This glossary is a practical guide to risk management terminology and vocabulary. Although every effort has been made to present accurate and up-to-date definitions, PRIMA accepts no responsibility or liability with regard to the information provided. Information is intended to be of a general nature only and is not necessarily comprehensive. Risk management is a complex field and changes rapidly; therefore, it would be impossible to include every applicable term. Glossary users should refer to standard texts and references for additional detail.

 

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A

AAIS: American Association of Insurance Services 

ACAS: Associate of the Casualty Actuarial Society

ACBM: asbestos-containing building material

accident: any unplanned or unexpected event causing material loss or damage or causing personal injury or death

ACGIH: American Conference of Governmental Industrial Hygienists

ACM: asbestos-containing material

ACORD: Agent-Company Organization for Research and Development

actual cash value (ACV): the cost of replacing or repairing damaged property minus depreciation

actual damages: money paid to a plaintiff for actual losses that were incurred

actuary: a person who uses statistical records to calculate premiums and other insurance-related rates

AD&D: accidental death and dismemberment

ADA: Americans with Disabilities Act

additional insured: a person or group not covered initially by an insurance policy, but for whom insured status is provided through an endorsement

ADEA: Age Discrimination in Employment Act

adjuster: person who settles claims

adjustment: the settling of insurance claims

admitted insurer: an insurance company licensed to do business in the state where the insured exposure is located

AGRIP: Association of Governmental Risk Pools

AHERA: Asbestos Hazard Emergency Response Act

AIC: Associate in Claims

AICPCU: American Institute for Chartered Property Casualty underwriters

AIHA: American Industrial Hygiene Association

AIPLU: American Institute for Property and Liability Underwriters

ALCM: Associate in Loss Control Management

all risk policy: property insurance that covers incidental losses except for those that are specifically excluded

alternate dispute resolution (ADR): a method of resolving legal disputes outside of the court system

ANSI: American National Standards Institute

arbitration: dispute resolution by an impartial third party

ARIA: American Risk and Insurance Association

ARM: Associate in Risk Management

ARM-P: Associate in Risk Management for Public Entities

ASCLU: American Society of Chartered Life Underwriters

ASHRM: American Society for Healthcare Risk Management

ASSE: American Society of Safety Engineers

assured: an insured party

ASTM: American Society for Testing and Materials

attenuation: the reduction in the sound pressure level that occurs in the ear when hearing protection is worn

audiogram: the recording produced by an audiometer that measures hearing loss

audiometer: a machine used to measure hearing loss.

audit: the process by which procedures and documentation are measured against standards

automobile liability insurance: insurance coverage that protects the insured party against auto-related injuries and property damage caused to others by the insured's vehicle

automobile physical damage insurance: insurance coverage that protects the insured party's vehicle against collision, theft and vandalism

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B

binder: a legal agreement that provides temporary evidence of insurance until the policy is formally issued

biological hazard: an organism, or a substance derived from an organism that is a potential threat to human health

blanket policy: a single insurance policy that covers several locations or properties

bloodborne pathogens: microorganisms present in human blood or bodily fluids that can cause disease or infection in persons exposed to the substance

boiler and machinery insurance: property insurance coverage for loss arising out of the operation of pressure, mechanical and electrical equipment.

bond: a contract where one party guarantees the performance of another party to a third party to whom the performance or debt is owed

book of business: the total number of accounts written by an insurance company or an agent

book value: the value of an organization's assets according to Generally Accepted Accounting Principles

broker: an intermediary who brings together clients who need insurance and the insurance companies that provide the policies

builder's risk insurance: property insurance that covers structures under construction

business continuity plan: a plan that describes the actions and participants needed to restore normal business operations after an adverse event

business interruption insurance: insurance that covers the loss of income resulting from the interruption of business that is caused by a covered peril

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C

CAFR: Comprehensive Annual Financial Report

cancellation: termination of an insurance policy or bond before its expiration date

capacity: the largest amount of insurance available from a company or insurance market

carrier: the company that issues and assumes the risk of an insurance policy

casualty insurance: insurance that covers losses caused by injury to persons and liability for said injuries or damage to personal property

