ACCREDITATION – If a state passes all the National Association of Insurance Commissioners (NAIC) model acts and otherwise passes the periodic examination of an insurance department’s policies, commercial insurers domiciled there will be acceptable security in other States.
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ACTUARIAL REPORT – An analysis intended to project ultimate loss costs using probability theory and other methods of statistical analysis. Used to determine the adequacy of a property and casualty insurer’s statutory loss reserves and a life insurer’s unearned premium (technical) reserves. May be the basis of rate development.
ACTUARY – An actuary analyzes, evaluates and manages statistical information to determine rates.
ADMITTED INSURANCE COMPANY – A company is admitted when it has been licensed and accepted by the appropriate governmental regulator of a state. The company will be authorized to sell insurance that domicile.
ADMITTED REINSURANCE – Reinsurance provided by a reinsurer licensed or authorized in the jurisdiction in question. A company is “admitted” when it has been licensed and accepted by appropriate insurance governmental authorities of a state or country.
AGENT – Individuals working for an insurer or an independent contractor selling insurance. Must be licensed in all states where the insurance is written.
AGGREGATE – The greatest amount recoverable under a policy or reinsurance agreement from all losses or a single loss incurred during the life of the contract.
AGGREGATE STOP LOSS – Reinsurance purchased for excess of an aggregate loss limit. Aggregate stop loss protection caps the annual aggregate loss.
ALTERNATIVE RISK TRANSFER (ART) – A method of financing risk outside the traditional commercial insurance market. A company’s risks are funded by means other than the purchase of insurance through an agent broker from an admitted insurer. ART forms include surplus lines placement, self-insured trusts, risk retention groups and captives. The alternative market seeks to avoid costs associated with insurance brokerage and allow a business to finance its own risk.
ARBITRATION CLAUSE – A clause within a reinsurance agreement providing that if the ceding company and the reinsurer fail to agree, then they select neutral arbitrators with the authority to bind both parties to a solution. Language providing a means of resolving differences between the reinsurer and the reinsured without litigation.
ASSOCIATION – Any legal organization of sole proprietorships, corporations, partnerships, limited liability companies or associations that has been in continuous existence for at least one year and has the power to vote all of the outstanding voting securities for its captive.
ASSOCIATION CAPTIVE – A captive insurance company established by members of an association to underwrite their own collective risks. An association captive usually only insurers members of the sponsoring association.
ATTACHMENT POINT – The dollar amount under an excess of loss reinsurance contract at which a ceding (primary) insurer’s retention requirements have been met, and the point at which the reinsurance will respond to a loss on specific or aggregate stop loss basis.
