in the loss proportionately. This is known as contribution. Contributory Negligence A principal of law recognising that injured persons may have contributed to their own injury. For example, by agreeing to be a passenger in a car being driven by someone that you know to be drunk. If you are subsequently injured you may be said to have been contributorily negligent. Cost Insurance and Freight If you import or export your goods on a CIF basis, then insurance is included in the deal. C & F excludes insurance - in this case, the buyer has to make his own insurance arrangements. Crop Insurance Covers various growing crops in the event of loss or damage caused by insured perils, notably fire, flood or hailstorm. In many countries this is available through government bodies. Counter Guarantee If an insurance company issues a Bond, then it will usually ask for either cash collateral or a counter guarantee from a surety or directors of the company to whom it issues the Bond. If insurers make payment, then redress will be sought against such sureties under a counter guarantee.

is for Deifie In Glasgow to sling a someone a deifie" is to ignore them or disregard

what they have to say or simply to pretend not to have heard them. At Trafalgar we listen to our clients and throw no deifies.

Debris Removal Clause The basic cover under a fire or industrial all risks policy does not automatically extend to include the cost of removing debris, shoring up buildings or dismantling machinery. These costs are insured under a separate debris removal clause. It is important to note that the standard debris removal clause does not extend to cover the removal of stock debris. Declaration Policies See adjustable policies Deductible The amount of any claim which is the responsibility of the Insured and which the insurer will deduct from any claim payment. Often this is referred to as an excess. Sometimes deductibles are voluntary and a premium discount allowed. Sometimes they are imposed by insurers as an underwriting requirement to avoid large numbers of small claims and their associated administration costs. Demurrage- Demurrage is the loss of use a vessel owner incurs if his vessel is restricted to port as a result of damage to the vessel or delays in loading or unloading.

Denial of Access A companys business could be affected by a nearby fire (or other loss) which restricts access to the companys premises. As a result, although the companys own premises are undamaged, they suffer a reduction in turnover and a loss of gross profit. This type of loss is not covered under a basic business interruption policy but can be covered if the policy is appropriately extended. Defective Design A public liability policy provides cover for liabilities an Insured may incur as a result of business activities. This policy may be extended to include goods sold or supplied or products liability. Even when so extended, a basic policy will not cover losses incurred by third parties due to the defective design in the products. To provide such defective design cover a further design extension is required. Difference in Conditions Insurance / Difference in Limits Insurance Multi-national companies often arrange their insurance programme centrally on a global basis so that the risk manager will know exactly what levels of cover operate and can ensure these offer appropriate cover for the organisation. However, the legislation in individual countries, the existence of joint venture partners or other circumstances may require local insurance to be arranged. In such circumstances, the global programme will cease to operate for those risks covered by the local policy, but will continue to operate for those areas not covered by the local programme but included in the global programme. If the standard of the cover is different, then the top-up cover provided by the global programme is called Difference in Conditions Insurance. If the sum insured or policy limits are different, then the top-up cover provided by the global programme is called Difference in Limits Insurance. Directors and Officers Insurance Legislation in many countries makes directors and senior officers personally responsible for wrongful acts they commit as representatives of the company. If poor management decisions are made and the company loses business, if investors are given inaccurate information or if an employee believes he has been unfairly dismissed, personal action may be taken and the company may be prohibited from paying costs or damages on the directors behalf. Extremely large personal claims have been seen in the USA and they are becoming more frequent in Asia. For more information on Directors and Officers Insurance, see our separate article. Driving Under the Influence of Alcohol or Drugs Although laws vary greatly, it is now a criminal offence in most countries to drive while under the influence of alcohol or drugs. However, not only do you commit a criminal offence, but if you should have an accident while driving under the influence of alcohol or drugs you will find your insurer will refuse to settle your insurance claim. Dual Basis Payroll See Business Interruption. Payroll is normally included as part of the Gross Profit insured under a business interruption policy. In some cases however, an Insured may feel it unnecessary to insure full payroll and wish to insure on a more restricted basis. Dual basis payroll cover allows the Insured to cover 100% of payroll for an agreed initial period say three months with cover then dropping to say 25% of payroll. This allows the Insured to perhaps pay all appropriate redundancy money to staff as they are laid off following a catastrophic loss, but to retain certain key staff (in this case up to 25% of the payroll) until the business is fully recovered. Dual basis also allows an option to consolidate. If this option is elected, the Insured can extend the initial period of full cover by a small additional period after which all cover for payroll ceases. Dual basis cover provides a flexible and low cost method of insuring payroll. It does however provide only partial cover.

is for Eident An old-fashioned word for hard-working or diligent descriptive of Trafalgar, your hard working risk management and insurance consultant.

Earthquake See Additional Peril under a Fire policy. Effective Date The date upon which cover under an insurance policy becomes effective. Usually this will not be until an insurer has accepted the proposal and confirmed cover in writing by issuing a cover note or cover confirmation. Employers Liability The legal rights of an employee are usually defined in law under a countrys Employment Code or Workmens Compensation Acts. Usually these laws provide for certain fixed sums to be paid by a government body to an employee if the employee is injured in the course of his work. The sums are usually funded by a government levy imposed upon all employers. This may be the only compensation employees are entitled to and is usually payable without any need to prove negligence on the part of the employer. However, in some territories it is possible for the employee to take legal action in common law to recover damages for injury if the accident occurred as a result of the negligence of the employer. Negligence on the part of the employer could come about for example by the employer providing unsafe equipment, an unsafe system of work or perhaps through the negligence of another employee.

Any damages awarded and the legal costs of defending any claim can be covered under an Employers Liability Policy. Engineering Insurance Also known as Machinery Breakdown or Plant All Risks Insurance, this type of insurance provides very broad cover for damage to electrical and mechanical machinery. Endorsements An endorsement is a special amendment to a policy wording. It may be attached to the policy from inception or it may be added to the policy mid term. Mid term endorsements are often issued at the request of the Insured. For example an endorsement may be issued to note a change of address of the Insured. Erection All Risks An erection all risks policy offers cover very similar to a contractors all risks or construction all risks policy. It is however aimed more at erection of plant and machinery rather than the construction of buildings. Errors and Omissions Insurance Engineers, architects, lawyers, accountants and even insurance brokers hold themselves out as professionals capable of offering accurate and well considered advice. If they fail in their duty to provide best advice they leave themselves exposed to claims for errors and omissions or professional negligence. There have been some spectacular claims in recent years with accountants failing to provide accurate reports on the financial status of companies, which are involved in takeovers. Losses also occur when insurance brokers fail to properly carryout instructions of their client and perhaps leave parts of the clients business uninsured. For this reason you should always ensure that your insurance broker carries appropriate levels of Errors and Omissions or Professional Indemnity insurance. At Trafalgar International we offer a professional service from a highly qualified team but we know that mistakes can happen. To protect your business and ours we carry appropriate levels of insurance Excess The amount of any claim which is the responsibility of the Insured and which the insurer will deduct from any claim payment. Often this is referred to as a deductible. Sometimes excesses are voluntary and a premium discount allowed. Sometimes they are imposed by insurers as an underwriting requirement to avoid large numbers of small claims and their associated administration costs. Excess of Loss Reinsurance Insurance companies can rarely bear a total loss on the business that is offered to them. They usually choose to share the risk with other insurers through co-insurance or reinsurance. Excess of Loss Reinsurance is a form of reinsurance whereby the original insurer decides the amount that it is prepared to bear on any one loss, and the reinsurer pays the amount of any claim in excess of this retention. Exclusions Also known as Exceptions. All contracts contain certain conditions and it is important that you are aware how these affect your rights under a contract. An insurance policy is no different in this respect. You should review any policy with your professional adviser to fully understand what areas are covered and what claims will not be paid. Some exclusions are very standard for example, war risks on land, nuclear radiation and the deliberate acts of the Insured. However some are imposed in exchange for premium discounts for example health insurance may exclude elective treatment in the USA where medical costs are very expensive. Ex Gratia Settlement A claim settlement made by an insurer even when the loss is not covered by the policy. Usually made for commercial reasons where the claims experience has otherwise been good. Expediting Expenses Costs incurred in returning a business to its normal trading status in the minimum possible time, following a loss for example, overtime, express freight and premium prices paid to secure replacement plant at short notice. Expediting expenses are not automatically covered and your policy should be appropriately extended. Explosion See Additional Peril under a Fire policy. A standard fire policy usually insures against fire that results from an explosion, but not the shock and concussion damage that can result. This should be covered under an explosion extension. UK policies do extend to include shock damage caused by explosion of domestic boilers and gas used for domestic purposes. Export Credit Insurance See Trade Credit Insurance Expropriation Insurance See Political Risks Insurance

is for Fankle A verb meaning to tangle. You can do it with a fishing line or a telephone wire, but make sure you do not fankle your insurance programme. Consult the professionals at Trafalgar International.

Facultative Reinsurance Insurance companies can rarely bear a total loss on the business that is offered to them. They usually choose to share the risk with other insurers through co-insurance or reinsurance. Facultative Reinsurance is a form of reinsurance whereby the original insurer decides what level of risk it is prepared to retain on any one policy and offers to share the risk (for a premium) with a reinsurer. The reinsurer will then decide whether the reinsurance premium is adequate and how much of the risk he wishes to reinsure, according to the merits of the individual case. See also Treaty Reinsurance. Fidelity Guarantee An all risks, theft or burglary policy will usually exclude losses due to theft by people legally on the premises. This obviously excludes losses caused by employee theft. Such losses are covered under a Fidelity Guarantee policy. Usually such policies are subject to deductibles or coinsurance by the Insured to ensure that recruiting policies are maintained and references properly followed up. Fire and Theft A limited form of cover for motor vehicles offered as an extension to a basic third party only policy Fire Policy Depending upon the individual territory, a standard Fire policy usually covers fire, lightning and explosion of gas or boilers used for domestic purposes. Fire means actual ignition. Scorching or charring is not covered. Cover will sometimes extend to cover fire arising from any cause, but more often it is subject to policy exclusions for example fire damage caused by a riot may not be covered unless the policy is extended to include Riot. It is important to consult you insurance professional, Trafalgar International to be sure you have the correct level of cover. A fire policy is usually extended to include Additional Perils. First Loss Policies This is a form of partial insurance where the Insured decides he could not suffer a total loss and selects a maximum sum to insure for any loss. First Loss Policies are often used in Theft insurance high-value goods which would be physically impossible to steal in a single burglary. It is most important that first loss sums insured are only used on first loss policies where Average does not apply. Otherwise the sum insured should represent the full value or you will not obtain a full settlement of any loss. Fleet Policy A single policy covering a number of vehicles usually issued to a company operating a large fleet of vehicles. Premiums are usually calculated on the basis of historic claims or a straight discount allowed for the reduced administration costs in combining several policies into one. Flood See Additional Peril under a Fire policy. FOB FOB or Free on Board is a contractual basis for the sale of goods internationally. On an FOB basis the seller's interest in the goods ceases when they are loaded onboard the carrying vessel. This is usually an appropriate time, as the ship's representative will normally inspect the goods on loading to ensure they are in good condition and record any damage. Once loaded onboard the carrying vessel, the buyer takes over responsibility for the goods and is responsible for any necessary insurance. Franchise A franchise is similar to a deductible in that the insurer makes no settlement if the total claim is below the franchise figure. However, if the claim is above the franchise figure, the claim is paid in full. Franchises are very unusual in modern insurance practice though machinery breakdown covers sometimes use time franchises. Free of Particular Average (FPA) Particular Average means partial loss so Free of Particular Average means excluding partial losses or Total Loss only. FPA is a set of marine cargo insurance conditions providing very narrow cover (though not limited to total loss only!). FPA conditions have now generally been replaced by the more modern Institute Cargo Clauses C. Full Theft Cover Most Theft or Burglary policies cover theft only if it involves forcible or violent entry to or exit from the premises. Full theft cover extends this cover to any dishonest appropriation. Full theft cover is not normally available to shops or hotels, which are susceptible to casual theft.

is for Gallus Over-confident, daring or reckless. The term derives from the word gallows whence gallus fools were often sent! These days the term is often used of something regarded as impressive or smart. Risk and Insurance are not areas to be reckless over. Consult Trafalgar International and we can help you ensure that your business and personal interests are properly protected.

General Agent In some territories this may mean merely an insurance agency involved in all types of insurance. In other territories it may mean an insurance agency for an overseas insurer and empowered to underwrite risks and settle claims on behalf of that insurer.

General Average In order to save a ship in peril of sinking during a storm, some of the cargo may have to be thrown overboard. The ship owner and the owners of the saved cargo obviously benefit at the expense of the owners of the jettisoned cargo. This was deemed unfair and the principal of General Average evolved so that all parties would contribute in such a situation. Thus if you ship cargo on a vessel that is involved in a loss, you may face a claim against you even though your goods are undamaged. Luckily, your marine insurance policy, if properly arranged, will protect in such cases where General Average is declared General Principles of Insurance Insurance practice has developed over many years in many territories and been added to and amended by the courts or governments. However certain basic principles have been established as the basis on which insurance is written and operates. These principles include Indemnity and its corollaries Contribution and Subrogation, Utmost Good Faith and Proximate Cause. Geographical Limits See territorial limits Glass Insurance Glass insurance is normally provided as part of a package policy for shops and other small risks but can be obtained a separate policy. The policy covers breakage of fixed glass from any cause but normally excludes damage to frames. Golfer's Insurance A sportsmans package policy which covers loss of or damage to golfing equipment, liability to third parties, personal accident and entertainment expenses incurred at the 19th hole celebrating that elusive hole in one. Cover is available as part of the Trafalgar International Domestic Insurance Programme. Click here for further information. Goods in Transit Insurance Property, especially stock, does not necessarily remain at your premises alone. It moves around the country and maybe internationally to be delivered from suppliers or to customers. Goods in Transit insurance provides cover for inland transit by road or rail and often extends to include inland and coastal waters. Cover may be arranged by the owner or by the haulier to protect him against his liabilities under the haulage contract. International transit by sea or air is insured under a Marine policy. Gross Profit The sum insured under a Business Interruption insurance. Your accountant may regard Gross Profit as being profit before tax, but this is not the insurance definition. Your broker should check through your management reports to ensure that the gross profit is properly defined to protect your business and that you have given your insurer the correct figures. Gross profit is normally defined by insurers as the amount by which the sum of the turnover and the closing stock shall exceed the sum of the opening stock and the uninsured working expenses. These uninsured working expenses vary from one business to another and should be specified in the policy. Arranging business interruption insurance correctly and at best terms is a core competency of Trafalgar International. Contact us now if you want to ensure your business interests are properly protected.

is for Haggis What else conjures up an image of Scotland and the Scot in the way this dish does - minced liver, heart and lungs of a sheep mixed with oatmeal, suet, salt and pepper, boiled in a sheeps stomach.

