Glossary

  • Active underwriter
    The person with principal authority to accept Risks on behalf of the Members of the Syndicate. Paul Lawrence is the Active Underwriter for Syndicate 33.
  • Agent
    There are three types of Agent. Managing Agents, for example Hiscox, are responsible for all aspects of running Lloyd's Syndicates. Member's Agents advise individual Members of Lloyd's on their underwriting commitments and provide a link between them and their Syndicates. Licensed Lloyd's advisers perform a similar function on behalf of Corporate Members. Lloyd's Agents, the 'eyes and ears' of Lloyd's, provide worldwide shipping information and assist Underwriters in the settlement of claims.
  • All risks
    Wider cover than given under a normal property insurance policy. Covers any loss or damage apart from exclusions stated in the policy. Hiscox 606 is an ‘all risks’ policy.
  • Annual venture
    The system used for running a Lloyd’s syndicate under which each 'year of account' is treated separately. Members own capacity on a syndicate for a 'year of account' and the results are declared when the year is closed by the RITC mechanism, usually after three years.
  • Any One Claim (AOC) limits
    The limit of cover you buy is available for each claim you make and unlimited during the policy period. Therefore should you be unfortunate enough to suffer from a number of different claims, you will always be covered up to your full indemnity limit.
  • Assessor
    A person appointed by the insured to assess and agree on the settlement of a claim under an insurance policy, the insurer’s appointee is called an adjuster
  • Assured
    Same as insured.
  • Average
    A policy condition that requires the amount of a claim payment to be reduced proportionately if the policyholder has not insured his property for the full amount of its value or replacement cost.

  • Binder

    1. US term for temporary cover used by an insurer, or a reinsurer.
    2. An authority by an underwriter to an agent to grant cover on the underwriter’s behalf (binding authority).

  • Bordereau

    A schedule or list. Commonly used in reinsurance practice for periodical statements of insurances, premiums and losses.

  • Box

    Business at Lloyd's is conducted at underwriting boxes, where an underwriter sits at their desk.

  • Broker

    An independent person or organisation whose business it is, for remuneration, usually in the form of commission, to find the most appropriate insurer to meet the needs of the customer’s risk profile.

  • Brokerage

    The commission received by a broker for placing insurance risks on behalf of the Insured. In practice it is paid to the broker by the underwriter out of the gross premium. Also means the business or office of the broker.

  • Capacity
    See syndicate capacity.
  • Catastrophe
    Sudden or severe disaster causing a large loss.
  • Central fund
    A fund, financed by contributions from all Lloyd’s Members, managed and applied by the Council for the advancement and protection of the interests of the members in connection with the business carried on by them as such members.
  • Claims adjuster
    A person who negotiates settlements of a claim on behalf of an insurer.
  • Claims notification clause
    A clause in a policy which provides for prompt notification of claims and commonly designates a specific adjuster to receive notice and deal with the claim.
  • Claims ratio
    Net claims incurred, including IBNR, as a percentage of net earned premiums.
  • Closed year
    A year of account to which no further adjustments are to be made and final accounts or profits statements can be prepared. This can be done only after providing for all outstanding claims by way of reinsurance to close. At Lloyd's the closed year is usually the third year of account.
  • Combined ratio
    The total of the claims and expenses ratios.
  • Corporate member
    A company incorporated with limited or unlimited liability admitted to membership of the Society at Lloyd's.
  • Cover note
    A document issued as evidence that Insurance has been granted pending the issue of a policy.
  • Cover/coverage
    The protection that is given by insurance. For example Hiscox can cover your valuables against theft.
  • Coverholder
    A person authorised to accept, or to issue insurance documents evidencing the acceptance of Risks on behalf of underwriting agents.

  • Declaration
    A statement signed by the proposer (later insured) at the foot of a proposal form, certifying to the best of their knowledge the accuracy of the information given .
  • Decline
    Refusal to accept the request for insurance coverage.
  • Deductible
    The amount of the loss which the Insured is responsible to pay before benefits from the insurance company are payable. You may choose a higher deductible to lower your premium. Also known as excess.
  • Direct business
    Insurance placed with an insurer directly, not through a broker.
  • Disclosure
    The duty of the Insured and their broker to tell the underwriter every material fact before acceptance of the risk.

  • Endorsement
    Any writing on or addition to a policy or any addition to the printed wording which changes or varies terms of, or parties to, the contract.
  • Equalisation provision
    This is a provision made to cover future catastrophe losses and is calculated in accordance with a set sector formula, which has the effect of smoothing the profit cycle.
  • Equitas
    The corporate entity into which the general business insurance liabilities of Lloyd's Syndicates allocated to the 1992 and prior years of account have been reinsured.
  • Excess
    An amount being the first part of the cost of a claim, which the insured has to bear in accordance with the terms of the insurance.
  • Excess of loss reinsurance
    Reinsurance covering claims only the extent that they exceed a stated amount.
  • Exclusion
    A provision in a policy that excludes the Insurer's liability in certain circumstances or for specified types of loss.
  • Expenses ratio
    Expenses as a percentage of net written premiums.
  • Exposure
    1. The state of being subject to the possibility of loss.
    2. The measurable extent of risk.
    3. The possibility of loss to insured property caused by its surroundings.

