In Canada, a company that is incorporated under Canadian law. See also foreign corporation.

In disability income insurance, a condition in which the insured is not totally disabled, but is still unable to function as before the sickness or injury, and therefore suffers a reduction in income of at least the percentage—typically 20 percent to 25 percent—specified in the disability income plan. Also known as partial disability.

See income protection insurance.

Claims that an insurer has thus far refused to pay but that it may pay in the future. Also known as disputed claims.

In long-term care (LTC) insurance, temporary care provided by a nursing home or other qualified LTC facility for an insured receiving home health care. Respite care is designed to give the primary caregiver in the home a break from the day-to-day care of the insured.

A system of policies and procedures that allows for revenues and expenses to be assigned to a specified employee or organizational level that is accountable for them.

The area, function, or organizational unit that a specified manager controls.

A management accounting report that itemizes budgeted and actual amounts that are under the responsibility manager's sphere of control and the corresponding variance for each revenue or cost (expense).

A provision in a long-term care (LTC) insurance policy that allows an insured person who has used a portion of benefits available under the LTC policy to regain a full benefit period after a stated period of time has passed following the delivery of the long-term care.

The profits that a corporation holds to reinvest in the business instead of paying the money out in dividends to the corporation's owners.

See retained asset account.

See persistency.

A specified maximum amount of insurance that an insurer is willing to carry at its own risk without transferring some of the risk to a reinsurer.

Stock that a company had previously issued, then later repurchased at market price, with no intention of reselling the stock at a later date. See also stock.

(1) A transaction by which a reinsurer cedes risks to another reinsurer, known as the retrocessionaire. (2) The unit of insurance that a reinsurance company cedes to a retrocessionaire. (3) The document used to record the transfer of risk from a reinsurer to a retrocessionaire. See also reinsurer, reinsurance, and retrocessionaire.

A reinsurer that assumes risks transferred from another reinsurer. See also reinsurer, reinsurance, and retrocession.

In group health insurance, a premium payment arrangement under which the insurer agrees to charge the group policyholder a lower monthly premium than it would normally charge based on the group's prior claim experience and the policyholder agrees to pay an additional amount if, at the end of the policy year, the group's claim experience has been unfavorable.

For insurance companies, a method of computing a value for a reserve liability by looking at a contract's past cash flows—its past premiums and benefits. Contrast with prospective reserve valuation method.

In a managed health care plan, the process in which the utilization review organization reviews the necessity and quality of the medical care an insured received in a hospital following the hospitalization. See also managed health care plan and utilization review (UR).

The profit or compensation an investor earns for taking a risk.

In long-term care (LTC) insurance, a nonforfeiture option which provides that all or a portion of the premiums paid for the LTC coverage are returned to the policyholder.

See annual reset method.

See internal rate of return (IRR).

See Canada Customs and Revenue Agency.

The amounts earned from a company's core business operations.

A life insurance policy beneficiary whose right to the policy's proceeds can be cancelled or reduced by the policyowner at any time before the insured's death. Contrast with irrevocable beneficiary.

See Request for Proposal.

An amendment or addition to a contract that either expands or limits the benefits payable under the contract. Also known as endorsement. See also policy rider.

See Regulatory Information Retrieval System.

The chance or possibility of loss.

In insurance underwriting, a process that involves ascertaining the degree of risk represented by each proposed insured person or group according to a range of criteria established when a specific insurance product was designed. Also known as risk selection and selection of risks. See also underwriting.

In insurance underwriting, a grouping of insureds that represent a similar level of risk to an insurance company. See also declined risk class, preferred risk class, standard risk class, and substandard risk class.

Investment earnings expressed as a percentage relative to the invested principal. See also principal.

See risk assessment.

The degree to which a person is willing to accept financial risk.

In the United States, requirements that enable state regulators to evaluate the adequacy of an insurer's capital relative to the riskiness of the insurer's operations.

An investment principle stating that the interplay between investment risk and return usually results in higher risks offering potentially higher returns, and lower risks offering potentially lower returns.

See required minimum distributions.

See regular ordinary life insurance.

A budget that allows a company to continually maintain projections for a specified time period into the future. Also known as continuous budget.