Hague Protocol 1955 An agreement amending the Warsaw Convention Limits relating to an airline operators liability to passengers and goods carried by air. Hague-Visby Rules Referred to in Bills of Lading, the Hague Visby Rules set out the conditions upon which goods are carried by and the obligations and responsibilities of the carrier and ship. Hazard Hazard is another word for risk. Insurers often separate risk into two areas: the physical hazard and the moral hazard. Physical hazard refers to the physical aspects of the risk that could make a loss more or less likely, or affect the severity of that loss. Moral hazard on the other hand refers to the attitude and conduct of the Insured himself. While physical hazard can nearly always be addressed by insurers through recommended risk improvements, policy conditions and premium rate, moral hazard can only be addressed by declining the risk absolutely. Highly Protected Risk (HPR) As the term suggests, HPR risks are those risks that are of the highest quality in terms of physical hazard. Both frequency and severity of loss will have been addressed by the installation of sprinkler systems, haylon systems, water hydrants and fire and smoke alarms. HPR risks enjoy a low premium rating.

Hired-in Plant Hiring contracts for plant and equipment usually make the hirer-in totally liable for any damage to the plant from the time the plant leaves the hirer-outs premises until the time it is returned unless it can be shown that a loss is due to bad maintenance by the hirer-out. The hirer-in should therefore arrange appropriate insurance under a hired-in plant policy. This can usually be arranged on an annual basis with the premium based on a percentage of annual hiring charges. An existing policy for owned plant may normally be endorsed to cover any sums you become legally liable to pay under the hiring agreement. If you do hire in mobile plant, you must insure the road traffic act liabilities if the plant is to be used on the public road Hired Premises If you hire premises for meetings, you may be responsible to the owners under the hire contract with them. The contract wording should be checked carefully and your Public Liability policy extended to include the risk of damage to property in your custody or control. Hoists and Lifts Your legal liability arising from the operation of lifts or hoists may be excluded from your public liability policy. Check the wording carefully to ensure cover is adequate or ask Trafalgar International for a full risk management review of you operations. Machinery Breakdown insurance is available to cover unforeseen damage to lifts and hoists Hole-in-One -By tradition a golfer will buy drinks at the 19th hole (the clubhouse) to celebrate a holein-one. A golfers policy normally includes cover for these entertainment expenses up to a certain limit. Trafalgar Internationals domestic insurance package can provide cover for those hole in one obligations and a wide range of other domestic insurance needs. Click here for details. Household Insurance Household or domestic insurance policies provide a wide range of personal insurance cover. Trafalgar International have negotiated very competitive terms for such insurance ad would be delighted to discuss your personal insurance needs with you. Click here for details Hull Insurance Ships or Hulls, like cargo, are insured under marine insurance policies usually based on Marine Institute Clauses. In the case of ships, the normal basis of cover is Institute Time Clauses Hulls. The Institute Clauses are complicated, old-fashioned wordings which, though often difficult to understand by the layman, have been subject to numerous legal precedents and the extent of the liability of insurers in almost all situations has been firmly established.

is for Islay A small island at the south of the Inner Hebrides where they produce fine malt whisky, among the peatiest flavoured malt whiskies in Scotland.

Impact See Additional Peril under a Fire policy. Impact covers damage to property by any road vehicle and often by animals as well. Wordings used to exclude damage caused by the Insureds own vehicles. Implied Conditions Certain policy conditions are not actually written into the policy but that have evolved from basic insurance principles over the years. For instance, the insurance cannot cover illegal operations and there must be an insurable interest in any insured property. Increased Cost of Working Increased costs may be incurred by an Insured in trying to maintain turnover following an insured loss. Such costs, with certain limits can be insured under a Business Interruption Policy. Indemnity Indemnity is one of the basic principles of insurance and has been legally defined on several occasions. It states that the Insured should not profit by any claim, but should be returned to as near as possible the same financial position as he would have been had the loss not occurred. Certain policies are not subject to the principle of indemnity, notably Personal Accident and Life policies with fixed sums insured. The modern approach of reinstatement and new for old covers put the Insured in a financial better position, but this is justified by the fact that second-hand replacement items may not be readily available. Index Linked Policies Index Linked Policies increase sums insured automatically at renewal by the amount of a given index. Industrial All Risks Also known as Industrial Special Risks, IAR or ISR policies offer wider cover than property covers written on a fire and allied perils basis. While accidental damage cover is given in addition to the fire and allied perils, the main difference is probably the difference in the way cover is described. Under a fire and allied perils policy, the wording defines exactly what perils are covered. Under an IAR policy everything is covered other than the exclusions, defined in the wording.

IAR policies are usually available only to especially large accounts. Inherent Vice Certain goods are, by their very nature susceptible to damage and it would be unreasonable to expect insurers to pay for such damage. Examples of inherent vice are would be deterioration of imperfectly cured skins, spontaneous fermentation or combustion of improperly dried grain. In-Patient Cover Certain Medical Expenses policies are restricted to expenses incurred during hospitalisation and do not cover out-patient care. Such policies are said to provide In-Patient Cover only.

Institute Cargo Clauses The cover under a Marine Cargo policy is defined by standard policy wordings issued by the Institute of London Underwriters (or the American Institute of Marine Underwriters). These are called Institute Cargo Clauses. While there are numerous clauses and different clauses will apply to different cargoes, normally the widest cover is provided under Institute Cargo Clauses A with more restrictive cover under, Institute Cargo Clauses B and Institute Cargo Clauses C. These new clauses replaced the previous Institute Cargo Clauses All Risks, With Average (WA) and Free of Particular Average (FPA). Insurable Interest Insurable Interest is one of the basic principles of insurance. It states that the Insured must have a financial interest in the property insured such that he benefits from its continued existence and will be prejudiced by its loss or damage. This basically differentiates insurance from gambling. The insurance policy insures the interest of the policyholder in the property. If there is no insurable interest, the policy will not respond. Many legal precedents have been seen relating to insurable interest and when it must be effective. With life insurance an insurable interest must be present when a policy is arranged but not necessarily when a claim occurs, with marine insurance an insurable interest must be present when a claim occurs but not necessarily when a policy is arranged and with most other insurance arrangements an insurable interest must be present when a policy is arranged and when a claim occurs. Intermediaries The insurance industry uses intermediaries to introduce clients to insurers and to provide day to day servicing of a clients insurance needs. The intermediary may be an international insurance broker offering a wide range of professional risk management services and access to world wide markets or he may be a part time tied agent acting purely as a commission agent. Trafalgar International are among the largest insurance brokers in Thailand and can offer access to international markets and a highly professional insurance service.

is for Jiggin Dancing or a dance both of the traditional Scottish country type and the more modern disco.

Jettison A Marine Insurance term referring to the throwing of cargo overboard to lighten the ship in order to save it from sinking. Jettison is one of the many perils covered under Institute Cargo Clauses A, B and C. Jewellers Block An all risks policy offering very wide cover for jewellers and similar shops and for manufacturers of jewellery. Jewellery Your personal jewellery can best be insured under an all risks section of a domestic insurance policy. Trafalgar International have developed a specialist policy for your domestic insurance. Click here for details. Jurisdiction Jurisdiction means the legal environment which will apply to a contract of insurance. A jurisdiction clause is often endorsed on Liability policies so that they will respond only to an action brought under a particular jurisdiction. Most commonly jurisdiction of USA and Canada would be excluded.

is for Ken not a famous Scottish clan name, but a verb meaning to know or understand. Trafalgar understands risk management and insurance and ensure your interests are properly protected.

Kidnap and Ransom Insurance can be purchased by individuals or companies worried about their key executives to cover ransom demanded by kidnappers. Most policies also cover professional advice and independent negotiators to remove emotion from negotiation with the kidnappers. The negotiators sole objective is to secure the release of the victim. This is a very specialist insurance product where confidentiality is obviously very important.

Knock for Knock Agreement An agreement between two insurance companies whereby each insurer pays the vehicles repair costs of its own policy-holder regardless of who was responsible for an accident. While an insurer may be able to pursue a recovery from the party responsible for an accident of from his insurer, this is a costly administrative procedure. The Knock for Knock Agreement simplifies recovery claims among insurers and the cost is seen to balance out over a long period of time.

is for Lion a Lion Rampant is the symbol of Scotland. A red lion standing on its hind legs on a yellow flag is referred to as a Lion Rampant. Of course, it is also the name of a small pub serving great malt whisky in Glasgow.

Lapse Your policy will lapse or expire if you fail to pay the renewal premium. Legal Expenses Public Liability policies include cover for legal costs and expenses incurred by the Insured with his insurers consent or recovered by any claimant against the Insured. Policies are now available to cover legal services in certain circumstances. For example, recovery of uninsured expenses following a motor accident or legal costs to evict a tenant who refuses to move out at the expiry of the lease. Legal Liability Liability at law can arise under tort (or civil actions) or under contract. While settlements are often made out of court by mutual agreement, legal liability can only be finally decided by the courts. Public, Products Professional Liability, Directors and Officers and other Third Party Liability insurance would normally cover only non-contractual obligations. Liability Insurance Covers Legal Liability to third parties, including legal costs Lightning A standard Fire policy will automatically cover damage to property caused by fire, lightning or certain types of explosion. Limits of Liability or Indemnity Liability policies normally contain a limit stating the maximum amount insurers will pay for any single event and perhaps for all events occurring in a single policy period. Limits should be carefully reviewed to ensure they are sufficient. Liquidation Liquidators take on onerous responsibilities when they take over a company for liquidation, as they are responsible for maximising creditors recovery and can face legal action if they do not act in a proper professional manner. If for example uninsured property was destroyed following a fire, the liquidator could be held responsible, as he had not protected the property with insurance. This situation can be a serious problem as many insurance policies laps automatically if the Insured becomes bankrupt or enters into an agreement with creditors. Special insurance packages can be arranged to protect liquidators by covering property, liability and business interruption risks immediately the liquidator becomes responsible. Cover is automatic and premiums calculated upon declaration of the details of the individual risks. Livestock A life insurance policy for animals, usually horses other than thoroughbred race horses, cows, bulls etc. Lloyds This is the worlds oldest and most famous insurance market, attended by Lloyds brokers and Lloyds underwriters. Lloyds started in a London coffee-house frequented by ship owners in the seventeenth century. Long Term Agreement While there are exceptions, insurance policies normally run for a period of one year only. Insurers will however offer a small discount if you undertake to offer the renewal to them for a period of three years at the same terms. LTAs are no longer common as insurance rates have fallen dramatically in recent years. Loss Adjusters Loss Adjusters are independent firms, dealing with the investigation and settlement of insurance claims. They are generally highly qualified and experienced operations that can fully understand the details of the Insureds loss and he insurance policy cover. Although insurers pay their fees loss adjusters are impartial. Loss adjusters should not be confused with loss assessors who are employed by the Insured to represent them in a claim recovery. Loss of Profits See Business Interruption. Loss of Use of Vehicle If you are involved in an accident you may have to hire a replacement vehicle. Standard Motor policies do not include cover for such costs but cover is available from specialist companies in certain territories. If the accident is cause by someone else it may be possible to claim loss of use from the other party or his insurers.

Loss Ratio The ratio of losses paid and outstanding to premiums. A low loss ration means the insurance is profitable to the underwriter. Bear in mind however that the insurance company must cover commissions and administration costs as well as claims.

is for Malt or Malt Whisky the pride of Scotland. A malt whisky is one made in a pot still from dried germinated barley. A single malt is entirely the product of a single distillery whereas a vatted malt is a blend of malt whiskies from several distilleries. Certain distilleries are renown for the particular taste of their malts; a peat flavour, smokey, smooth.

Machinery Breakdown Complex industrial plant and simple office machinery can be insured not only for fire and allied perils, but also for any accidental damage including mechanical or electrical derangement. Such cover is usually subject to certain levels of maintenance being maintained and is almost certainly subject to a significant deductible. For industrial plant business interruption following breakdown is also usually insured. Maintenance Period The Maintenance Period is the period following completion of a construction project during which the contractor is responsible for certain maintenance issues under the many building or engineering contracts. During this period, the contractor needs to maintain insurance in force, the extent of which will depend on the contract and on his own concern for the risk he is facing. Normally the maintenance period will last for twelve months from the completion of the contract but this may be longer or shorter. Differing levels of cover are available (visits maintenance, extended maintenance guarantee maintenance) depending upon the specifics of the particular contract. Malicious Damage See Additional Peril under a Fire policy. Cover against malicious damage provides cover against damage caused by malicious persons and is usually only available as part of a riot and strike extension. Malpractice Insurance Engineers, architects, lawyers, accountants, insurance brokers and the like carry professional indemnity or errors and omission insurance. Doctors, nurses, surgeons and hospitals require the same type of cover, but refer to it as malpractice insurance. Marine Insurance Marine insurance refers to much more than the insurance of ships. The insurance market tends to divide into three areas: Life, Marine and Non-Marine. Marine insurance will include the insurance of hulls, the cargo they carry, liabilities that may devolve upon ships and ship operators, known as protection and indemnity and also the insurance of wharves, ports and harbours, container terminals and even oil platforms and drilling rigs. Material Damage Proviso All Business Interruption policies contain a requirement that a Material Damage policy remains in force at all times to protect the property, which is the subject of the business interruption policy. This is usually a Fire policy, an Industrial All Risks policy or a machinery breakdown policy. This is to ensure that in the event of a loss, funds are available to repair the damage and thus minimise the period during which the business will be interrupted. It is important to note that as a result of the material damage proviso, older style wordings may exclude cover under a business interruption policy where the material damage falls below the material damage deductible. Special care is needed and we recommend strongly that your insurance experts, Trafalgar International be consulted. Material Fact The principle of utmost good faith requires anyone seeking insurance to disclose all the material facts about the risk that he knows, or should know. A material fact has been defined in a number of legal cases and broadly is any fact which may influence the judgement of a prudent underwriter in deciding whether to accept a risk and if so at what rate of premium. How do you as an Insured know what an underwriter may regard as material? If in doubt as to whether some piece of information is relevant, tell insurers anyway. While the law has softened in favour of the Insured in many territories, it is still normally possible for the insurer to turn away any claim if there has been a breach of utmost good faith i.e. material facts have been withheld by the Insured Maximum Indemnity Period The Maximum Indemnity Period is a limit under a business interruption policy relating to the maximum period over which the insurer will pay for loss of profit. It is the responsibility of the Insured to decide upon the Maximum Indemnity Period and if the period chosen is inadequate, it can have a very serious effect on the Insureds business. Professional advice is necessary in deciding this issue and we recommend you contact your professional advisors, Trafalgar International. Maximum Probable Loss There is no fixed definition for this term, which tends to mean slightly different things to different insurers. It is used along with Estimated Maximum Loss (EML) and Maximum Possible Loss to refer to the largest loss likely, possible or probable under any given insurance policy.