  • Funds at Lloyd’s
    The amount of assets, which can be cash, investments or letters of credit, that a syndicate member has to deposit with Lloyd’s to support their share of the capacity on a syndicate. The minimum amount is 40% of the capacity owned by the member.

  • General average
    The principle in maritime law that when a sacrifice is made or an expense voluntarily incurred to preserve the rest of a venture the loss or expense should be shared among all the interests involved in proportion to their value.
  • Gross written premium
    Premiums contracted for before any deductions.
  • Group controlled gross written premium
    The total gross written premium controlled by Hiscox including the 29% of the syndicate capacity not owned by Hiscox.

  • IBNR
    Incurred but not reported. An estimate made at the end of each accounting period to cover the expected cost of losses that have occurred but have not yet been reported to the insurer or reinsurer.
  • Inception date
    The date on which an insurance begins to operate.
  • Incurred loss ratio
    Paid and outstanding losses as a percentage of premiums. Gross incurred loss ratio is before deducting any reinsurance and net is after deducting reinsurance.
  • Indemnity
    1. The making good of a loss by means of a monetary payment.
    2. An agreement by one party to make good a loss sustained by the other party.
  • Insured
    The policyholder – the person(s) or organisation protected in case of a loss or claim.
  • Integrated Lloyd’s Vehicle
    A company which owns or controls a dedicated vehicle supporting one or more continuous syndicates and the managing agency.

  • Jeweller's block cover
    This insurance covers the Insured's stock, property left with the Insured for repair or other purposes, and the Insured's interest in and legal liability for property on memorandum or consignment from others in the jewellery trade.

  • Key man (or woman) insurance
    Life insurance policy bought by a company, usually a small business, on the life of a key executive, with the company as beneficiary.

  • Liability insurance
    Insurance to cover the legal liability of the Insured to the extent of such liability but subject to any limitations expressed in the policy.
  • Limit
    Maximum amount a policy will pay either overall or under a particular coverage.
  • Limit of indemnity
    The maximum sum payable under a contract of indemnity. It may be expressed as per accident, per event, per occurrence, or per premium.
  • Line
    The proportion of a risk accepted by an underwriter. Also used to refer to the amount which an underwriter has fixed as his maximum exposure for any one risk.
  • Line slip
    An agreement between a group of Underwriters and, as the case may be, insurance companies and a Lloyd’s broker where in a specific class of insurance business certain named or otherwise designated underwriters or insurance companies within the group may accept risks introduced by that Lloyd’s broker on behalf of all of the members of the group in accordance with the terms of the agreement.
  • Long-tail
    A term used to describe an insurance risk that has the potential for claims development or new claims to be reported a number of years after expiry of the term of the policy.
  • Loss
    A claim under a policy. The financial Loss caused to the Insured by the happening of the event insured against.
  • Loss adjuster
    Independent company appointed by Hiscox to assist the insured with the claims process.
  • Loss ratio
    The proportion of claims paid or payable to premiums earned.

  • Managing agent
    An underwriting agent, such as Hiscox, responsible for managing a syndicate and among other things employing the active underwriter.
  • Material fact
    Any fact or circumstance which would affect the judgement of a prudent underwriter in considering whether he would accept a risk or not, and on what terms, including the amount of premium.
  • Member or name
    The companies or individuals who own the capacity of a syndicate and who belong to the membership of the Society of Lloyd’s.
  • Members' agent
    An agent appointed by a member to provide services and perform duties of the same kind and nature as those set out in the standard Members’ Agent’s Agreement. This will include advising on a member's underwriting commitments and providing a link between the member and their syndicates.
  • Mixed syndicate
    An underwriting syndicate at Lloyd's, the capacity being provided by both individual and corporate members.
  • Moral hazard
    The risk arising from the character or management style of the Insured or his employees.

  • Name
    An individual member of the Society of Lloyd's.
  • Negligence
    A civil wrong whereby a person breaches a duty of care owed to another causing them loss.
  • Net premium
    The amount of the premium left after removing the brokerage and any other deductions.
  • Net premiums earned
    Premiums received after the cost of reinsurance and adjustment for unearned premium. Unearned premium covers the future period of risk of an insurance policy.
  • Net premiums written
    Premiums contracted for after deduction of reinsurance.
  • Non-disclosure
    Failure by the insured or his broker to disclose a material fact or circumstance to the underwriter before acceptance of the risk.

  • Open year
    A year of account of a syndicate which has not been closed by reinsurance to Close (RITC). RITC usually occurs at the end of the third year. A year of account can be left open beyond the third year if the extent of the future liability cannot be accurately quantified.