A direct transfer of retirement funds from one qualified plan to another plan of the same type or to an individual retirement arrangement (IRA) that does not pass through the hands of the owner and thus does not incur any tax liability for the owner. Also known as direct rollover and direct transfer.

In the United States, a type of individual retirement arrangement (IRA) that permits people within certain income limits to make nondeductible annual contributions and to withdraw money on a tax-free basis at retirement age.

In insurance underwriting, a visit to a physician that was not motivated by a symptom or health problem.

In group insurance, a document that is attached to a Request for Proposal that specifies the agent's proposed rates for each type of insurance coverage for each class of employees. See also Request for Proposal.

See registered retirement savings plan.

In the United States, National Association of Insurance Commissioners (NAIC) model regulation designed to prevent unfair, deceptive, and misleading advertising and ensure that insurers truthfully disclose the benefits provided by health insurance policies as well as any limitations and exclusions in those policies.

In the United States, National Association of Insurance Commissioners (NAIC) model regulation designed to ensure that life insurance advertising materials provide full and truthful disclosure of all relevant information about a life insurance policy.

A situation in which many customers at once demand to withdraw their funds from a financial institution.

An insurance policy that is classified as having a greater-than-average likelihood of loss, usually issued with special exclusions, a premium rate that is higher than the rate for a standard policy, a reduced face amount, or any combination of these.

During the underwriting process for insurance, the act of approving an application on a basis other than the basis for which the policy was applied for, including actions such as approving the application at a higher premium rate than applied for or with less coverage than applied for. The resulting policy is said to be a rated policy.

In the insurance industry, an independent organization that evaluates the financial condition of insurers and provides information to potential customers of and investors in insurance companies.

A reduction in an insurer's quality rating. A downgrade often leads to a run on assets. Contrast with rating upgrade. See also quality rating.

An increase in an insurer's quality rating. A rating upgrade is viewed as a sign of increased financial strength. Contrast with rating downgrade. See also quality rating.

A comparison of two numeric values that results in a measurement expressed as a percentage or a fraction. See also financial ratio.

See risk-based capital ratio requirements.

Insurance laws that require insurers to reduce the amount of technical jargon and legal language included in insurance and annuity contracts.

Land or anything attached to the land. Contrast with personal property.

An accounting concept which states that a company should recognize revenue when it is earned, regardless of when the company receives the actual payment, so long as a legal and reasonable expectation exists that the customer will remit payment in full.

A restriction insurers include in medical expense policies which specifies that the amount paid for a claim must conform to the amount most frequently charged for a medical procedure in a given geographical area.

An insurance sales practice in which an insurance agent offers a prospect an inducement, such as a cash payment, to purchase an insurance policy from that agent. The practice of rebating is prohibited in most states.

A process by which a ceding company takes back from a reinsurer some or all ceded business.

In a reinsurance arrangement, a contractual provision that permits the ceding company to end or modify the reinsurance arrangement by taking back from the reinsurer some or all ceded business.

A type of short-term asset representing an outside party's promise to pay cash to the holder of the asset.

A short-term asset based on agents' obligations to an insurer.

A contract through which short-term assets known as receivables are sold for cash.

In the United States, the insurance commissioner, or someone acting on the commissioner's behalf, who is responsible for formulating a plan to distribute an impaired insurer's assets and for making sure that the insurer's obligations to customers are fulfilled to the greatest extent possible. Also known as conservator.

In the United States, a legal condition under which a state insurance commissioner takes control of and administers a financially impaired insurer's assets and liabilities. Also known as conservatorship.

In accounting, a cost allocation method that fully recognizes the services that service departments perform for each other.

A reinsurance arrangement in which certain insurers and reinsurers agree to cede business to each other and assume risk from each other.

A method of changing the beneficiary of a life insurance policy under which the change is effective when the policyowner notifies the insurer in writing of the change. Contrast with endorsement method.

In accounting, when a company records all authorized and executed transactions in the correct accounting period, in the correct accounts, and in the correct monetary amounts.

In disability income insurance policies, a type of disability that is the result of the same cause as for an original disability and that reappears after the original period of disability and an intervening period of recovery.

A prohibited practice in which an insurer refuses coverage to an applicant, or cancels an insured's existing coverage, solely because of the applicant's or insured's geographic location.