CAT: catastrophe

CBRN: chemical, biological, radiological or nuclear weapon

CCIP: contractor controlled insurance program

CEBS: Certified Employee Benefits Specialist

cede: to transfer a risk from an insurance company to a reinsurance company

ceiling limit: the maximum allowable concentration of a substance to which an employee may be exposed

CERCLA: Comprehensive Environmental Response Compensation and Liability Act

certificate of insurance: a document that proves insurance was purchased by a party

CIH: Certified Industrial Hygienist

claim: a demand for recovery from a loss that is covered by an insurance policy

claims adjuster: person who settles claims

claims-made policy: an insurance policy that covers claims made during the year the policy is in force for incidents that occur during that year

Class A fire: fire containing common combustibles such as paper and wood

Class B fire: fire containing flammable liquids and gases such as grease, oil, or gasoline

Class C fire: fire containing live electrical equipment

Class D fire: fire containing flammable metals such as magnesium and lithium

Class K fire: fire containing cooking media such as oils and fats

CLU: Chartered Life Underwriter

COB: coordination of benefits

COBRA: Consolidated Omnibus Budget Reconciliation Act

coinsurance: a jointly-issued insurance policy (method of reinsurance)

combined ratio: the percentage of each premium dollar a property/casualty insurer spends on claims and expenses

commercial general liability policy (CGL): an insurance policy that protects businesses against claims for bodily injury and property damage arising out of premises, operations, products and completed operations as well as advertising and personal injury

commission: the percentage of premium that serves as compensation for a broker or insurance agent

comparative negligence: a rule of law applied in accident cases to determine responsibility and damages based on the negligence of every party directly involved in the accident

compensatory damages: money paid to a plaintiff for actual losses that were incurred

composite ratio: the percentage of each premium dollar a property/casualty insurer spends on claims and expenses

concealment: the intentional holding back of information that could potentially affect the issuance of an insurance policy

confined space: a space that has limited or restricted means of entry or exit, Is large enough for an employee to enter and perform assigned work, and is not designed for continuous occupancy by the employee. These spaces may include, but are not limited to, underground vaults, tanks, storage bins, pits and diked areas, vessels, sewers, and silos.

confined space entry permit: employer's written procedure for preparing and issuing permits for entry and for returning the permit space to service following termination of entry

consequential damages: damages that are given not as a direct result of an act, but as consequence of the initial act.

consideration: in contractual law, something of value given by one party in return for the promises of the other party to the contract.

Consumer Product Safety Commission CPSC): an independent federal agency charged with protecting the general public against unreasonable injuries associated with consumer products

contingency planning: organized steps that are taken in order to deal with an adverse event within an entity

contingent liability: a potential liability

contract: an agreement between two or more parties where there is mutual agreement, consideration, competent parties and legal subject matter

contributory negligence: a doctrine of common law that if a person was injured in part due to his/her own negligence (his/her negligence "contributed" to the accident), the injured party would not be entitled to collect damages from another party who supposedly caused the accident.

coordination of benefits: A process for determining the respective responsibilities of two or more health plans that have some financial responsibility for a medical claim

COSO: Committee on Sponsoring Organizations

cost allocation: in a pool, the formula that determines a member's premium.

cost of risk: sum of items such as the cost of risk management operation, insurance premiums, claims and legal expenses and other costs related to controlling the impact of adverse events

cover: a) an insurance contract, b) to effect insurance, c) to include within coverage of an insurance contract

coverage: insurance

CPCU: Chartered Property Casualty Underwriter

crime coverage: coverage that protect the insured against theft, robbery and burglary. Covers money and securities as well as stock and fixtures

critical facilities: Structures that are essential to the operation of communities and the economy of an entity.