  • Policy limit The maximum amount a policy will pay, either overall or under a particular coverage.
  • Policy or policy wording
    The written contract of insurance.
  • Premium
    The amount paid to an insurer or reinsurer in consideration of their acceptance of a risk.
  • Pro-rata condition of average
    A policy condition providing that in the event of under-insurance any claim shall be scaled down in proportion to the degree of under-insurance.
  • Proposal form
    An application by a proposer for Insurance. The proposer becomes the insured when the application has been accepted and the contract brought into existence.
  • Prospectus
    A form which is often part of the proposal form, giving details of the cover available with particulars of extra benefits and rebates.

  • Qualifying quota share reinsurance
    These are quota share reinsurance policies, which Lloyd’s allow in certain circumstances, that enable a syndicate to write gross premium in excess of its capacity.
  • Quota share treaty
    A reinsurance agreement whereby the reinsured cedes a predetermined proportion of all business (or a specified part of that business) to his reinsurers.

  • Rate
    Costs per unit of insurance.
  • Recovery
    Money received by an insurer in respect of a loss, thus reducing the loss, by way of subrogation, salvage or reinsurance.
  • Reinsurance
    Insurers reduce their exposure to risk by insuring themselves with other insurers against claims.
  • Reinsurance to close – RITC
    The reinsurance to close comprises a premium payable by the closing year to the members on the next open year of account and a contract which transfers the liability for all claims in respect of the closing year to the next open year.
  • Renewal
    Continuing an insurance after its expiry.
  • Replacement cost
    The cost to repair or replace an insured item. This may be based on market value at the time of loss, the cost to repair the item or the cost to replace it.
  • Reserve
    A fund set aside out of assets for general or specific purposes after provisions have been made.
  • Retrocession
    Retrocession is the transfer of assumed reinsurance to another reinsurer i.e. a reinsurance of a reinsurance.
  • Risk management
    The systematic treatment of risk in order to preserve capital and income from financial loss. This involves identifying, analysing and quantifying risks, taking measures to avoid or minimise loss, and deciding what financial treatment, such as hedging, insurance, and self insurance, is best calculated to minimise unavoidable losses.
  • Run-off account
    At Lloyd’s, a year of account which kept open after the date on which it would normally have been closed.

  • Short-tail
    Business on which claims generally arise and are settled quickly.
  • Slip
    A document submitted by a broker to underwriters containing particulars of a risk proposed for insurance. The underwriter signifies his acceptance by initialling the slip and indicating on it the share of the insurance he will take.
  • Specie
    Lloyd’s term which refers to the line of business that covers cash and valuables in vaults, premises or in transit.
  • Subrogation
    The right of the underwriter to 'stand in the shoes of the insured' and take over the insured's rights, following payment of a claim, to recover the payment of an incurred loss from a third party responsible for the loss. It is limited to the amount of loss paid by the insurance policy.
  • Sum insured
    The sum expressed in a policy as the amount payable on the occurrence of the event insured against in the case of a benefit policy, or as the maximum of the insurer’s liability under a contract of indemnity.
  • Surplus treaty or surplus line
    A reinsurance where the surplus of the reinsured's retention is ceded up to an agreed amount. The reinsurers will normally base this participation on the retention of the ceding Insurer, but once accepted, the reinsured and the reinsurers pay their proportion of losses arising.
  • Syndicate
    A group of underwriting members underwriting insurance through the agency of a managing agent to which a particular syndicate number is assigned by the council.
  • Syndicate capacity
    Also referred to as the ‘stamp’. The maximum amount of business that a syndicate in Lloyd’s can write per year, aggregated from all its members.

  • Third-party liability
    Liability incurred by the insured to another party under common or statute law.
  • Total loss
    1. A loss of the subject matter of insurance such that it is totally lost, destroyed or damaged beyond economic repair.
    2. A loss that gives rise to a payment of the full sum insured.
  • Treaty
    A reinsurance contract usually effected to cover the whole or a certain section of the reinsured's business.

  • Underwriter
    Underwriters are the professionals upon whose experience and judgement the market depends for its expertise and reputation. It is the underwriter's responsibility to assess and accept the merits of each risk and decide a suitable premium for accepting all or part of the risk.
  • Underwriting
    The process of selecting and accepting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.
  • Underwriting agent
    A registered underwriting agent is a firm or company permitted by the council to act as an underwriting agency at Lloyd's.
  • Underwriting profit
    The profit derived from the transaction of insurance or reinsurance exclusive of interest on investments.
  • US surplus lines
    Direct risks written according to the surplus (or excess) lines laws of the state from which the risk is exported.

  • Year of account
    The year to which a risk is allocated and to which all premiums and claims in respect of that risk are attributed. The year of account of a risk is determined by the calendar year in which it is first signed. A year of account is normally closed by reinsurance at the end of 36 months.

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