Medical Insurance An absolute must for expatriates where medical facilities may not be as modern or as reliable as they are at home. Trafalgar International are experts in this area and operate a number of programmes which can be tailor made to any situation. Refer to our article on medical insurance by clicking here. Money Insurance Cash, bank and currency notes, cheques, money orders, postal orders and current postage stamps are excluded from the cover given by a fire insurance policy and a separate money policy is usually required. This is written on an All Risks basis to cover any accidental loss or damage but will exclude or limit cover for employee dishonesty. Cover can extend to money in or out of a safe on business premises, in the home of any director or employee, in a safety deposit box, in transit to or from the bank or in the hands of bill collectors. One particular area that needs to be considered is the definition of money. Does it really include all the financial instruments that you hold? Moral Hazard See Hazard. Moral hazard hand refers to the attitude and conduct of the Insured.

http://www.trafalgar-intl.com/definitions3.htm
Marine Insurance Terms and Abbreviations
The most commonly used cargo insurance terms have been established by the International Chamber of Commerce Incoterms link. TERMS: What is "Average"? This is a term most used with marine cargo insurance policies. In order for the insured to be sure that the insured values are for an adequate amount, it is important to understand the meaning of these terms: General Average This type of loss is deliberate -- it is incurred by the master of the vessel, usually including jettison of some cargo, or incurring towing and/or salvage charges in order to save the ship and cargo from a threatened peril. These costs, called general average sacrifices, are proportioned among all of the parties to the marine adventure, including the various owners of the cargo and the vessel owner. There are four frequently used average clauses: FPA AC (American Conditions) Free of particular average (partial loss) unless caused by stranding, sinking, burning, or collision with another vessel. This limits recovery on partial losses to those directly resulting from these perils. This is the most limited average clause in general use today. FPA EC (English Conditions) This is similar to the FPAAC Clause except that it is not necessary that the actual damage to cargo be a direct result of one of the specified perils, but only that one of the perils has occurred during the voyage and cargo is subsequently damaged by another peril of the sea such as heavy weather. WITH AVERAGE This gives protection for partial loss from perils of the sea if the partial loss amounts to a certain percentage (usually 3%) of the insured value. A common clause reads "Subject to particular average if amounting to 3%, each case or shipping package separately insured." The percentage is called a franchise it is not a deductible percentage, but is the amount the claim must reach before the partial loss from a peril insured against is paid. The franchise is not applied if the vessel is involved in a fire, stranding, sinking, burning, or a collision, nor is it applied in general average losses. AVERAGE, IRRESPECTIVE OF PERCENTAGE All partial losses due to perils covered in the basic Marine Perils Clause are fully recoverable regardless of percentage.

ABBREVIATIONS and TERMS: A.B.S. American Bureau of Shipping A.C. Account, American Conditions A.C.W.R.R.E. American Cargo War Risks Reinsurance Exchange Ad Valorem - According to value A.G.W.I. Atlantic Gulf and West Indies A.H.F. American Hull Form A.H.I.S. American Hull Insurance Syndicate A.I.M.A. As interest may appear A.I.T.H. American Institute Time Clauses (Hulls) A.O.A. Any one accident A.O.B. Any one bottom A.O.L. Any one loss or Any one location A.O.V. Any one vessel A.P. Additional Premium A.P.L. As per list (Lloyd's Shipping Index) A.R. All Risks A.T.C. Automatic Termination Clause (War Risks) Aux - Fitted with auxiliary engine AWB Airway Bill BDI Both days inclusive B.I. Business Interruption or Bodily Injury B.L. or B/L Bill of Lading B.O.V. Basis of Valuation B.D.I. Both days inclusive BDLS Bundles B.N.A. British North America B.O.C. Breach of Contract, Bulk Oil Clauses C. & F. Cost and Freight C.C. Civil Commotions, Cancelling Clause, Collecting Commission Classification Clause, Continuation Clause C.D. or C/D Country damage C.G.M.E. China, Glass, Marble and Earthenware CGO Cargo CF Cost and Freight C.I.F. Cost, Insurance and Freight C.K.D. Completely Knocked down CMR International carriage of goods by road C.N. Cover Note COGSA Carriage of Goods at Sea Act (US) C.P. Charter Party C.P.A. Claims Payable Abroad C.R.O. Cancelling returns only C.T.C. F.P.A. Corn Trade Clauses F.P.A. C.T.L. Constructive Total Loss Return to Top of Page D.A. Deductible Average D.B.B. Deals, Battens and Boards D.D. Damage done, Dry Dock D.P.R. Daily pro rata D.T.B.A. Date to be advised D.V.C. Dual Valuation Clause D.W.T. Deadweight E. & E.A. Each and every accident E. & E.L. Each and every loss E. & E.O. Each and every occurrence

E.C. East Coast, English Conditions, Extended coverage E.P.I. Earned Premium Income E.S.D. Echo Sounding Device E.V. Equal values, Each Vessel F.A.A. Free of all average F. & D. Freight and Demurrage F.A.S. Free alongside F.C.A.R. Free of claim for accident reported F.C. & S. Free of capture and seizure (Excludes War) F.C.V. Full Completed (or Contract) Value F.D.O. For declaration purposes only F.I.A. Full interest admitted F.I.O. Free in and out F.O.B. Free on board F.O.C. Flags of Convenience, Free of Cost, Free of Claims F.O.D. Free of Damage F.O.M. Flag ownership, or management F.O.R. Free on Rail F.P.A. Free of Particular Average F.P.I.L. Full Premium if Lost F.R.O. Fire Risk Only FRT Freight F.W.D. Freshwater Damage G.A. General Average G.M.T. Greenwich Mean Time UTC G.N.P.I. Gross Nett Premium Income G.P.I. Gross Premium Income G.O.R. Gross Original Rate G.R.T. Gross Registered Tonnage H.C. or H/C Held Covered H and O Hook and Oil Damage HSSC Heating, sweating, spontaneous combustion HWD heavy weather damage I. and/or O. In and/or Over, Under and/or on Deck I.C.C. Institute Cargo Clauses I.L.U. Institute of London Underwriters INS VAL Insured value I.O.P. Irrespective of Percentage I.T.C. Institute Time Clauses I.V. Increased Value, Inherent Vice J. & W.O. Jettison and Washing Overboard J.C.C. Joint Cargo Committee J.H.C. Joint Hull Committee LCL Less container load L.H.W.C.A. Longshoremen's and Harbour Workers Compensation Act LTL Less truck load L.O.A. Length Overall L.O.H. Loss of Hire L.P.S.O. Lloyd's Policy Signing Office L.R. Lloyd's Register Ltr Lighter Ltrg Lighterage L.U.A. Lloyd's Underwriters Association L.U.R. Lay-Up Return

M.D. or MALD Malicious Damage M.I.A. Marine Insurance Act Mindep. Minimum and Deposit Premium M.S. Motor Ship MV or M/V Motor Vessel N.A. Nett Absolutely m- no deductions from gross premium N.C.A.D. Notice of Cancellation at Anniversary Date N.C.R. No Claim return N.D. Non-Delivery, No Discount N.E. Not Exceeding, North East N.M. Non-Marine N.N.H. Not North of Hatteras N.P. Nett Premium, Named Perils N.R.A.D. or N.R.A.L. No Risk after Discharge / Landing N.R.T.O. R. No risk attached until on Rail N.R.T.W.B. No risk attached until Waterbourne N.R.L. Nett Retained Line N.U.R. Not Under Repair O.C. Open Contract, Open Cover, Off Cover, Original Condition O.C.A. Outstanding Claims Advance O.D. On Deck O.G.P. Original Gross Premium O.G.R. Original Gross Rate O.N.P. Original Nett Premium O.N.R. Original Nett Rate O.R. Original Rate, Overriding Commission O.S. Outstanding P.A. Particular Average, Per Annum P.C. Profit Commission P.D. Property Damage P.E. Personal Effects P. & I. Protection and Indemnity Risks P.I. Personal Injury, Premium Income P.L. Public Liability, Partial Loss P.P. Professionally Packed P.P.I. Policy Proof of Interest P.R. Pro rata Protest A sworn statement by captain after an accident P.T. Premium Transfer Q.S. Quota Share R. & C.C. Riots and Civil Commotions R.D.C. Running Down Clause (Collision Clause) R.I. Reinsurance RNASX Renew as expiring R.R.I. Respective Rights and Interests R.O.D. Rust, Oxidization and Discolouration RoRo Roll on Roll off - Drive on service loading vessel R.P. Return Premium R.T.B.A. Rate to be agreed R.F.W. Rain and Freshwater S.A. Subject Approval, South Africa, South America, Salvage Association (London) S.A.N.R. Subject to Approval (usually of leading Underwriters) No Risk S.A.P.L. Sailed as per Lloyd's List S.C. Salvage Charges, Spontaneous Combustion S.D. Steel Diesel, Short Delivery

S.G. Ship and Goods S.L. Sue and Labour charges S.O.L. Shipowners' Liability S.R. & C.C. Strikes, Riots and Civil Commotions S.R.L.L. Ship Repairers' Legal Liability S. of S. Service of Suit Clause S.V. Sailing Vessel TB Twisting Bending T.C.H. Time Charter Hire T. or C.T.L. Total or Constructive Total Loss T.C.A. Comp Total or Constructive or Arranged or Compromised T.L.V.O. Total Loss of Vessel Only T.P.L. Third Party Liability T.P. & N.D. Theft, Pilferage and Non-Delivery T.O.R. Time on Risk T.S. Transhipment T.T.F.C. Timber Trade Federation Clauses U.C.B. Unless Caused By (the vessel being stranded, sunk, burnt, on fire or in collision) U.D. Under Deck U.E.P. Unearned Premium U.K.C. (B/H) United Kingdom and/or Continent of Europe Bordeau - Hamburg range. U.N.L. Ultimate Nett Loss U.R. Under Repair U.S. Ad. (Pac.) United States Atlantic (Pacific) USL&HWCA US Longshoremen's and Harborworkers Compensation Act U.S.N.H. United States North of Hatteras U.S.S.A. United States Salvage Association V.C. Valuation Clause V.M.M. Vandalism and Malicious Mischief V.O.P. Valued as in original Policy W.A. With Average W.B.S. Without Benefit of Salvage W.C. West Coast W.C.A. Workmen's Compensation Act W.C.S.A. West Coast of South America W.D.F. Wireless Direction Finder W.E.F. With Effect From W.O. Washing Overboard W.P. Without Prejudice W.P.A. With Particular Average W.R.O. War Risks Only W.W. Worldwide X.L. Excess Loss XS Excess Y.A.R. York Antwerp Rules

Glossary of Reinsurance Terms

Admitted Reinsurance - A company is admitted when it has been licensed and accepted by appropriate insurance governmental authorities of a state or country. In determining its financial condition a ceding insurer is allowed to take credit for the unearned premiums and unpaid claims on the risks reinsured if the reinsurance is placed in an admitted reinsurance company. Arbitration Clause - Language providing a means of resolving differences between the reinsurer and the reinsured without litigation. Usually, each party appoints an arbiter. The two thus appointed select a third arbiter, or umpire, and a majority decision of the three becomes binding on the parties to the arbitration proceedings. Bordereau (plural Bordereaux) - A form providing premium or loss data with respect to identified specific risks which is furnished the reinsurer by the reinsured. Burning Cost - A term most frequently used in spread loss property reinsurance to express pure loss cost or more specifically the ratio of incurred losses within a specified amount in excess of the ceding companys retention to its gross premiums over a stipulated number of years. Cancellation - (a) Run-off basis means that the liability of the reinsurer under policies, which became effective under the treaty prior to the cancellation date of such treaty, shall continue until the expiration date of each policy; (b) Cut-off basis means that the liability of the reinsurer under policies, which became effective under the treaty prior to the cancellation date of such treaty, shall cease with respect to losses resulting from accidents taking place on and after said cancellation date. Usually the reinsurer will return to the company the unearned premium portfolio, unless the treaty is written on an earned premium basis. Capacity - The percentage of surplus or the dollar amount of exposure that an insurer or reinsurer is willing to place at risk. Capacity may apply to a single risk, a program, a line of business, or an entire book of business. Catastrophe Reinsurance - A form of reinsurance that indemnifies the ceding company for the accumulation of losses in excess of a stipulated sum arising from a catastrophic event such as conflagration, earthquake or windstorm. Catastrophe loss generally refers to the total loss of an insurance company arising out of a single catastrophic event. Cede - When a company reinsures its liability with another, it cedes business. Ceding Commission - The cedants acquisition costs and overhead expenses, taxes, licenses and fees, plus a fee representing a share of expected profits - sometimes expressed as a percentage of the gross reinsurance premium. Ceding Company - The original or primary insurer; the insurance company which purchases reinsurance. Claims-Made Basis - A form of reinsurance under which the date of the claim report is deemed to be the date of the loss event. Claims reported during the term of the reinsurance agreement are therefore covered, regardless of when they occurred. A claims made agreement is said to cut off the tail on liability business by not covering claims reported after the term of the reinsurance agreement - unless extended by special agreement. See Occurrence Basis. Commission - In reinsurance, the primary insurance company usually pays the reinsurer its proportion of the gross premium it receives on a risk. The reinsurer then allows the company a ceding or direct commission allowance on such gross premium received, large enough to reimburse the company for the commission paid to its agents, plus taxes and its overhead. The amount of such allowance frequently determines profit or loss to the reinsurer. Commutation Clause - A clause in a reinsurance agreement, which provides for estimation, payment and complete discharge of all future obligations for reinsurance losses incurred

regardless of the continuing nature of certain losses such as unlimited medical and lifetime benefits for Workers Compensation. Contingent Commissions (or Profit Commission) - An allowance payable to the ceding company in addition to the normal ceding commission allowance. It is a pre-determined percentage of the reinsurers net profits after a charge for the reinsurers overhead, derived from the subject treaty. Contributing Excess - Where there is more than one reinsurer sharing a line of insurance on a risk in excess of a specified retention, each such reinsurer shall contribute towards any excess loss in proportion to his original participation in such risk. Example: Retention $100,000, Reinsurer A accepts one-half contributing share part of $1,000,000 in excess of said $100,000. Reinsurer B accepts remaining one-half contribution share part of $1,000,000. Earned Premium - (1) That part of the premium applicable to the expired part of the policy period, including the short-rate premium on cancellation, the entire premium on the amount of loss paid under some contracts, and the entire premium on the contract on the expiration of the policy. (2) That portion of the reinsurance premium calculated on a monthly, quarterly or annual basis which is to be retained by the reinsurer should there cession be canceled. (3) When a premium is paid in advance for a certain time, the company is said to earn the premium as the time advances. For example, a policy written for three years and paid for in advance would be one-third earned at the end of the first year. Errors and Omissions Clause - A provision in reinsurance agreements which is intended to neutralize any change in liability or benefits as a result of an inadvertent error by either party. Excess of Loss - A form of reinsurance under which recoveries are available when a given loss exceeds the cedants retention defined in the agreement. Ex Gratia Payment - A payment made for which the company is not liable under the terms of its policy. Usually made in lieu of incurring greater legal expenses in defending a claim. Rarely encountered in reinsurance as the reinsurer by custom and for practical reasons follows the fortunes of the ceding company. Expense Ratio - The percentage of premium used to pay all the costs of acquiring, writing and servicing insurance and reinsurance. Experience - (1) The loss record of an insured or of a class of coverage. (2) Classified statistics of events connected with insurance, of outgo, or of income, actual or estimated. (3) What figures show to have happened in the past. Experience may be compiled on different bases to provide various means of appraisal, viz. Accident Year, Calendar Year, or Policy Year, but, for underwriting purposes, should always compare earned premium with incurred losses after the latter have been modified by an allowance for loss development and incurred but not reported losses (I.B.N.R.). Extra Contractual Obligations (ECO) - A generic term that, when used in reinsurance agreements, refers to damages awarded by a court against an insurer which are outside the provisions of the insurance policy, due to the insurers bad faith, fraud, or gross negligence in the handling of a claim. Examples are punitive damages and losses in excess of policy limits. Facultative - Facultative reinsurance means reinsurance of individual risks by offer and acceptance wherein the reinsurer retains the faculty to accept or reject each risk offered. Financial Reinsurance - A form of reinsurance which considers the time value of money and has loss containment provisions. One of its objectives is the enhancement of the cedants financial statements or operating ratios, e.g., the combined ratio; loss portfolio transfers; and financial quota shares are examples. Flat Rate - In reinsurance, a percentage rate applied to a ceding companys premium writings for the classes of business reinsured to determine the reinsurance premiums to be paid the reinsurer.