CRIS: Construction and Risk Insurance Specialist

CRO: Chief Risk Officer

CSP: Certified Safety Professional

CWCP: Certified Workers' Compensation Professional

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D

declarations page: the pages of an insurance policy that show basic information such as policy limits, the named insured and the locations of premises covered

deductible: a portion of the loss that is not paid by the insurer

defendant: in civil cases, the party against whom the claim has been brought

defense clause: An insurance provision in which the insurance company agrees to defend, with respect to insurance afforded by the policy, all suits against the insured.

defense coverage: liability insurance that covers defense costs, but not settlements or indemnity payments

defined benefit plan: a pension plan that provides specific benefits to an employee

defined contribution plan: a pension plan where a specific contribution is made, but no specific benefit is promised

development: the difference between the cost of a loss as it is initially reserved and its value at a later date

direct loss: a loss that is incurred due to direct damage to property

directors' and officers' liability insurance (D&O): policy that insures corporate directors and officers against claims alleging financial loss due to mismanagement

disability: a condition that incapacitates a person in a way where they cannot carry on normal life activities

disaster: an unplanned event that can cause death or injury, property damage, financial loss or an interruption to normal operations of an entity

disaster management: structured method of dealing with problems and conditions arising from an adverse event

discovery: an investigation of the facts of a claim

DOL: U.S. Department of Labor

dollar threshold: For no fault coverages, the amount of money that determines whether or not a case is litigated

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E

EAP: employee assistance program

earned premium: the part of the premium that applies to the expired portion of the policy

earthquake coverage: purchased as a separate policy from property coverage to protect against damage due to seismic activity

educator's legal liability insurance: coverage for claims made against administrators, employees, and staff members of K-12 schools, colleges and universities

effective date: the date where coverage by an insurance policy goes into effect

eligibility period: span of time where employees may enroll in a group benefits program

emergency management: structured method of dealing with problems and conditions arising from an adverse event

employee benefits liability: potentially negligent act that could occur in the administration of an insured’s employee benefits such as health insurance

employee dishonesty coverage: provides protection from theft of money, securities or property by employees

employment practices liability insurance: covers wrongful act that arise as a result of the employment process

end of service life indicator (ELSI): used on a chemical cartridge to indicate when the cartridge should be discarded

endorsement: an addition to an insurance policy that changes an original provision of the policy.

enterprise risk management (ERM): a holistic approach for dealing with insurable as well as uninsurable risks within an entity

environmental impairment liability insurance: a policy that covers liability and cleanup costs due to pollution

EPLI: employment practices liability insurance

equipment breakdown insurance: insurance coverage for loss due to the breakdown of boilers as well as other types of mechanical equipment such as computers

ergonomics: the study of physical factors that impact a person performing a particular job in a particular environment

ERISA: Employee Retirement Income Security Act

ERPL: employment-related practices liability

errors and omissions (E&O) insurance: insurance that protects the policyholder against claims that allege negligence due to a mistake or an omission in the performance of duties. Usually refers to professional services.

ESH: environmental safety and health

excess and surplus insurance: coverage that cannot be placed with an admitted insurer

excess insurance: a policy that applies to losses in excess of a specified amount

exclusion: the portion of a policy that references items not covered by the policy

exclusive remedy: the component of workers' compensation that disallows employees who are injured on the job from making tort liability claims against the employer

expense ratio: the portion of premium used to write, service and obtain insurance or reinsurance

experience: an insured's loss record or that of a specific employee classification

experience modifier: a factor that measures the difference between an insured's past experience and the expected experience

experience rating: in workers' compensation, a comparison between the actual loss experience and the experience that is expected from others in the insured's rating class

expiration date: termination date of an insurance policy

Explosion Class 1: flammable gas/vapor

Explosion Class 2: combustible dust

Explosion Class 3: ignitable fibers

exposure: vulnerability to a particular risk

exposure level: The level of a physical or chemical hazard to which an employee has been exposed.

extended coverage: an endorsement to a fire policy that adds windstorm, hail, explosion (except steam boilers), riot, civil commotion, aircraft, vehicles and smoke as covered perils

extended reporting period: a period after the expiration of a claims-made policy where a claim can be made and coverage made available if that claim was made during the policy period

extra expense: costs that an entity incurs when excess of normal operations whenever property is being repaired or replaced after being damaged

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F

FCAS: Fellow of the Casualty Actuarial Society

FEMA: Federal Emergency Management Agency

fidelity bond: insures a business for losses caused by the dishonest acts of its employees.