One of several nonforfeiture options included in life insurance policies that allows the owner of a policy with cash values to discontinue premium payments and to use the policy's net cash value to purchase paid-up insurance of the same plan as the original policy. See also nonforfeiture options.

An insurance policy provision that reduces the amount of the benefit payable for a specified loss. See also limitation.

In the United States, a regulatory examination of an insurance company that is conducted as a follow-up to a comprehensive or target examination and that is designed to determine whether the insurer has complied with recommendations or directives contained in a previous examination report.

In sales, the name of a prospect that a client has given to a sales person or agent.

An action taken by borrowers when they repay their debt before repayment is due in order to make new borrowing arrangements at lower interest rates.

See life income with refund annuity.

A method of receiving life insurance policy proceeds under which the insurer uses the policy proceeds to purchase a life income with refund annuity for the beneficiary/payee. See also life income with refund annuity and settlement options.

An insurance company office that is charged with many of the same functions and operations as the company's home office but that is geographically closer to the market it serves and generally reports to the home office. See also home office.

In Canada, a private retirement plan that meets the legal requirements to receive favorable federal income tax treatment. See also qualified retirement plan.

An officer or manager of a National Association of Securities Dealers (NASD) member, who is involved in the day-to-day operation of the securities business, has qualified as a registered representative, and has an NASD Series 24 or 26 registration.

A sales representative or other person who has registered with the National Association of Securities Dealers (NASD), disclosed the required background information, and passed one or more NASD examination. A registered representative engages in the securities business on behalf of a NASD member by soliciting the sale of securities or training securities salespeople.

A Canadian retirement account that is similar to individual retirement accounts in the United States and that allows individuals or their spouses (not employers) to make tax-deductible contributions, subject to specified maximum amounts, for the purpose of accumulating money for retirement.

A written statement containing detailed information about a security and the issuer of that security, including specified financial statements.

Ordinary life insurance products sold through the home service insurance distribution system.

A New York state insurance regulation designed to protect consumers against replacements that are not in the consumers' best interests. See also replacement.

Rules or orders that are issued by administrative agencies and that have the force of law.

See compliance.

A database maintained by the National Association of Insurance Commissioners (NAIC) that contains information on insurance companies and individuals who have been the subjects of regulatory or disciplinary actions.

(1) In disability income insurance, the process of helping a disabled person return to work, either at her own occupation or at another occupation if she is unable to perform the duties of her own occupation (2) In insurer insolvencies in the United States, a court-ordered process intended to restore a financially troubled company to a financially sound basis—the financially impaired insurer continues to operate and to exist. Contrast with liquidation. See also receivership.

See indemnity benefits.

The process by which an insurer puts back into force an insurance policy that has either been terminated for nonpayment of premiums or continued as extended term or reduced paid-up coverage.

A provision in an individual life insurance, health insurance, or annuity policy that describes the conditions a policyowner must meet for the insurer to reinstate such a policy. See also reinstatement.

A transaction between two insurance companies in which one company—the ceding company—transfers some of its insurance risk to another company—the reinsurer. The reinsurer agrees to reimburse the ceding company for covered losses claimed under the policies that have been reinsured according to the terms of the reinsurance agreement. See also ceding company and reinsurer.

In a reinsurance agreement, the payment from a reinsurer to a ceding company that represents a share of the ceding insurer's acquisition expenses and maintenance expenses for items such as commissions, underwriting costs, policy issue costs, and premium taxes.

A formal examination of an insurer's reinsurance records to evaluate whether those records contain accurate details and that ensures that both parties to a reinsurance agreement understand and have complied with the terms of the agreement.

See reinsurance intermediary.

In a reinsurance arrangement, the document that notifies the ceding company that reinsurance is officially in force.

See reinsurer.

The date upon which the reinsurance coverage for a specific risk takes effect.

A third party that acts as a go-between for a ceding company and a reinsurer in effecting a reinsurance transaction. A reinsurance intermediary helps ceding companies find appropriate coverage for large-amount and unusual cases and can arrange for sufficient reinsurance from multiple reinsurers if no single reinsurance company will accept the entire risk. Also known as reinsurance broker.

In a reinsurance arrangement, a group of two or more reinsurers who accept risk from a given insurer.