Following the Fortunes - The clause stipulating that once a risk has been ceded by the reinsured, the reinsurer is bound by the same fate thereon as experienced by the ceding company. Incurred Loss Ratio - The percentage of losses incurred to premiums earned. (See Experience.) Inflation Factor - A loading to provide for increased medical costs and loss payments in the future due to inflation. Intermediary - A third party in the design, negotiation, and administration of a reinsurance agreement. Intermediaries recommend to cedants the type and amount of reinsurance to be purchased and negotiate the placement of coverage with reinsurers. Intermediary Clause - A provision in reinsurance agreements which identifies the intermediary negotiating the agreement. Most intermediary clauses shift all credit risk to reinsurers by providing that:

1. the cedants payments to the intermediary are deemed payments to the reinsurer; 2.
and the reinsurers payments to the intermediary are not payments to the cedant until actually received by the cedant.

This clause is mandatory in some states. Layer - A horizontal segment of the liability insured, e.g., the second $100,000 of a $500,000 liability is the first layer if the cedant retains $100,000 but a higher layer if it retains a lesser amount. Lead Reinsurer - The reinsurer who negotiates the terms, conditions, and premium rates and first signs on to the slip; reinsurers who subsequently sign on to the slip under those terms and conditions are considered following reinsurers. Letter of Credit - A financial guaranty issued by a bank that permits the party to which it is issued to draw funds from the bank in the event of a valid unpaid claim against the other party; in reinsurance, typically used to permit reserve credit to be taken with respect to nonadmitted reinsurance; and alternative to funds withheld and modified coinsurance. Loss Adjustment Expense - All expenditures of an insurer associated with its adjustment, recording, and settlement of claims, other than the claim payment itself. The term encompasses both allocated loss adjustment expenses (ALAE) which are loss adjustment expenses identified by a claim file in the insurers records, such as attorneys fees; and unallocated loss adjustment expenses (ULAE), which are operating expenses not identified by claim file, but functionally associated with settling losses, such as salaries of claims department. Loss Development - The difference between the original loss as originally reported to the reinsurer and its subsequent evaluation at a later date or at the time of its final disposal. A serious problem to reinsurers who, being involved in the more serious cases, must frequently wait many years for the final disposition of a loss. Loss Event - The total losses to the ceding company or to the reinsurer resulting from a single cause such as a windstorm. Loss Ratio - Proportionate relationship of incurred losses to earned premiums expressed as a percentage. Non-Admitted Reinsurance - A Company is non-admitted when it has not been licensed and thereby recognized by appropriate insurance governmental authority of a state or country. Reinsurance is non-admitted when placed in a non-admitted company and therefore may not be treated as an asset against reinsured losses or unearned premium reserves for insurance company accounting and statement purposes.

Occurrence - An adverse contingent accident or event neither expected nor intended from the point of view of the insured. With regard to limits on occurrences, property catastrophe reinsurance agreements frequently define adverse events having a common cause and sometimes within a specified time frame, for example 72 hours, as being one occurrence. This definition prevents multiple retentions and reinsurance limits from being exposed in a single catastrophe loss. Offset Clause - A provision in reinsurance agreements which permits each party to net amounts due against those payable before making payment; especially important in the event of insolvency of one party which ceases to remit amounts due to the other. Participating or Pro Rata Reinsurance - Includes Quota Share, First Surplus, Second Surplus, and all other sharing forms of reinsurance whereunder the reinsurer participates pro rata in all losses and in all premiums. Peril - This term refers to the causes of possible loss in the property field - for instance: Fire, Windstorm, Collision, Hail, etc. In the casualty field the term Hazard is more frequently used. Per Risk Excess Reinsurance - Retention and amount of reinsurance apply per risk rather than on a per accident or event or aggregate basis. Policy Year - The year commencing with the effective date of the policy or with an anniversary of that date. Pool - An organization of insurers or reinsurers through which particular types of risks are underwritten with premiums, losses, and expenses shared in agreed ratios. Portfolio Reinsurance - In transactions of reinsurance, it refers to all the risks of the reinsurance transaction. For example, if one company reinsures all of anothers outstanding Automobile business, the reinsuring company is said to assume the portfolio of Automobile business and it is paid the total of the unearned premium on all the risks so reinsured (less some agreed commission). Portfolio Run-off - The opposite of Return of Portfolio - permitting premiums and losses in respect of in-force business to run to their normal expiration upon termination of a reinsurance treaty. Premium, Deposit - When the terms of a policy provide that the final earned premium be determined at some time after the policy itself has been written, companies may require tentative or deposit premiums at the beginning which are readjusted when the actual earned charge has been later determined. Premium, Pure - The portion of the premium calculated to enable the insurer to pay losses and, in some cases, allocated claim expenses or the premium arrived at by dividing losses by exposure and in which no loading has been added for commission, taxes, and expenses. Premium (Written/Unearned/Earned) - Written premium is premium registered on the books of an insurer or reinsurer at the time a policy is issued and paid for. Premium for a future exposure period is said to be unearned premium for an individual policy, written premium minus unearned premium equals earned premium. Earned premium is income for the accounting period, while unearned premium will be income in a future accounting period. Professional Reinsurer - A term used to designate a company whose business is confined solely to reinsurance and the peripheral services offered by a reinsurer to its customers as opposed to primary insurers who exchange reinsurance or operate reinsurance departments as adjuncts to their basic business of primary insurance. The majority of professional reinsurers provide complete reinsurance and service at one source directly to the ceding company. Profit Commission - A provision found in some reinsurance agreements which provides for profit sharing. Parties agree to a formula for calculating profit, an allowance for the reinsurers expenses, and the cedants share of such profit after expenses.

Quota Share - The basic form of participating treaty whereby the reinsurer accepts a stated percentage of each and every risk within a defined category of business on a pro rata basis. Participation in each risk is fixed and certain. Reinstatement Clause - When the amount of reinsurance coverage provided under a treaty is reduced by the payment of a reinsurance loss as the result of one catastrophe, the reinsurance cover is automatically reinstated usually by the payment of a reinstatement premium. Reinstatement Premium - A pro rata reinsurance premium is charged for the reinstatement of the amount of reinsurance coverage that was reduced as the result of a reinsurance loss payment under a catastrophe cover. Reinsurance - The practice whereby one party called the Reinsurer in consideration of a premium paid to him agrees to indemnify another party, called the Reinsured, for part or all of the liability assumed by the latter party under a policy or policies of insurance which it has issued. The reinsured may be referred to as the Original or Primary Insurer, or Direct Writing Company, or the Ceding Company. Reinsurer - An insurer or reinsurer assuming the risk of another under contract. Retention - The net amount of risk which the ceding company or the reinsurer keeps for its own account or that of specified others. Retrocession - A reinsurance of reinsurance. Example: Company B has accepted reinsurance from Company A, and then obtains for itself, on such business assumed, reinsurance from Company C. This secondary reinsurance is called a Retrocession. The transaction whereby a reinsurer cedes to another reinsurer all or part of the reinsurance it has previously assumed. Retrospective Rating - A plan or method which permits adjustment of the final reinsurance ceding commission or premium on the basis of the actual loss experience under the subject reinsurance treaty - subject to minimum and maximum limits. Risks - A term used to denote the physical units of property at risk or the object of insurance protection and not Perils or Hazard. Reinsurance by tradition permits each insurance company to frame its own rules for defining units of Risks. The word is also defined as chance of loss or uncertainty of loss. Salvage and Subrogation - Those rights of the insured which, under the terms of the policy, automatically transfer to the insurer upon settlement of a loss. Salvage applies to any proceeds from the repaired, recovered, or scrapped property. Subrogation refers to the proceeds of negotiations or legal actions against negligent third parties and may apply to either property or casualty coverages. Self-Insurance - Setting aside of funds by an individual or organization to meet his or its losses, and to absorb fluctuations in the amount of loss, the losses being charged against the funds so set aside or accumulated. Sliding Scale Commission - A ceding commission which varies inversely with the loss ratio under the reinsurance agreement. the scales are not always one to one: for example, as the loss ratio decreases by 1%, the ceding commission might increase only 5%. Slip - A binder often including more than one reinsurer. At Lloyds of London, the slip is carried from underwriter to underwriter for initialing and subscribing to a specific share of the risk. Special Acceptance - The facultative extension of a reinsurance treaty to embrace a risk not automatically included within its terms. Spread Loss - A form of reinsurance under which premiums are paid during good years to build up a fund from which losses are recovered in bad years. This reinsurance has the effect of stabilizing a cedants loss ratio over an extended period of time.

Stop Loss - A form of reinsurance under which the reinsurer pays some or all of a cedants aggregate retained losses in excess of a predetermined dollar amount or in excess of a percentage of premium. Subject Premium - A cedants premiums (written or earned) to which the reinsurance premium rate is applied to calculate the reinsurance premium. Often, subject premium is gross/net written premium income (GNWPI) or gross/net earned premium income (GNEPI), where the term gross/net means gross before deducting reinsurance premiums for the reinsurance agreement under consideration, ;but net after all other adjustments, e.g., cancellations, refunds, or other reinsurance. Normally, subject premium refers to premium on subject business. Also known as base premium. Surplus - The excess of assets over liabilities. Statutory surplus is an insurers or reinsurers capital as determined under statutory accounting rules. Surplus determines an insurers or reinsurers capacity to write business. Surplus Share - A form of proportional reinsurance where the reinsurer assumes pro rata responsibility for only that portion of any risk which exceeds the companys established retentions. Treaty - A general reinsurance agreement which is obligatory between the ceding company and the reinsurer containing the contractual terms applying to the reinsurance of some class or classes of business, in contrast to a reinsurance agreement covering an individual risk. Ultimate Net Loss - This term usually means the total sum which the assured, or any company as his insurer, or both, become obligated to pay either through adjudication or compromise, and usually includes hospital, medical and funeral charges and all sums paid as salaries, wages, compensation, fees, charges and law costs, premiums on attachment or appeal bonds, interest, expenses for doctors, lawyers, nurses, and investigators and other persons, and for litigation, settlement, adjustment and investigation of claims and suits which are paid as a consequence of the insured loss, excluding only the salaries of the assureds or of any underlying insurers permanent employees. Unearned Premium - That portion of the original premium that applies to the unexpired portion of risk. A fire or casualty insurer or reinsurer must carry a reserve against all unearned premiums as a liability in its financial statement, for if the policy should be canceled, the company would have to pay back the unearned part of the original premium. Working Layer - The first layer above the cedants retention wherein moderate to heavy loss activity is expected by the cedant and reinsurer. Working layer reinsurance agreements often include adjustable features to reflect actual underwriting results.

Ab initio -Latin for from the beginning. Accident year -The calendar or accounting year in which a loss occurs. Accreditation - The process by which a firm may obtain registration as a
Lloyds broker.

Accredited Lloyds broker - A Lloyds broker. Active Underwriter -The individual at the underwriting box with principal
authority to accept insurance and reinsurance risk on behalf of the members of a syndicate.

Actual Total Loss

This term derives from section 57 of the Marine Insurance Act 1906 (MIA) and refers to situations in marine insurance where (a) the subject matter of the insurance is destroyed; (b) the subject matter of the insurance is so damaged as to be no longer be capable of still being described as the thing insured; or (c) the insured is deprived of the subject matter of the insurance forever. Section 58 of the MIA adds that where there is no news of a missing ship then after a reasonable period an actual loss may be presumed.

Adjuster- See loss adjuster. Adjustment premium

An additional or return premium that is payable in relation to a deposit premium depending on the performance of an insurance or reinsurance contract.

Agent
Someone who acts for another person (the principal) usually for reward. There are four main classes of agent that may be involved in the underwriting of insurance and reinsurance risks by Lloyds underwriters: members agents, managing agents, brokers and coverholders. In addition, there are Lloyds agents which are independent businesses that provide surveys and loss adjusting services to managing agents, insurance companies and others on a worldwide basis. Further in some situations one underwriter may act as the agent of other underwriters (see general underwriters agreement).

Aggregate- Total (limit of indemnity, premium, retention etc). Aggregate excess of loss reinsurance
A form of excess of loss reinsurance in which the excess and the limit of liability are expressed as annual aggregate amounts.

Agreed business plan

A syndicate business plan that has been approved by or on behalf of Lloyds Franchise Board. No managing agent may underwrite for a syndicate without an agreed syndicate business plan. Agreed syndicate business plans may be amended with the agreement of the Franchise Board or someone acting on its behalf.

Agreed value policy An insurance contract under which the insurer agrees
to pay the insured a stated amount in the event of the total loss of the property insured without any adjustment for depreciation or appreciation.

Aligned Member A corporate member of a syndicate that is directly or

indirectly owned by the same firm that owns the managing agent of the syndicate.

All risks A property insurance which covers any accidental loss or damage that is
not specifically excluded under the policy.

Allocated Capacity
This may refer to a members allocated capacity or syndicate allocated capacity.

Annual accounting- The reporting of syndicate results on a calendar year

basis, with profit taking being restricted to earned premiums.

Annual venture
This term refers to the reconstitution of a syndicate as an annual business venture where insurance and reinsurance business is written on a year of account basis.

Appreciation
In the context of property insurance an increase in value of the property insured.