first dollar coverage: insurance that pays losses up to a specified amount without the use of deductibles

first responder: the first persons trained to arrive at the scene of a hazardous materials event, an accident or other adverse incident-usually police, fire or emergency medical personnel

flash point: the lowest temperature at which a flammable-vapor-air mixture above a liquid will ignite when an ignition source is introduced

fleet policy: coverage for a number of vehicles under common ownership

floater: property insurance for items that are moved from one place to another

FMLA: Family and Medical Leave Act

frequency: the likelihood that a loss will happen

FRM: Fellow in Risk Management

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G

garage keeper's insurance: provides coverage of vehicles left in the insured's custody for safekeeping or repairs

GASB: Governmental Accounting Standards Board

general liability insurance: provides coverage for most liability exposures except for vehicles and professional liability

generally accepted accounting principles (GAAP): accounting procedures used to prepare financial statements

geological hazard: natural processes such as earthquakes, landslides or volcanic eruptions that can cause death, injury , property damage or an interruption of normal operations of an entity

gross negligence: Failure to use even the slightest amount of care in a way that shows recklessness or willful disregard for the safety of others.

gross premium: pure premium adjusted to reflect insurer expenses

group insurance: insurance provided to a specific group of people

group self-insurance: self-insurance jointly provided for an entire group of entities rather than to the individual entities

guaranty fund: funds available through a state insurance commission that protect policyholders in the event an insurer becomes insolvent or cannot meet its obligations

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H

hammer clause: a provision that states if the insured does not approve a settlement figure recommended by the insurer, the insurer will not be liable for additional funds required to settle the claim or for defense costs beyond the settlement recommendation

hard market: an insurance market cycle characterized by high rates, low coverage limits and restrictions on coverage

hazard: conditions that increase the chances of a loss occurring

HAZMAT: an acronym for 'hazardous materials

Health Insurance Portability and Accountability Act (HIPAA): law guaranteeing continuity of healthcare insurance coverage for persons who change jobs

HEPA filter: High Efficiency Particulate Air filters

HMO: health maintenance organization

hold harmless: the assumption of liability through contractual agreement by one party, thereby eliminating liability on the part of another party

hold harmless agreement: a provision within a contract that spells out the assumption of liability through contractual agreement by one party, thereby eliminating liability on the part of another party

HVAC: heating, ventilation and air conditioning

hydrometeorological hazard: weather-related adverse conditions such as hurricanes, thunderstorms, floods, etc.

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I

IBNR: an estimate of losses where the claim-generating event has occurred, but the loss has not been reported to the insurer

IDEA: Individuals with Disabilities Education Act

IDLH: immediately dangerous to life and health

IME: independent medical exam

immunity: The legal protection that prevents a sovereign state or person from being sued without consent.

incident: an event; a definite occurrence

incurred but not reported (IBNR): a dollar estimate of the liability for events that have occurred, but have not been reported as claims to the insurer

incurred claims: claims paid during the policy year plus the claim reserves as of the end of the policy year, minus the corresponding reserves as of the beginning of the policy year

incurred loss: the total amount of paid claims plus the loss reserves during a particular period of time (usually a policy year)

incurred loss ratio: the ratio of paid losses plus reserves to the amount of premium earned

incurred losses: total paid claims plus claims reserves within a given period (usually a policy year)

indemnify: to compensate a party for an injury, loss or damage

indemnity: compensation of a loss up to the amount of the loss

indexing: adjustment of reinsurance limits by measures of economic activity such as the Consumer Price Index

indirect loss: A loss that arises from a peril, but is not directly and immediately caused by it

initial reserve: funds set aside when a claim is first opened in order to estimate the cost of said claim

insolvent: a condition where an insurance carrier cannot meet its financial obligations or pay claims

insurance: a contractual relationship that exists where one party, for consideration, agrees to reimburse another party for a specific loss caused by specified hazards

Insurance Services Office (ISO): an organization that collects data and ratings information, develops policy forms and files information with state regulators for the insurance companies that are its members

insured: person or entity covered by an insurance policy

insurer: company that indemnifies losses and provides insurance services

investment income: income derived from an entity's investments versus its operations

IRMI: International Risk Management Institute

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J

joint and several liability: in civil cases, a form of liability by which members of a group are either individually or mutually responsible to a party who has been awarded a favorable judgment

Joint Powers Authority: an institution that when created, allows two or more local governments (or other public entities) to act in a cooperative manner.

JSA: job safety analysis

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K