In indemnity reinsurance, premiums paid by a ceding company to a reinsurer for reinsurance coverage.

A type of account receivable that is recorded in an account titled amounts recoverable from reinsurers. This receivable represents a balance that a reinsurer owes to the insurer, usually for health insurance or another indemnity line of business.

A formal written agreement that is negotiated and signed by a ceding company and a reinsurer and that establishes the terms and conditions by which risk can be submitted for reinsurance.

An insurance company that, for an exchange of value, such as a payment, accepts insurance risks transferred from another company—the ceding company—in a reinsurance transaction. Also known as assuming company. See also ceding company.

A written document that a recipient of life insurance policy proceeds must sign prior to receiving the policy's proceeds which states that the claimant has received full payment of his claim and that he gives up any and all claims that he has or might have against the insurer as a result of that policy.

In accounting, the quality of accounting information that requires a company's accounting information to be useful, timely, and likely to affect an interested user's decisions.

In accounting, the quality of accounting information that requires a company's accounting records and financial statements to present accurate, objective information that is free from bias and misrepresentation.

A term life insurance policy that gives the policyowner the option to continue the coverage at the end of the specified term without presenting evidence of insurability, although typically at a higher premium based on the insured's attained age.

A sales commission paid to an insurance sales agent for a specified number of years after the first policy year on policies that the agent sold. The renewal commission rate is generally lower than the first-year commission rate.

See maintenance expenses.

Any insurance policy premium payable after the initial premium.

(1) A term life insurance policy provision that gives the policyowner the right, within specified limits, to continue the coverage for an additional policy term without providing evidence of insurability. (2) An individual health insurance policy provision that describes the circumstances under which the insurer has the right to refuse to renew or the right to cancel the coverage and the insurer's right to increase the policy's premium rate.

For group insurance plans, a type of underwriting in which the underwriter reviews all the risk assessment factors considered when the group was originally underwritten and all changes in the group and its coverage between the previous underwriting and the current time.

In insurance, a transaction that occurs when a policyowner surrenders an insurance policy or part of the coverage of a policy in order to buy another policy. Replacements may be external or internal. An external replacement occurs when the new policy is issued by a different insurer than the one that originally issued the policy. An internal replacement is one in which the new contract is purchased from the same insurer that issued the original contract.

A type of homeowners' insurance that pays the policyowner the full cost of replacing the lost or damaged property, subject to a maximum amount.

In the United States, a National Association of Insurance Commissioners (NAIC) model regulation that applies to life insurance policies and annuities that are being replaced and that is designed to ensure that insurers and agents provide consumers with fair and accurate information about policies so consumers can make buying decisions that are in their own best interests. See also replacement.

In disability income insurance, the percentage of the insured's income that a disability policy will replace.

A statement made by a contracting party that is relevant to the formation of the contract. Representations that are not substantially true will invalidate the contract. Contrast with warranty.

In group insurance, a document that provides detailed information about the requested coverage and requests a bid from the insurer for providing that coverage.

An insurance company's amount of capital and surplus to support financial obligations that arise from an insurer's existing book of business. Required capital allows the insurer to remain in business. Also known as committed capital.

Amounts that participants in qualified retirement plans and owners of traditional individual retirement arrangements (IRAs) must begin to receive by a specified age or time. Also known as minimum required distributions (MRD).

See policy reserve.

A legal action in which a contract is declared void or cancelled. An insurer usually seeks a rescission of an insurance policy when there has been a material misrepresentation in the insurance application. See also misrepresentation.

See reserves.

An accounting entry used by a ceding company to record the reduction of reserves, due to the use of reinsurance, in its Annual Statement or Annual Return. See also ceding company, reinsurance, and reinsurer.

For an insurance company, the act of decreasing a reserve liability amount, which results in an increase in the insurer's capital or surplus. Contrast with reserve strengthening.

For an insurance company, the act of increasing a reserve liability amount, which results in a decrease in the insurer's capital or surplus. Contrast with reserve destrengthening.

A formal actuarial process of establishing a value for an insurer's required policy reserves.

For an insurer, liability accounts that identify the amounts of money that the insurer expects to need to meet future business obligations. Although many different types of reserves exist, insurers use the term to refer to policy reserves. See also contingency reserve and policy reserve.