Approved person
An individual who has been approved by the Financial Services Authority (FSA) to perform a FSA controlled function for an authorised person.

Approved run-off company

A company that is permitted by Lloyds to perform specified functions that would normally be performed by a managing agent of a run-off syndicate on behalf of that agent or a substitute agent.

Assured - Another name for an insured. Attachment date

Another term for inception date, being the date on which an insurance or reinsurance contract comes into force.

Attorney in Fact
A person appointed by a power of attorney to act on behalf of another person. A Lloyds attorney in fact is a representative appointed by Lloyds to represent Lloyds and Lloyds underwriters in a particular country or US state. An attorney in fact may be a natural person or a company and performs a similar role to a Lloyds General Representative.

Authorised person
A person (usually a firm) that has been approved by the Financial Services Authority (FSA) to carry on one or more FSA regulated activities.

Average
If the sum insured under non-marine insurance is expressed to be subject to average and that sum is less than the value of the subject matter of the insurance then any claim that is agreed under the policy will be reduced proportionately to reflect the under insurance. Section 81 of the Marine Insurance Act 1906 say that an insured shall be his own insurer as regards any under insurance. In marine insurance the term average may also refer to one of two types of loss, general average and particular average.

Avoidance of a contract ab initio

The cancellation of an insurance or reinsurance contract from its beginning by an insurer or reinsurer on the basis of the misrepresentation and/or non-disclosure of material facts. The result is that the insurer/reinsurer has no liability under the contract but must repay the premium to the insured/reassured.

Back years-

See prior years.

Bailee
A person who holds the property of another person (the bailor) under a contract or agreement according to which the property held is to be returned to the bailor or delivered somewhere to his order. A bailee for reward is paid for his services.

Basis (of insurance) clause

A clause that makes the declarations contained in an insurance proposal form the basis of any contract of insurance that is made in consequence of the completion of that form. Such declarations are thereby converted into warranties with the result that if one of them is found to be untrue then the insurer may disclaim all liability under the relevant contract from the date of the breach, regardless as to whether the false declaration was material to the underwriting of the contract or causative of any loss. Basis of insurance clauses are not normally found in personal lines insurance contracts sold in the United Kingdom and, where they appear in other contracts, they may be qualified by the inclusion of a term in the proposal form that the declarations made in that document are true to the best of the knowledge and belief of the person making the declarations.

Beyond economic repair

Where the cost of repairing the insured property, eg a car, exceeds the market value of that property. In such circumstances the insurer will pay the insured the market value of the insured property at the date of loss, subject to the terms of the policy (assuming the insurer is not under any obligation to provide a replacement).

Binding authority
An agreement between a Lloyds managing agent and a coverholder under which the Lloyds managing agent delegates its authority to enter into a contract or contracts of insurance to be underwritten by the members of a syndicate.

Bordereaux
A list of premiums payable and claims paid or due which is prepared by a coverholder for a managing agent or by a reassured for its reinsurer. Bordereaux are commonly produced on a monthly or quarterly basis. They breakdown block premium payments that are made to underwriters and detail claim payments made on behalf of or due from underwriters.

Box
Each syndicate has a box in the underwriting room at Lloyds from which business may be transacted with Lloyds brokers. Each box comprises a couple of opposite facing benches and desks at which the underwriters employed by the managing agent of the syndicate sit, plus some loose stools for the visiting Lloyds brokers to sit on. Most boxes have computer terminals as well as access to other information technology.

Broker
There are two types of broker involved in arranging insurance and reinsurance at Lloyds: insurance brokers and reinsurance brokers. Some brokers act both as insurance brokers and reinsurance brokers.

Brokerage
The commission that is payable to a broker for placing an insurance or reinsurance contract with an insurer or a reinsurer. Compare fee for service. Although brokerage is payable by the insured as part of the gross premium the amount of brokerage is agreed by the insurer. The insured may request his broker to state the amount of his brokerage on a given placement. Similar considerations apply to reassureds under reinsurances. Sometimes the term brokerage may be used to refer the business of a broker.

Business process reform

An initiative to increase the speed and efficiency with which business is transacted at Lloyds and also to reduce of the cost of doing business at Lloyds. It includes the promotion of contract certainty.

Buy back
In the context of general insurance this refers to the purchase of cover in respect of an otherwise excluded peril by means of the payment of additional premium.

Byelaws
The primary rules made by the Council of Lloyds regarding the conduct of insurance business at Lloyds.

Cancellation clause
A clause in an insurance contract which permits an insurer and/or an insured to cancel the contract before it is due to expire. The clause may provide for a return of premium in respect of the unused portion of the policy.

Capacity
This term may refer to: (a) a members allocated capacity (b) syndicate allocated capacity (c) the total underwriting capacity of all syndicates combined; or (d) the underwriting capacity of an insurance company or reinsurance company.

Capacity auction
A procedure which allows a member to sell his participation rights in one or more syndicates for the following year of account to one or more other members, a managing agent or a members agent operating a MAPA by means of electronic bidding at specific times. Individual members and some corporate members buy and sell capacity through their members agents.

Capital provider
As regards a Lloyds syndicate, its member(s). As regards a company, its shareholders.

Carrier (of risk)- An insurer or reinsurer. Cash call - A request for funds made by a managing agent to members of a
syndicate.

Casualty - Refers to a loss, particularly the loss of a ship. Casualty book

A book which stands in the centre of the underwriting room and which records details of vessels which are or are likely to become total losses. The entries are made a by Lloyds waiter using a quill pen.

Casualty business Another term for liability insurance. Cedant -A syndicate or company that transfers a risk exposure under a
reinsurance contract.

Cedants line- The retention under a surplus lines treaty. Cede- To transfer a risk exposure under a reinsurance contract. Central accounting
A facility is that is operated by the Corporation of Lloyds whereby sums due to and from individual Lloyds brokers and syndicates are processed centrally and their accounts debited and credited on a net basis regularly. Urgent one off payments may be made more quickly.

Central Fund - See New Central Fund. CentreWrite Limited

A subsidiary of the Society that is permitted to underwrite run-off reinsurance contracts for syndicates in run-off and estate protection reinsurance for Names.

Certificate of insurance
Depending on the context this term may refer to: (a) A document which evidences the existence of insurance cover but which does not detail all its terms which are contained in a separate policy of insurance. Certain certificates are required as a matter of law in the United Kingdom, for example for motor insurance. (b) A document that is issued by a coverholder which evidences the existence of insurance cover and details the terms of such cover. No policy of insurance is issued where such a certificate is issued.

Cession -A particular risk exposure that is transferred under a reinsurance

treaty.

Claim
Depending on the context this term may refer to: (a) a demand made by a policyholder on his insurer(s) for payment or some other contractual benefit under an insurance policy; (b) a demand made by an insurer on its reinsurer(s) to be paid under a reinsurance contract; or (c) a demand made by a third party on a policyholder to be compensated for some injury, damage or loss for which the third party blames the policyholder. A claim is payable under an insurance or reinsurance contract if it is caused by an insured peril and it is not excluded under the terms of that contract.

Claimant - The person making a claim. Claims made policy

A policy which only pays claims that are notified to the insurer during a specified period.

Claims notification clause

A clause in an insurance or reinsurance contract which sets out the procedure that the insured or reassured must follow in order to make a claim under the contract. Such clauses frequently provide for prompt notification of claims and events which may gives to claims in the future.

Classes of business

The Lloyd's market underwrites five main classes of insurance and reinsurance business: marine, non-marine, motor, aviation and term life insurance. The market rules that previously prevented marine underwriters writing more than one class of business have been abolished. However, the premiums and claims relating to term life insurance must be kept separate from those relating to other classes of business and the rules of the Financial Services Authority (FSA) prohibit a syndicate writing both general insurance and long term insurance as defined by the FSA. Term life may constitute long term insurance.

Closed Year
A year of account that has been closed into another year of account by means of a reinsurance to close contract. Historically most Lloyds syndicates have operated a three year underwriting account according to which the profit or loss of an underwriting account is determined by the managing agent 36 months after the beginning of that account which is always the start of a calendar year. According to this system the normal closure date of the 2000 year of account (which commenced on 1 January 2000) was 31 December 2003 with the calculation of the reinsurance to close as at that date being finalised in or about February/March 2004.

Coinsurance
This may refer to either of the following situations: (a) Where two or more insurers underwrite the same risk with several liability such that each insurer is not bound to follow the decisions of any co-insurer unless it has agreed to do so. (b) Where the insured acts as its own insurer for a specified proportion of the sum insured.

Combined ratio
The claims and expenses of an insurer/reinsurer for a given period divided by its premium for the same period. It is normally expressed as a percentage with any figure in excess of 100% signifying a technical underwriting loss.

Coming into line

A biannual procedure currently undertaken in June and November each year which requires members to demonstrate that they have sufficient eligible assets to meet their current underwriting liabilities and to support future underwriting before they may underwrite for the next following year of account.

Commercial lines
Insurance which is sold to firms. This term is used in contrast to personal lines.

Commutation
The termination of a reinsurance contract by agreement of the parties on the basis of one or more lump sum payments by the reinsurer which extinguish its liability under the contract. The payment made by the reinsurer commonly relates to incurred losses under the contract.

Consortium
An agreement between a group of two or more insurers according to which each member of the group agrees to accept a proportion of all risks of a specified type that are underwritten by one or more designated members of the group which act as leading underwriters.. Unlike a line slip there is usually no restriction on which Lloyds brokers may place business with a consortium.

Constructive total loss

Section 60 of the Marine Insurance Act 1906 states that, subject to any policy provision, a constructive total loss arises where the subject matter of an insurance is reasonably abandoned to the insurer by the insured on account of its actual total loss appearing unavoidable or because it could not be preserved from actual total loss without an expenditure that would exceed its value.

The term is sometimes used to refer to insured property, e.g. a car, which is damaged beyond economic repair.

Contract certainty
Refers to the situation where the terms of an insurance or reinsurance contract are agreed before the inception date of the contract rather than being negotiated afterwards.

Conversion arrangement
A scheme sponsored by a members agent which allows an individual member to switch from underwriting on an unlimited liability basis to underwriting on a limited liability basis.

Coordinating agent
A members' agent who is appointed by a member who has more than one members agent to co-ordinate the administration of the member's affairs at Lloyd's.

Corporate member
A member of the Society which is a body corporate (including for the avoidance of doubt limited liability partnerships) or a Scottish limited partnership.

Corporate member syndicate

A syndicate with a single corporate member as its only member.

Corporation of Lloyds
The executive of the Council of Lloyds, Lloyds Franchise Board and their respective committees. The Corporation does not underwrite insurance or reinsurance itself but provides the licences and other facilities that enable business to be underwritten on a worldwide basis by managing agents acting on behalf of members.

Council of Lloyds
The Council of Lloyds was constituted as the governing body of Lloyds by Lloyd's Act 1982. It currently comprises 6 external members, 6 working members and 6 nominated members and is empowered to make byelaws governing the conduct of insurance business at Lloyds. Since 2003 the Council has acted by Lloyds Franchise Board as regards the development and direction of the implementation of the commercial policy of the Lloyds franchise and the direction and regulation of the business of insurance of Lloyds.

Cover -Insurance or reinsurance as it applies to one or more specific risk

exposures.

Cover note
A document issued by a broker pending the issue of a policy which confirms the arrangement of cover for the named insured/reassured. Motor insurance cover notes that are issued in the United Kingdom (which incorporate a certificate of insurance) are usually of short duration.

Coverholder
A company or partnership authorised by a managing agent to enter into a contract or contracts of insurance to be underwritten by the members of a syndicate managed by it, in accordance with the terms of a binding authority.

Declinature -The refusal of an insurer or reinsurer to offer terms of cover.

Dedicated vehicle
A corporate member that only participates on one or more syndicates that are managed by the same managing agent or group of managing agents. The term is often used interchangeably with the expression aligned member.

Deductible
The amount that is deducted from some or all claims arising under an insurance or reinsurance contract. The practical effect is the same as an excess: the insured or reassured must bear a proportion of the relevant loss. If that loss is less than the amount of deductible/excess then the insured or reassured must bear all of the loss (unless there is other insurance in place to cover the deductible). An increase in deductible should result in a reduction in premium.

De-emption
Where a managing agent reduces the underwriting capacity of a syndicate, for example when it expects to write less business in future. The participations of the members of the syndicate are reduced proportionately.

Deposit premium
A premium that is payable at the inception (start) of an insurance or reinsurance contract and in respect of which an adjustment premium (usually an additional premium) is due depending on the performance of the contract including, possibly, the amount of the business that is ceded thereunder. Compare minimum premium.

Depreciation
The decrease in the value of an item due to age, use or wear and tear. Such devaluation is not covered under a contract of indemnity. However an insurer may agree to provide cover on a new for old basis which represents a modification of the principle of indemnity and avoids the need to determine rates and amounts of deprecation when settling claims.

Deterioration in reserves
Where the reserves of an insurer or reinsurer for prior years are insufficient to meet the estimated liabilities of one or more loss exposures and therefore require to be increased.

Direct business- Insurance placed with an insurer direct and not through an
intermediary.

Duty of disclosure
The duty of every person seeking insurance or reinsurance to inform the insurer/reinsurer from whom a quotation for insurance/reinsurance is sought of every material fact. The duty arises when seeking new insurance/reinsurance, when seeking a variation of cover (but only as regards a change in risk where the carrier is the same as before) and at renewal (but only as regards a change in risk where the carrier is the same as before). The scope of the duty may be modified by the terms of a proposal form. Should a person seeking insurance/reinsurance fail to disclose a material fact then this may lead to the avoidance of the relevant insurance or reinsurance by the underwriter. The consequences of non-disclosure may be modified by the terms of the relevant insurance/reinsurance.

Earned premium- The proportion of premium that relates to a used period

of cover.

Endorsement
A document that is attached to a slip, cover note or policy which evidences one or more changes in the terms of the insurance or reinsurance contract to which it refers.

Equitas Reinsurance Ltd

A reinsurance company that was formed by the Society of Lloyds for the purpose of accepting reinsurances to close of non-life syndicates for the 1992 and prior years of account in 1996. The company is not a subsidiary of the Society of Lloyds and operates independently of it.

Establishment business - See freedom of establishment.

European Economic Area
The member states of the European Union plus Norway, Iceland and Liechtenstein.

European Union
The European Union is made up of 27 Member States: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

European Union/European Economic Area - definition of a risk

A risk is deemed to be located in an European Union or European Economic Area member state if it is: (a) a building (and its contents issued under the same policy) situated in that state; (b) a motor vehicle, ship, yacht or aircraft registered in that state; (c) a travel policy for four months or less taken out in that state. For any other type of insurance (including a life insurance) it is an individual if the policyholder is habitually resident in the member state or a business or an organisation if the establishment to which the contract relates is situated in that state.

Ex gratia payment
A payment made by underwriters as a favour or out of kindness without an admission of liability so as to maintain goodwill.

