Termination of an insurance policy because of failure to pay a premium or lack of sufficient cash value to maintain the policy’s in-force status
Working Layer. A layer of an excess-of-loss reinsurance treaty just above the cedant’s retention layer, in which frequent losses are expected.
Appeal Bond. A form of surety bond that guarantees to the court that the party against whom a judgment was rendered will pay the judgment if the appeal fails.
Bank. Within the context of reinsurance, this term is used to refer to the profits earned by a reinsurer during the life of a program.
Capitation. A payment system whereby managed care plans pay health care providers a fixed, per-capita amount (usually on a monthly basis) to care for a patient over a given period. Providers are not reimbursed for services that exceed the allotted amount. The rate may be fixed for all members or it can be adjusted for the age and gender of the members, based on actuarial projections of medical utilization.
Comparative Negligence. A legal dages notwithstanding a finding that the claimant ages are apportioned in accordance with degrees of culpability.
Cost Containment. Refers to the practice of controlling health care costs through the elimination or reduction of inefficiencies in the health care delivery system.
Defined Benefit (DB) Plan. A retirement pension plan that provides a specified level of benefits upon an employee’s retirement, with the employer being responsible for funding the plan. Benefits usually are expressed as a function of an employee’s years of service and average salary over the last few years of employment. Plan participants have no responsibility for the investment strategy, which is borne by the sponsor, who has sole discretion over the investment of plan assets. If asset values decline, it is the obligation of the sponsor to make additional contributions to the plan.
Employee Retirement Income Security Act (ERISA). Federal legislation enacted in 1974 applicable to most private pension and welfare plans. The legislation seeks to protect covered employees by establishing certain minimum standards for such plans.
Extended Warranty Insurance. A form of insurance that provides warranty protection against faulty construction for a term beyond the warranty period provided by the manufacturer.
Financial Guaranty. The promise to make payments to the holder of a debt, loan or other similar financial instrument in the event the borrower or underlying obligor fails to do so.
457 Plan. A tax-qualified deferred compensation retirement plan offered to employees by state or local governments, municipalities and organizations that obtain their funding from government sources.
Guaranteed Purchase Option. The provision in a life insurance policy that grants the insured the option to purchase additional amounts of life insurance without evidence of insurability.
Illinois Insurance Exchange. A marketplace established in 1982 to underwrite large or unusual insurance and reinsurance risks. Located in Chicago, Illinois. Renamed INEX Insurance Exchange in 1997.
Inflation Guard Endorsement. An amendment to a homeowners insurance policy that provides for automatic increases in coverage to take into account increases in value resulting from inflation.
For example, if a reinsurer providing catastrophe reinsurance has earned $100,000 in premiums and incurred no losses, there would exist a $100,000 bank
Lump Sum Distribution. A defined contribution plan participant’s taking the assets in his or her account as a single sum, instead of as an annuity (upon retirement), or rolling the assets over into an IRA or a new employer’s plan. A few defined benefit plans allow participants to take their assets as a lump sum, as well.
Medical Savings Account (MSA). A program analogous to an Individual Retirement Account (IRA), permitting tax-preferred savings toward medical expenses. The Health Insurance Portability and Accountability Act of 1996 provided for an experiment of the concept, and some Republicans have proposed its adaptation (via a Medicare Medical Savings Account, or MMSA) to Medicare.
Naive Capacity. A term describing insurers that enter the insurance marketplace without appropriate knowledge of the risks inherent in the business, thereby contributing to an excess of available capital and a soft insurance market; also known as innocent capacity.
Partial Disability. A disability that prevents an insured from performing one or more duties related to the insured’s employment. See Disability.
Preferred Provider Organizations (PPOs). Health care delivery systems in which hospitals, physicians and other health care providers agree to provide health care services at a discount. A health care arrangement between purchasers of care (e.g., employers, insurance companies) and providers that provides benefits at a reasonable cost by providing members incentives (such as lower deductibles and copays) to use providers within the network. Members who prefer to use nonpreferred physicians may do so, but only at a higher cost. Preferred providers must agree to specified fee schedules in exchange for a preferred status and are required to comply with certain utilization review guidelines.
Risk HMO. A type of Medicare private managed care plan, provided for under TEFRA, which is essentially a closed-network HMO that payday loans Hawaii provides Medicare-covered services and (usually) supplemental benefits in exchange for fixed payments from Medicare, including what are referred to as Competitive Medical Plans (CMPs).
SFAS 115. Statement of Financial Accounting Standard requiring that, under Generally Accepted Accounting Principles (GAAP), about 80% of insurer bond holdings be valued at current rates instead of amortized cost.
Stable Value Fund. Also known as guaranteed funds, interest income funds and fixed yield funds, the stable value fund is an investment option offered to defined contribution plan participants that offers protection of principal, a guarantee that the participant’s full account will not decline in value and liquidity without a penalty.
Tail. The period of time that elapses between the writing of an insurance policy and the payment of the claim or between the loss occurrence (or the insurer’s knowledge of the loss) and the payment of the claim.
Treaty Reinsurance. The reinsurance of a class of business by a cedant that the reinsurer must automatically accept. Also known as obligatory reinsurance.