Excess
The amount or proportion of some or all losses arising under an insurance or reinsurance contract that is the insured or reassured must bear. If the loss is less than the amount of the excess then the insured/reassured must meet the cost of it (unless there is other insurance in place to cover the excess). Compare deductible and retention. Excesses may either be compulsory or voluntary. An insured which accepts an increased excess in the form of a voluntary excess will receive a reduction in premium.

Excess of loss
A type of reinsurance that covers specified losses incurred by the reassured in excess of a stated amount (the excess) up to a higher amount, for example 5 million excess of 1 million. An excess of loss reinsurance is a form of non-proportional reinsurance.

Exclusion
A term in an insurance or reinsurance contract that excludes the insurer or reinsurer from liability for specified types of loss. An exclusion may apply throughout a policy or it may be limited to specific sections of it. In certain circumstances an exclusion may be limited or removed altogether following the payment of an additional premium.

Extended reporting period

The period after the expiry of a claims made policy in which claims under that policy must be made if they are to be covered. It may be possible for an insured to extend this period on payment of an additional premium.

External member- A member who is not a working member or a nominated

member.

Facultative risk
A reinsurance risk that is placed by means of separately negotiated contract as opposed to one that is ceded under a reinsurance treaty.

Facultative/obligatory treaty
A reinsurance contract which allows the reassured to select which risks of a given type are to be ceded to the reinsurer. The reinsurer is obliged to accept all the cessions made by the reassured provided they fall within the scope of the treaty.

Fee for service

Where a broker is remunerated on the basis of a fee agreed with its client instead of brokerage. The benefit to the broker is that, subject to the terms of agreement, the fee will be payable whether or not cover is placed whereas brokerage is only payable in respect of the placement of cover.

Fidelity insurance
A type of insurance which is designed to protect a firm from losses caused by the dishonest acts of its employees.

Following underwriter
An underwriter of a syndicate or an insurance company that agrees to accept a proportion of a given risk on terms set by another underwriter called the leading underwriter.

Franchise (Lloyds)
The Lloyds brand, worldwide trading licences, financial strength rating, mutual security and other support services that enable members to underwrite insurance and reinsurance at Lloyds on a global basis.

Franchise Board - See Lloyds Franchise Board.

Franchise goal
The creation and maintenance of a commercial environment at Lloyds in which the long term return to all capital providers is maximised.

Franchisee - A managing agent. Franchisor

Lloyds in the form of the Council, Franchise Board and their respective committees and executives.

Freedom of establishment
In the context of insurance the right of an insurer located in one member state of the European Union (EU) to sell insurance in another member state of the EU through a local branch, agency or subsidiary. In the case of

Lloyds this includes business that is underwritten by a coverholder in a EU member state where Lloyds has a representative office and where the coverholder may enter into contracts of insurance without first consulting the managing agent that granted the binding authority.

Freedom of services
The right to provide services on a cross-border basis within the European Union (EU). The essential feature so far as the provision of insurance is concerned is that the contract is made in an EU member state which is different from the member state where the risk is located (see European Union/European Economic Area risk). It therefore covers open market business (with or without the involvement of a local intermediary) and business that is written under any binding authority where the local coverholder does not have authority to enter into contracts of insurance without first consulting the managing agent that granted the binding authority.

Funds at Lloyd's
Funds of an approved form that are lodged and held in trust at Lloyd's as security for a members underwriting activities. They comprise the members deposit, personal reserve fund and special reserve fund and may be drawn down in the event that the members syndicate level premium trust funds are insufficient to cover his liabilities. The amount of the deposit is related to the member's premium income limit and also the nature of the underwriting account. (See risk based capital).

General average
A loss that arises from the reasonable sacrifice at a time of peril of any part of a ship or its cargo for the purpose of preserving the ship and the remainder of its cargo together with any expenditure made for the same purpose. An example of a general average loss would include jettisoning cargo to keep a ship afloat and an example of general average expenditure would include towing a stricken vessel into port. An average adjuster calculates the value of each saved interest to each interested party which is then obliged to contribute towards the general average loss or expenditure proportionately. Subject to the terms of the policy, insurance will generally only apply if the loss was incurred to avoid or in connection with the avoidance of an insured peril.

General Representative
A person appointed by Lloyds to represent Lloyds and Lloyds underwriters in a particular country or territory. A General Representative may be a natural person or a company. An agreement between Lloyds and the General Representative sets out the General Representatives duties and responsibilities.

General underwriters agreement

An agreement between insurers and reinsurers on a subscription risk specifying the terms on which the leading underwriter shall act as the agent of the following underwriters as regards the agreement of amendments to coverage terms.

Grace period
A short period during which cover under an annual policy may be extended beyond its expiry date to allow for the payment of a renewal premium. The privilege will be lost if the insured rejects the proposed renewal terms, by his actions or words. There are no grace periods in motor or marine insurance.

Gross claims
Claims under contracts of insurance underwritten by the members of a syndicate plus internal and external claims settlement expenses less salvage or other recoveries, but before the deduction of reinsurance recoveries.

Gross line
The amount of risk that an insurer or reinsurer is carrying before taking account of any applicable reinsurance that reduces that risk.

Gross premium
Original and additional inward premiums, plus any amount in respect of administration fees or policy expenses remitted with a premium but before the deduction of outward reinsurance premiums.

Hard market
When the availability of some or all classes of insurance or reinsurances is limited relative to demand for such insurance or reinsurance resulting in increased premiums and coverage restrictions.

Hazard- Something that causes an exposure to injury, loss or damage. Hazardous pursuits
Certain sports and activities are termed hazardous pursuits and are excluded from travel insurances although it may be possible to have them included on payment of an additional premium.

Inception- Commencement or beginning (eg of cover). Inception date -The date on which an insurance or reinsurance contract
comes into force.

Incurred but not reported (IBNR) losses

Estimated losses which an insurer or reinsurer, based on its knowledge or experience of underwriting similar contracts, believes have arisen or will arise under one or more contracts of insurance or reinsurance, but which have not been notified to an insurer or reinsurer at the time of their estimation.

Incurred losses
The aggregate of the paid and outstanding claims of an insurer or reinsurer for a year of account or some other given period of time. These losses represent known losses to an insurer or reinsurer and, subject to issues of proof of liability and the determination of the final amount payable in the case of outstanding claims, are relatively certain.

Indemnity
The principle according to which a person who has suffered a loss is restored (so far as possible) to the same financial position that he was in immediately prior to the loss, subject in the case of insurance to any contractual

limitation as to the amount payable (the loss may be greater than the policy limit). The application of this principle is called indemnification. Most contracts of insurance are contracts of indemnity. Life insurances and personal accident insurances are not contracts of indemnity as the payments due under those contracts for loss of life or bodily injury are not based on the principle of indemnity.

Indication
A non-binding statement by an underwriter of the likely level of premium that he would charge to underwrite a risk, subject to the provision of additional information. Compare quotation.

Individual member
A member of the Society who is an individual (as opposed to a corporate member).

Insurable interest
If an insured wishes to enforce a contract of insurance before the Courts he must have an insurable interest in the subject matter of the insurance, which is to say that he stands to benefit from its preservation and will suffer from its loss. In non-marine insurances, the insured must have insurable interest when the policy is taken out and also at the date of loss giving rise to a claim under the policy. In life insurance the insured must have insurable interest must when the policy is taken out and in marine insurance the insured must generally have insurable interest at the date of loss giving rise to a claim under the policy .

Insurance
A contract whereby an insurer promises to pay the insured a sum of money or some other benefit upon the happening of one or more uncertain events in exchange for the payment of a premium. There must be uncertainty as to whether the relevant event(s) may happen at all or, if they will occur (eg death) as to their timing.

Insurance broker
An individual or firm that acts as agent for an individual, body or firm in arranging insurance cover and in presenting claims under such cover. At present only Lloyds brokers may arrange cover directly with or on behalf of underwriters in the underwriting room.

Insurance contract
Determines what insurance coverage is in place and determines the legal framework under which the content of an insurance policy is enforced.

Insurance intermediary
A person through whom an insurance contract is effected. It normally refers to an insurance broker and/or an agent of an insurer such as a coverholder.

Insurance policy - See policy.

Insured
A person who is insured under a contract of insurance. Where there is one insured this person may also be referred to as the policyholder.

Insured peril - A harmful event which is covered under a contract of insurance.

Insurer
A provider of insurance. If the insurance is underwritten at Lloyds the insurer(s) will be the members of one or more syndicates. If the insurance is not underwritten at Lloyds the insurer(s) will be one or more insurance companies. Some insurances may be underwritten by syndicates and insurance companies.

Integrated Lloyd's vehicle (ILV)

A company which owns a corporate member of a syndicate and the managing agent of that syndicate.

Intervening cause
An event that prevents a loss being attributable to another event by breaking the chain of causation. Compare proximate cause.

Investment income
That part of the income of an insurer or reinsurer that comes from the investment of premiums and reserves.

Inward reinsurance
Reinsurance that is assumed by a Lloyds syndicate or other carrier as distinct from outward reinsurance.

Jeweller's block policy

A form of property insurance that is provided to jewellers.

Jurisdiction clause
A clause in an insurance or reinsurance contract which states to which territorys courts any contractual dispute shall be referred for resolution

Key person insurance

A policy that protects a firm from loss caused by the death or disability of a 'key person' within the company.

Large Risks
An official term used in EEA insurance regulation. The formal definition of Large Risks is found in the EUs 2nd Non-Life Insurance Directive (88/357). It can be summarised as meaning: (i) Risks classified as: Railway rolling stock Aircraft (including aircraft liability) Ships (sea, lake and river and canal vessels) (including liability) Goods in transit (including merchandise, baggage, and all other goods). (ii) Risks classified as Credit or Surety where the policyholder is engaged professionally in an industrial or commercial activity or in one of the liberal professions, and the risks relate to such activity. (iii) Risks classified as: Fire and natural forces Other damage to property General liability Miscellaneous financial loss in so far as the policyholder exceeds the limits of at least two of the following three criteria: - balance-sheet total: 6.2 million euros,

- net turnover: 12.8 million Euros, - average number of employees during the financial year: 250. If the policyholder belongs to a group of undertakings for which consolidated accounts are drawn up, the criteria mentioned above is applied to the consolidated accounts.

Leading underwriter
The underwriter of a syndicate or insurance company who is responsible for setting the terms of an insurance or reinsurance contract that is subscribed by more than one syndicate or insurance company and who generally has primary responsibility for handling any claims arising under such a contract. Where an insurance or reinsurance contract that is underwritten by more than one syndicate Xchanging Claims Services normally acts as the representative of the following underwriters as regards the agreement of claims under the contract. In certain situations a managing agent of a following syndicate will be appointed together with Xchanging Claims Services to represent the following underwriters. However some matters require to be referred to all the following underwriters on risk and an insured may always insist that its claim is shown to each following underwriter.

Leading underwriter's agreement

An agreement that allows for certain changes to the terms of an insurance or reinsurance contract to be agreed by the leading underwriter(s) without reference to the following underwriters.

Liability insurance
An insurance which covers the insured against third party claims or, in the case of employers liability insurance, claims by employees, subject to specified terms and conditions.

Life assurance- Another term for life insurance.

Life assured- The person whose life is insured under a life insurance. Life insurance
A policy that pays a specified sum to beneficiaries upon the death of the life assured, or upon the assured surviving a given number of years, depending on the terms of the policy. Life insurance policies may be for fixed or indefinite term. See term life as regards fixed term policies.

Limit of indemnity
Another term for policy limit. It refers to the maximum amount payable under a policy of insurance or reinsurance, either overall or with reference to a particular section of a policy.

Line
The proportion of an insurance or reinsurance risk that is accepted by an underwriter or which an underwriter is willing to accept. When it refers to a line that is entered on a slip it is commonly expressed as a percentage of the limit of indemnity.

Lloyds
Depending on the context this term may refer to (a) the society of individual and corporate underwriting members that insure and reinsure risks as members of one or more syndicates. Lloyds is not an insurance company; (b) the underwriting room in the Lloyds Building in which managing agents underwrite insurance and reinsurance on behalf of their syndicate members. In this sense Lloyds should be understood as a market place; or

(c) the Corporation of Lloyds which regulates and provides support services to the Lloyds market.

Lloyd's Act 1982

The most recent of seven private Acts of Parliament that define the powers of the Society of Lloyds. The Council of Lloyds was made the governing body of Lloyds under this Act.

Lloyds Agent
A firm that is appointed to conduct or arrange surveys of ships and cargoes for Lloyds underwriters, other insurers and commercial interests throughout the world. Many Lloyds agents also undertake non-marine surveys, act as loss adjusters and provide information about shipping movements and losses. There are over 300 Lloyds agents, 160 of whom have authority to settle claims on behalf of Lloyds underwriters and insurance companies.

Lloyds American Trust Fund

A trust fund that is maintained in the USA for the protection of holders of US dollar denominated policies which incepted between August 1939 (when the fund was established) and 31 July 1995. It is a premiums trust fund. Compare Lloyds Dollar Trust Funds.

Lloyd's broker
A firm that is listed in the register of Lloyds brokers maintained under the Intermediaries Byelaw which is permitted to broke insurance business at Lloyd's. A syndicate can generally only accept insurance business that has been broked or placed from or through a Lloyds broker.

Lloyds Canadian Trust Fund

A trust fund that is maintained in Canada for the protection of holders of insurance policies covering Canadian risks. It is a premiums trust fund.

Lloyds Dollar Trust Funds

These funds are maintained in the USA for the protection of holders of US dollar denominated policies which incepted on or after 1 August 1995 (when the fund was established). They are premiums trust funds. Compare Lloyds American Trust Fund.

Lloyds Franchise Board

The board established by the Council of Lloyds which is responsible for developing and directing the implementation of the franchise policy to create an maintain a commercial environment at Lloyds in which the long term return to all capital providers is maximised. The Council delegates certain of its powers to the Board which may operate within limitations set by Council.

Lloyds market
This term may refer to the place where business is transacted between managing agents and Lloyds brokers, or to the syndicates that provide cover at Lloyds.

Lloyd's Market Board

The committee of the Council of Lloyds that was formerly responsible for the development and growth of Lloyd's worldwide business. It was abolished in 2002 in anticipation of the transfer of its responsibilities to Lloyds Franchise Board.

Lloyds Policy Signing Office Ltd

Lloyds Policy Signing Office used to be part of the Corporation of Lloyds. Following its incorporation it is now part of the Xchanging group of companies.

Lloyd's Regulatory Board

The committee of the Council of Lloyds that was formerly responsible for the regulation of the Lloyds market. It was abolished in 2002 in anticipation of the transfer of its responsibilities to Lloyds Franchise Board.

Lloyds solvency test

A test that is undertaken annually to ensure that members of the Society have sufficient eligible assets to meet their underwriting liabilities. The test is undertaken at member level and also on an aggregate basis for all members taking in account the centrally held assets of the Society such as the New Central Fund. Any member that fails the solvency test at member level will be required to provide additional funds or cease underwriting. The centrally held assets of the Society must be sufficient to cover any shortfall of assets at member level.

Lloyds underwriters
This term may variously refer to (a) the professional underwriters who are employed by managing agents to underwrite insurance and reinsurance business on behalf of the members of the syndicates that those agents manage. (b) the members of one or more syndicates that underwrite a particular policy; or (b) all members (of the Society) collectively.

Lloyds waiter - A liveried member of Lloyds staff. LMP slip

A standard form slip that managing agents must use to underwrite insurance at Lloyds except (a) if the insured requires some other slip to be used; or (b) the slip relates to motor business, personal lines including motor business or term life business and the slip will not be processed by LPSO Ltd. For further information visit www.lmp2001.com. Please note: Lloyd's accepts no responsibility for the content of external sites.

Long tail (risk)

This refers to a type of insurance where claims may be made many years after the period of the insurance has expired. Liability insurance is an example of long tail business. The opposite of long tail business is short tail business

Loss
This term generally refers to some injury, harm, damage or financial deteriment that a person sustains. Losses may be insured or uninsured. Whether a loss is covered by a policy or certificate of insurance depends on the terms of that document and local law.

Loss adjuster
A person who is appointed to investigate the circumstances of a claim under an insurance policy and to advise on the amount that is payable to the policyholder in order to settle that claim. Loss adjusters are generally appointed by underwriters but sometimes policyholders appoint their own loss adjusters to negotiate claims on their behalf.

Loss event- The event which causes a loss, for example a fire or hurricane. Managing agent

An underwriting agent which has permission from Lloyds to manage a syndicate and carry on underwriting and other functions for a member.

Managing agent's agreement

A standard form agreement between a member and the managing agent of a syndicate on which the member participates which sets out the powers of the managing agent and the obligations of the managing agent and the member towards one another. There are two forms of managing agents agreement: the managing agents agreement (general), which applies to every member that has a members agent and the managing agents agreement (corporate) which applies to every member that does not have a members agent. Copies of current versions of these agreements are annexed to the Agency Agreements Byelaw.

Mandataire General-

The title used by a Lloyds General Representative in certain countries, predominantly those that are French speaking.

Market agreement - An agreement between all the underwriters in a

certain section of the Lloyd's market.

Mass risks
An official term used in EEA insurance regulation. It means any risk that is not a 'large risk'. See large risks.

Material fact
This refers to any fact which would influence the judgment of a prudent underwriter in deciding whether to accept an insurance/reinsurance risk and the terms on which he would be willing to grant cover. See duty of disclosure.

Material representation
A statement that is made to an underwriter during the negotiation of cover or the amendment or renewal of cover which would have influenced the judgment of a prudent underwriter in deciding whether to accept an insurance/reinsurance risk and the terms on which he would be willing to grant cover.

Means

The minimum level of wealth that a member must demonstrate he, she or it has in order to underwrite at Lloyds. The means of all members must be held in approved form and must be maintained in value so long as the member has actual or potential outstanding underwriting liabilities.

Member (of the Society)

A person (either individual or corporate) admitted to membership of the Society.

Members allocated capacity

That part of overall premium limit of a member that is allotted to a particular syndicate for a given year of account. It represents the amount of premium that the Member may accept in respect of that syndicate for that year of account.

Members' agent
An underwriting agent which has permission from Lloyds to be appointed by a member to provide services and perform duties of the same kind and nature as those set out in the standard members agents agreement. These services and duties include advising the member on which syndicates he should participate, the level of participation on such syndicates and liaising with the members managing agents.

Members' agent Pooling Arrangement (MAPA)

An arrangement operated by a members agent whereby a number of members combine pool some or all of their underwriting capacity thus enabling them to participate in a wider range of syndicates than would otherwise be the case.

Members' agent's agreement

A standard form of contract between a member and his member's agent, which sets out the services, duties, powers and remuneration of the member's agent and obligations of the member. The terms of the contract with the exception of the amount of the members agents remuneration are set by the Council of Lloyds. A copy of the current versions of the members' agent's agreement is annexed to the Agency Agreements Byelaw.

Minimum premium
The minimum amount that is payable to an insurer or reinsurer as a premium in respect of a insurance or, more commonly, reinsurance contract which provides for a deposit premium. The minimum premium may be the same as the deposit premium or a different figure.

Misrepresentation (of risk)

A misstatement of fact that is made by the insured or his broker to an underwriter during the negotiation of the placement, amendment or renewal of cover which causes the underwriter to grant, amend or renew cover on an incorrect basis of fact. If the misrepresentation is material the underwriter may avoid the contract on the basis that the insured has breached his duty of utmost good faith. Compare duty of disclosure.

Mixed syndicate A syndicate which is made up of Names and/or MAPAs and

corporate members.

Moral hazard
Those personal characteristics of a prospective insured or its employees or associates that may increase the probability or size of an insurance loss.

Name
An individual member underwriting with unlimited liability. Since 6 March 2003 no person has been admitted as a new member to underwrite on an unlimited liability basis.

Nameco
A company that is a corporate member whose members consist of a single individual or a group of connected individuals or their nominees. Many Namecos were formed by Names who wished to cease underwriting on an unlimited liability basis.

Net claims- Gross claims less reinsurance recoveries.

Net premium
The amount of the premium that is left after the subtraction of some or all permitted deductions such as brokerage and (for certain types of business) profit commission.

New Central Fund [*]

The fund held, managed and applied by the Society pursuant to the New Central Fund Byelaw (No. 23 of 1996).

Nominated member

A member of the Council of Lloyds who is not an external member or a working member and whose appointment has been approved by the Governor of the Bank of England.

Non-disclosure (of a material fact)- See duty of disclosure.

Non-proportional reinsurance
A type of reinsurance in which the reinsurer does not share similar proportions of the premiums earned and the claims incurred by the reassured plus certain associated expenses. Compare proportional reinsurance. Excess of loss reinsurance is an example of non-proportional reinsurance.

Open market basis- See open market business. Open market business
Insurance business that may be offered to and placed with any managing agent that is willing to underwrite it on behalf of its managed syndicate. It excludes business that is underwritten pursuant to a binding authority.

Open market correspondent

A firm that produces business to a Lloyds broker for placement on an open market basis. Lloyds requires that firms in certain overseas territories must be approved or registered by its attorney in fact or general representative before they can produce business to one or more sponsoring Lloyds brokers for placement on an open market basis.

Open year of account

A year of account of a syndicate which has not been closed by reinsurance to close. There are two types of open year of account; naturally open years of account and run-off accounts. Syndicates are required to keep each year of account open for a minimum of three years before it may be closed by reinsurance to close. In normal circumstances a syndicate will therefore have three naturally open years of account at any point in time: the third year of one year of account, the second year of the following year of account; and the first year of the next year of account. Thus in 2005 the 2003 year of account is in its third year, the 2004 year of account is in its second year and the 2005 year of account is in its first year. Where the liabilities attaching to a particular year of account of a syndicate (including any prior year of account closed into that year) cannot be quantified after three years then that year of account will be left open until such time as a reinsurance to close may be effected or all the liabilities attaching to that year of account are extinguished.

Order
This may refer to (a) the communication by a broker to an underwriter of a clients acceptance of his quotation; or (b) the amount of the sum insured that is covered by a particular slip where more than one slip is used to arrange cover.

Outwards reinsurance
The reinsurance of a syndicate or of an insurance company as distinct from inwards reinsurance.

Overall premium limit (or overall premium income limit) (OPL)

In relation to a member, the limit for the time being prescribed on the amount of insurance business which is to be underwritten on his behalf from time to time, such limit being expressed as the maximum permissible amount of his premium income allocable to any year of account.

Overriding commission
A commission that is paid by a reinsurer to the reassured to cover the latters overheads in administering the reinsurance.

Overwriting
Where a syndicate exceeds its allocated capacity. Depending on the scale of the problem the managing agent of the syndicate may be required to cease underwriting some or all new business and the members may be required to make available additional funds at Lloyds to cover the overwriting.

Particular average
A partial loss of a ship or cargo which is caused by an insured peril and which is not a general average loss. The term partial loss may be used instead.

Peril
A harmful event which may be covered under a contract of insurance or reinsurance as an insured peril or excluded from it.

Personal accident insurance

A type of insurance which provides for the payment of specified sums in the event that the insured suffers some bodily injury as a result of an accident.

Personal lines insurance

Insurance which is sold to individual consumers such as buildings, contents and travel insurance. This term is used in contrast to commercial lines.

Personal reserve fund

A reserve of cash or investments held on behalf of a member and comprising part of his funds at Lloyds. The reserve, which is held within the premiums trust fund of the member, may be built up by setting aside a proportion of past profits or by the setting aside of funds from other sources. It is separate from any special reserve fund the member may have.

Placement (of cover)

Where a broker effects an insurance or reinsurance contract with underwriters on behalf of its client.

Placing broker
This term may refer to an individual broker or a broking firm that places cover directly with one or more underwriters. Compare producing broker.

Placing slip- See slip.

Policy -The wording of a contract of insurance or reinsurance.

Policy holder- The person who is insured under a contract of insurance.

Policy limit
Another term for limit of indemnity. It refers to the maximum amount payable under a policy of insurance or reinsurance, either overall or with reference to a particular section of the policy.

Pre-emption
Where a managing agent increases the underwriting capacity of a syndicate, for example when it expects to write more business in future. The participations of the members of the syndicate are increased proportionately to the extent the managing agents pre-emption offer is taken up.

Premium
The amount charged by an insurer or reinsurer as the price of granting insurance or reinsurance cover, as stated before or after the subtraction of brokerage and other deductions.

Premiums trust fund (PTF)

The premiums and other monies that members receive in respect of their underwriting at Lloyds are held by their managing agents in trust for them subject to the discharge of their underwriting liabilities. The premiums trust funds comprise a sterling fund, Lloyds American Trust Fund, Lloyd's Dollar Trust Funds, Lloyd's Canadian Trust Fund and the Lloyds Asia Trust Fund. These premiums trust funds are available to fund overseas regulatory deposits, claims, return premiums, underwriting expenses and (once a year of account has been closed) any profit that is payable to the member.

Prior years
Earlier years. This term usually refers to earlier years of account which have been closed into another year of account by reinsurance to close.

Pro rata cancellation

When an insurance contract is terminated mid-term by an insurer, the return premium will usually be calculated on a pro rata basis. For example this means that if a 12 month contract is cancelled 4 months before its expected expiry date then the insured would receive back 4/12 of its premium.

Producing broker
This term may refer to (a) the individual broker who obtains a proposal for insurance or reinsurance for the broking firm for which he works; or (b) a broking firm or individual broker that is responsible for introducing a proposal for insurance or reinsurance to another broking firm. The original producing broker will be the person who deals directly with the client. The term producing broker is often used in contrast to the term of placing broker although it is common for individual brokers and broking firms to undertake both functions.

Profit commission
A commission that is payable according to a pre-determined formula as an incentive and reward for profitable underwriting. The following are examples of profit commission: (a) the commission paid to a coverholder by a managing agent for underwriting a profitable account; (b) the commission paid by a Member to a managing agent in respect of the profitability of its syndicate in a given year of account; and (c) the commission paid by a reinsurer to an insurer in respect of a profitable reinsurance treaty.

Proportional Reinsurance

A type of reinsurance in which the reinsurer shares similar proportions of the premiums earned and the claims incurred by the reassured plus certain associated expenses. Compare non-proportional reinsurance. Quota share treaties and surplus line treaties are examples of proportional reinsurance.

Proposal form
A standard form which is prepared by an insurer and which contains a number of questions which a person seeking insurance is required to answer for the purpose of enabling the insurer to decide whether or not it is willing to grant cover and, if so, the terms on such cover. See duty of disclosure.

Proposer- A person who seeks insurance (frequently by means of

completing a proposal form).

Proximate cause
An insurer will only be liable to pay a claim under an insurance contract if the loss that gives rise to the claim was proximately caused by an insured peril. This means that the loss must be directly attributed to an insured peril without any break in the chain of causation. Compare intervening cause.

Pure year of account

A year of account viewed in isolation, which is to say disregarding any prior years that may have been reinsured into by means of reinsurance to close.

Qualifying quota share (QQS) reinsurance

A quota share treaty that may be purchased by a managing agent with the permission of Lloyds so as to increase the underwriting capacity of its managed syndicate, subject to a specified limit and subject to the treaty complying with certain terms and conditions.

Quantum
Latin for amount. Where an insured or reassured makes a claim it must first be established whether the insurer or reinsurer is legally liable to pay the claim (ie it must be shown the relevant loss is covered under the insurance or reinsurance). If the insurer or reinsurer is liable to pay the claim it must then be established how much is the insurer must pay. For example, there may be deductions for an excess, under insurance or depreciation.

Quota share treaty

A reinsurance treaty which provides that the reassured shall cede to the reinsurer a specified percentage of all the premiums that it receives in respect of a given section or all of its underwriting account for a given period in return for which the reinsurer is obliged to pay the same percentage of any claims and specified expenses arising on the reinsured account.

Quotation
A statement of the premium that an underwriter requires to underwrite an insurance/ reinsurance risk based on the information supplied by the person seeking cover, either directly or via their broker. A quotation may be conditional, eg it may be subject to the provision of further information, or not. If a quotation is accepted before it is withdrawn, then subject to the satisfaction of any conditions that may attach to the quotation, an insurance/reinsurance contract will be made. Compare indication.

Rate The premium expressed as a percentage of the sum insured or limit of

indemnity.

Recognised accountant [*]

An individual or firm entitled to act as a recognised accountant in accordance with the Audit Arrangements Byelaw (No. 7 of 1998).

Reinstatement of cover
The restoration of cover following its exhaustion as a result of a loss by payment of an additional (reinstatement) premium. Many reinsurances provide for one or more automatic reinstatement of covers.

Reinsurance
A contract under which a reinsurer agrees to pay specified types and amounts of underwriting loss incurred by an insurer or another reinsurer in return for a premium. Reinsurance serves to 'lay-off' risk. Reinsurance may be proportional or non-proportional and may take the form of a cover in respect of an individual risk exposure (see facultative risk) or cover in respect of multiple risk exposures (see treaty). Reinsurance accounts for more than half of Lloyd's total business.

Reinsurance to close (RITC) [*]

A reinsurance which closes a year of account by transferring the responsibility for discharging all the liabilities that attach to that year of account (and any year of account closed into that year) plus the right to any income due to the closing year of account into an open year of account of the same or a different syndicate in return for a premium. Where a reinsurance to close is effected between members of the same syndicate the reserves of the closing year of account constitute the premium for a reinsurance to close. This premium must be equitable as between the members of the two years of account concerned which means that neither the reinsured nor the reinsuring members should expect to profit from the transaction at the time it is concluded. Where a reinsurance to close is effected between members of different syndicates the managing agent of the reinsuring members will want to make a profit from the transaction for those members and will set the reinsurance to close premium accordingly. This usually involves a loading on the reserves of the closing year of account.

Reinsurer
An underwriter of reinsurance. If the reinsurance is underwritten at Lloyds the reinsurer(s) will be one or more syndicates. If the reinsurance is not underwritten at Lloyds the reinsurer(s) will be one or more insurance companies. Some reinsurances may be underwritten by both syndicates and insurance companies.

Replacement
Where an insurer agrees to replace irreparably damaged or stolen goods with goods of a similar type and quality under a contract of indemnity instead of paying a cash sum to the insured.

Representation
A statement of fact or expectation. Representations made as to material facts at the time of the negotiation of the placement, amendment or renewal of cover must be true whereas representations as to a matter of expectation must be made in good faith.

Reserves
The amount of money that has been set aside by an insurer or reinsurer to meet outstanding claims, incurred but not reported losses and any associated expenses.

Retention
The amount of any loss or combination of losses that would otherwise be payable under an insurance/reinsurance contract which the insured/reassured must bear itself before the insurer or reinsurer becomes liable to make any payment under that contract. Compare deductible and excess. An insured or reassured may be able to insure its retention with another insurer/reinsurer.

Retrocedant- A reinsurer that is reinsured under a retrocession. Retrocession

A reinsurance of a reinsurer by another reinsurer. It serves to 'lay-off' risk.

Retrocessionaire- The reinsurer under a retrocession. Risk

This term may variously refer to (a) the possibility of some event occurring which causes injury or loss; (b) the subject-matter of an insurance or reinsurance contract; or (c) an insured peril.

Risk based capital

The determination of a members capital requirement according to the spread of syndicates in which he participates and the nature of business that those syndicates underwrite.

Run-off account -A year of account which has not been closed as at the date
at which it would normally have been closed and which remains open.

Run-off syndicate
A syndicate with one or more run-off years of account.

Salvage
This may refer to (a) property that is rescued from danger on land or at sea; or (b) an award that is paid to someone for voluntarily rescuing property at sea from a marine peril.

Salvage value - The estimated cash amount that would be received if damaged
property were to be sold.

Services business - See freedom of services. Several liability

Each member underwrites for his own account and is liable accordingly for his share of all claims and expenses that are incurred by the syndicates in which he participates.

Short-rate cancellation
When an insurance contract is terminated prior to its expiry date by the insured any return premium that is payable will usually be calculated on a time on risk basis. The result is that the insured will receive less return premium than would be the case if the return premium was calculated on a pro rata basis (see pro rata cancellation).

Short-tail (risk)
A type of insurance where claims are usually made during the term of the policy or shortly after the policy has expired. Property insurance is an example of short tail business. The opposite of short tail business is long tail business.

Signed line -This refers to the amount of a given risk that an underwriter has
agreed to accept. It may be the same as the underwriters written line or, if there is signing down, a lower amount

The amount of a syndicates signed line should be shown in a table in the policy, where one is issued. Signing Down
Where a risk is oversubscribed, which is to say that the underwriters written lines exceed 100% then, absent some contrary instruction, those lines will be proportionally reduced ('signed down') by the broker until they total 100%. An underwriter may insist on preserving his written line in which event the written lines of the other underwriters will be proportionally reduced until they total 100% when added to the preserved written line of the other underwriter.

Signing slip - See slip. Slip

There are two types of underwriting slip: a placing slip and a signing slip. A placing slip is a document created by a broker that contains a summary of the terms of a proposed insurance or reinsurance contract which is then presented by the broker to selected underwriters for their consideration. Underwriters may delete, amend or add terms on a slip as they consider appropriate for the purpose of providing an indication or a quotation.

A signing slip is a document that is created by a Lloyds broker after a quotation has been accepted for the purpose of processing premiums under the contract that is evidenced by the placing slip. It is a cleaned up version of the final placing slip and shows underwriters stamps, signed lines and underwriting references, these details being inserted by each underwriter at the request of the broker. Provided that it shows the underwriters stamps, signed lines and underwriting references a placing slip may be used as a signing slip.

Slip policy
A signed slip which is agreed to be a policy where the insured or the reassured does not require a separate policy.

Society of Lloyds [*]

The Society incorporated by Lloyds Act 1871 by the name of Lloyds.

Soft market
When the availability of some or all classes of insurance or reinsurances is high relative to demand for such insurance or reinsurance. Competition amongst insurers and reinsurers leads to downward pressure on premiums and to the availability of more extensive coverage terms. Compare hard market.

Special reserve fund

A reserve that is held on behalf of a member and comprising part of his funds at Lloyds. The reserve, which is held within the premiums trust fund of the member, may be only built up by setting aside a proportion of past profits and funds can only be withdrawn from it in the event of the payment an overall underwriting loss or on the death or resignation of the member following the closure of all years of account in which he underwrote. It is separate from the personal reserve fund of a member.

Spread vehicle
A corporate member which participates in a number of syndicates.

Stop loss reinsurance

Also known as excess of loss ratio reinsurance. This is a form of excess of loss reinsurance which provides that the reinsurer will pay some or all of the reassureds losses in excess of a stated percentage of the reassureds premium income in respect of its whole account or a specified account, subject (usually) to an overall limit of liability which may be expressed as a percentage of the relevant premium income or an amount.

Subrogation
The right of an insurer which has paid a claim under a policy to step into the shoes of the insured so as to exercise in his name all rights he might have with regard to the recovery of the loss which was the subject of the relevant claim paid under the policy up to the amount of that paid claim. The insurers subrogation rights may be qualified in the policy. In the context of insurance subrogation is a feature of the principle of indemnity and therefore only applies to contracts of indemnity so that it does not apply to life assurance or personal accident policies. It is intended to prevent an insured recovering more than the indemnity he receives under his insurance (where that represents the full amount of his loss) and enables his insurer to recover or reduce its loss.

Subscriber- A person that bids for underwriting capacity in a capacity auction.

Substitute agent [*]A person or body appointed in accordance with part K of
the Underwriting Byelaw.

Sum insured
The maximum amount that an insurer will pay under a contract of insurance. The expression is usually used in the context of property and life insurance where (subject to the premium cost) the insured determines the amount of cover to be purchased.

Sum insured
The maximum amount that an insurer will pay under a contract of insurance. The expression is usually used in the context of property and life insurance where (subject to the premium cost) the insured determines the amount of cover to be purchased.

Sunrise clause -A clause that provides retroactive cover in respect of losses

occurring before the inception of a (re) insurance contract.

Sunset clause
A clause which restricts cover to claims notified during the period from the inception of a (re) insurance contract to a specified date after the expiry of that contract.

Surplus lines insurance

These are insurance risks that have been certified by a local broker as having been declined by a prescribed number (usually three or four) of licensed insurers in a given state in the United States of America and which therefore be underwritten as 'surplus lines'.

Surplus lines insurer -An insurer that underwrites surplus lines insurance
in the US. Lloyds underwriters are surplus lines insurers in all jurisdictions of the US, except Kentucky and the US Virgin Islands.

Surplus treaty or surplus lines treaty

A type of reinsurance under which bands of cover known as lines are granted above a given retention which is referred to as the cedants line. Each line is of equivalent size and the capacity of the treaty is expressed as a multiple of the cedants line so that with a retention of 2 million, a three line treaty would provide reinsurance cover of 6 million (2 million X 3) excess of 2 million. The reinsurer receives an equivalent proportion of the full risk premium. A surplus treaty is a form of proportional reinsurance.

Surrender -The termination of a life insurance policy while the life assured is
still alive in return for a cash sum.

Syndicate [*]
A member or group of members underwriting insurance business at Lloyds through the agency of a managing agent or a substitute agent to which a syndicate number is assigned by the Council. Except where it is expressly otherwise provided the several groups of members to which in different years a particular syndicate number is assigned by or under the authority of the Council shall be treated as the same syndicate, notwithstanding that they may not comprise the same members with the same individual participations.

Syndicate allocated capacity [*]

In relation to a syndicate, the aggregate of the members syndicate premium limits of all the members for the time being of the syndicate.

Syndicate business forecast

A statement of the expected range of results of each open year of account of a syndicate that is submitted to Lloyds by its managing agent in mid year together with the managing agents expectations for the next year of account.

Syndicate business plan

A plan of the underwriting of a given syndicate for a given year of account that is prepared by the managing agent of a syndicate and submitted to Lloyds for approval in advance of the commencement of underwriting for that year of account.

Syndicate number
The unique identifying number assigned to a syndicate by the Council of Lloyds.

Syndicate pseudonym
A series of letters used to identify a syndicate which together with its number are contained in the underwriting stamp of the syndicate.

Syndicate reinsurance -The reinsurance of a syndicate by one or more

reinsurers. Such reinsurance can only be arranged by a Lloyds broker.

Syndicate stamp
This term may refer to (a) a document which lists the names of the members of a syndicate for a given year of account and the amount of each members overall premium limit that is allocated to that syndicate; (b) the syndicate allocated capacity of a syndicate; or (c) the underwriting stamp of a syndicate.

Tenderer- A member that seeks to sell some or all of his underwriting capacity
in a capacity auction.

Term life insurance -A life insurance policy that pays the sum insured
only if the life assured dies within the period of the policy which is for a fixed period.

Terms of business agreement (TOBA)

Each Lloyds broker that wishes to do business with a managing agent must enter into an agreement with the managing agent which records the general terms and conditions on which business will be conducted between them.

Third party Someone other than the insured or his insurer who has suffered
injury or loss.

Third party liability The liability that an insured has to a third party. Total loss -Where the subject matter of an insurance is lost, destroyed or
damaged beyond repair.

Treaty- A reinsurance contract under which the reassured agrees to offer and the
reinsurer agrees to accept all risks of certain size within a defined class.

Uberrima fides - Latin for utmost good faith. Unaligned member

A member that is either (a) not affiliated to the managing agent of a particular syndicate; or (b) not affiliated to any managing agent.

Under insurance -Where the sum insured does not represent the true value
of the property insured. See average for an explanation of the consequences of under insurance.

Underwrite - This term may refer to

(a) The process of evaluating, defining and pricing insurance and reinsurance risks including where appropriate the rejection of such risks. (b) The acceptance of the obligation to pay or indemnify the insured or reassured under a contract of insurance or reinsurance.

Underwriter -Depending on the context this term may refer to:

(a) the individual who is responsible for underwriting a particular insurance or reinsurance contract and who is either an employee of a managing agent, an insurance company or reinsurance company or an employee of a coverholder or any similar underwriting agent. (b) an individual member or company that insures or reinsures a risk.

Underwriters -Depending on the context this term may refer to:

(a) the employees of managing agents, insurance companies and reinsurance companies and their respective underwriting agents that underwrite insurance or reinsurance risks; (b) the members or other carriers that underwrite a particular contract of insurance or reinsurance; (c) members collectively; or (d) insurers and reinsurers collectively.

Underwriting agent [*]- A managing agent or a members agent. Underwriting capacity

Depending on the context this term may refer to: (a) a members allocated capacity (b) syndicate allocated capacity, with or without the addition of cover from qualifying quota share reinsurance; (c) the total underwriting capacity of all syndicates combined, with or without the addition of cover from qualifying quota share reinsurance; or (d) the underwriting capacity of an insurance company or a reinsurance company. Underwriting stamp The stamp that is applied to a slip by an underwriter to signify his acceptance of a risk. It shows the number and pseudonym of the syndicate or the name of the

(re)insurance company for whom the underwriter acts and has a space for his underwriting reference to be inserted. The underwriter will insert his line on a slip next to his underwriting stamp.

Unearned premium -The proportion of premium that relates to the

unused period of cover.

Utmost good faith -Contracts of insurance and reinsurance are contracts of

utmost good faith. In the event that either party fails to observe utmost good faith towards the other in regard to the negotiation of cover then the other party may avoid the contract. The duty of utmost good faith requires each party to inform the other all material facts during the negotiation of the placement, renewal or alteration of cover. An insured has a separate duty of good faith when making a claim under an insurance policy.

Valued policy- See agreed value policy. Void policy- A contract which has no legal effect and is therefore unenforceable
in a court of law. For example, an insurance contract where the policyholder does not have an insurable interest.

Voidable contract - A contract which may be voided at the option of either

party. For example, an insurer may avoid a policy from inception for the misrepresentation or non-disclosure of material facts during the negotiation of the placement, renewal or alteration of cover. A insurer may also avoid a policy from the date of the presentation of a fraudulent claim.

War and civil war risks exclusion agreement

An agreement between Lloyd's underwriters and non-marine insurance companies that they will not cover certain war and civil war risks on land.

War risk waterborne agreement -A marine market agreement

whereby underwriters will only cover goods against war risks whilst they are on the vessel subject to a time limit after arrival at the port of destination. There is reduced cover for offloading and transhipment at the port of destination.

Warranty - Where an insured or reassured promises that something will or will

not be done during the period of cover or that a particular state of affairs exists or does not exist at the inception of cover. If the promise is untrue or is not kept then the insurer/reinsurer may disclaim all liability under the policy from the date of the breach, regardless as to whether the false declaration was material to the underwriting of the contract or causative of any loss.

Wear and tear- The amount deducted from a claims payment in recognition
of the depreciation of the property insured through usage of it over time. Where cover is provided on a 'new for old basis' ie where the insurer agrees to replace an old item with a similar new one, no such deduction is made.

Working member- A member who occupies himself principally with the

conduct of business at Lloyds by a Lloyds broker or underwriting agent, or a member who has retired but who immediately before his retirement occupied himself in this way.

Written line - The amount of a risk that an underwriter is willing to accept on

behalf of the members of the syndicate or company for which he underwrites. This is commonly expressed as a percentage of the sum insured which is written on the brokers placing slip. If, on completion of the broking exercise, the written lines exceed 100% then, absent some contrary instruction, they will be signed down by the broker, which is to say they will be reduced proportionately so that they total 100%.

Xchanging -An outsource provider of policy, premium and claims processing

services to the Lloyds market and others. These services are delivered via its operating subsidiaries, Ins-Sure Services and Xchanging claims services.

Year of account -

The year in which an insurance or reinsurance contract that is underwritten by a syndicate is allocated for accounting purposes and into which all premiums and claims arising in respect of that contract are payable. Insurance or reinsurance contracts are generally allocated to years of account according to the calendar year of their inception date so that a contract that commences in 2005 will normally be allocated to the 2005 year of account. Historically syndicates have operated a three year accounting system which means that each calendar is normally left open for two further years before a profit or loss is determined. A year of account is normally closed by reinsurance to close at the end of 36 months. Compare open year of account and run-off account.

ANNEX I (Dirty ballast water) (Oily Tank Washings) (Oily Bilge Waters) (Oily residues - sludge) (Scale & sludge from tank cleaning) (...) (Waste lubricants