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Risk Management Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

L

lapsed policy: a policy that has been terminated due to non-payment of premium

large loss principle: transfer of high severity risks through the insurance contract to protect against catastrophic occurrences

liability: a legally-enforceable obligation

liability insurance: coverage that protects the insured against losses arising from legal liability to others

limited losses: a dollar amount that limits the size of a loss resulting from an individual claim

limits: the total amount of losses to be paid under an insurance policy

loss: a negative consequence of an incident (could be financial or non-financial). The basis for claims under terms of an insurance policy

loss control: the process that involves reducing the possibility that a loss will occur and reducing the severity of losses that do occur

loss triangle: a table that shows loss experience and claims development over regular intervals. Name comes from the shape the data take when displayed in the table

lower explosive limit (LEL): the minimum percent by volume of a gas which, when mixed with air at standard temperature and pressure, will form a flammable mixture

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M

malpractice: an act of negligence while performing a professional service

managed care: structured healthcare delivery meant to provide cost-effective and appropriate services

manuscript policy: a custom-made insurance policy

marine insurance: coverage for the transport of goods via ocean or land (ocean and inland marine are the two types)

market risk: exposure to uncertainty due to changes in rates or prices of invested assets

master policy: the combination of two or more properties or locations under the same policy for the same insured

material safety data sheet (MSDS):OSHA form that describes a hazardous chemical's properties, potential hazards as well as safe storage and handling procedures

McCarran-Ferguson Act: the act that exempted insurance from federal regulation. Insurance regulation is performed by individual states

Medicaid: federal program that pays medical expenses for low-income individuals

Medicare: federal program that pays medical expenses for individuals over 65 years of age and those who are disabled if they qualify for Social Security Benefits

memorandum of understanding (MOU): a document describing an agreement between parties that spells outspecific activities and duties but usually does not imply a legal commitment

MHSA: Mine Safety and Health Administration

misrepresentation: a false statement that can potentially allow an insurer to void an insurance contract

mitigation: A means of reducing the significance of adverse effects

multi-peril policy: a policy that insures a number of causes of loss.

MUTCD: Manual of Uniform Traffic Control Devices

mutual: an insurance company owned by its policyholders

mutual insurance company: an insurance company owned and operated by its insureds

MVR: motor vehicle record

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N

NAIC: National Association ofInsurance Commissioners

named insured: a person or entity specifically designated by name as covered by an insurance policy

named perils coverage: property insurance coverage for those perils specifically named in the policy

NCCI: National Council on Compensation Insurance

negligence: a civil wrong involving the failure to use reasonable care and consideration under a given set of circumstances. Can be an act of omission or commission

NFIP: National Flood Insurance Program

NFPA: National Fire Protection Association

NIMS: National Incident Management System

NIOSH: National Institute for Occupational Safety and Health

non-admitted insurance company: a carrier not licensed to do business within a particular state

non-economic damages: an award to an injured party based on a non-monetary loss; i.e. pain and suffering

NRRA: National Risk Retention Association

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O

occupational injury: personal injury arising from employment-related factors

occurrence policy: an insurance policy that covers claims made during the year the policy is in force regardless of when the claim was filed.

operational risk: the potential for adverse events by exposures other than credit, market and interest rate risks

owner-controlled insurance program (OCIP): an insurance policy held by a property owner during the construction or renovation of a property.

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P

package policy: an insurance policy providing different types of coverage; usually a combination of general liability and property coverages

PARMA: Public Agency Risk Managers Association

partial disability: a disability that is not total

peril: a cause of loss

permanent partial disability (PPD): in workers' compensation, a disability where the employee is able to work, but at a reduced capacity

permanent total disability (PTD): in workers' compensation, a type of disability where the employee is unable to ever work again at any type of employment

permissible exposure limit (PEL): the maximum permissible concentration of a toxic chemical or exposure level of a harmful physical agent to which an employee maybe exposed

permissible exposure limit (PEL): maximum amount of a toxic substance that a worker can be subjected to, usually an average of 8 hours (time-weighted average)

permit-required confined space: An area that meets the definition of a confined space and has one or more of these characteristics:

  • contains or has the potential to contain a hazardous atmosphere
  • contains a material that has the potential for engulfing the entrant,
  • has an internal configuration that might cause an entrant to be trapped or asphyxiated by inwardly converging walls or by a floor that slopes downward and tapers to a smaller cross section, and/or contains any other recognized serious safety or health hazards.


personal injury protection (PIP): a form of vehicle insurance that provides first party benefits without regard to fault

personnel risk: an exposure to loss arising form the death, injury, disability or departure of an employee

plaintiff: the party that brings suit and seeks damages

police professional liability insurance: coverage for law enforcement officers and their departments within the scope of their duties

policy: a written contract of insurance between the insurer and policyholder

policyholder: person in actual possession of the insurance policy; the insured

pollutant: an irritant or contaminant-can be in a solid, liquid or gaseous form

pool: a group of organizations that form a separate entity where risks are shared

power of attorney: legal authority given to a person or entity to act on the behalf of another

PPO: preferred provider organization

preexisting condition: a health or physical condition that existed prior to the effective date of a medical insurance policy

premium: the amount of money charged for coverage by an insurance policy or a bond

premium: the money an insurer charges to provide insurance coverage

premium tax: a state tax that is imposed on gross written premiums

present value: the value today of a future payment,

PRIMA: Public Risk Management Association

primary insurance: insurance that responds first to a claim

principal sum: the amount payable in the event of an accidental death or dismemberment

prior acts coverage: a policy that covers claims that arise out of events that occurred before the policy period

producer: another term for a broker or agent who sells insurance

professional liability insurance: coverage for economic losses related to the performance of professional services

proof of loss: a statement made by the insured to the insurer regarding a claim so that liability may be determined

property damage coverage: physical harm to tangible property

proration: adjustment of policy benefits due to changes in exposure or the existence of other insurance

public officials' liability insurance: coverage for the errors and omissions of public officials

punitive damages: damages in excess of compensatory damages, usually for wanton or willful acts, that are meant as punishment a defendant

pure premium: actual cost of indemnity payments and expenses to an insurer

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Q

quid pro quo: the exchange of values by parties in order to form a valid contract

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R

rate: the unit of cost that determines an insurance premium

rated insurer: an insurer that has received a rating on their size and strength from an agency such as Standard and Poor's

rating bureau: an organization that collects statistics on behalf of insurance companies

RCRA: Resource Conservation and Recovery Act

reasonable accommodations: from the Americans with Disabilities Act "modifications or adjustments to a job application process or a job performance process that enable a qualified applicant with a disability to be considered for or perform the position

reimbursement: provision in a policy where the insured pays a loss and is reimbursed by the insurer

reinstate: returning a policy limit to its original amount after the original limit has been exhausted

reinsurance: the purchase of insurance from one insurance company to another in order to limit losses-the sharing of risks between insurance companies.

remediation: cleanup of hazardous materials from a polluted site

renewal: the replacement of an expiring policy

replacement cost: the cost of replacing damaged property with materials of like kind and quality

Request for Proposal (RFP): a document used to secure proposals for insurance or risk management rvices

Request for Qualifications (RFQ): a document issued prior to a request for proposal that gives a vendor information for deciding whether to engage in the RFP process

reservation of rights: a notice from an insurer to the insured that coverage for a claim may not apply

reserve: funds set aside in anticipation of claims payments

residual market: an insurance market that serves as a last-resort for people and firms that have been rejected by the voluntary market

respondeat superior: legal doctrine that states the employer can be held liable for the actions of employees

retrocession: a reinsurer transfers risks it has reinsured to another reinsurer

retrocessionaire: a reinsurer of reinsurers

retrospective rating: a rating plan that adjusts premium according to current loss experience of the insured

rider: an addition to an insurance policy or bond that changes an original provision of the policy.


RIMS: Risk and Insurance Management Society

risk: the threat of an action or inaction that will prevent an entity from achieving its objectives

risk: uncertainty that arises from a possible occurrence

risk appetite: the willingness of an entity to accept a specific level of risk in order to operate in ac ost-effective manner

risk avoidance: an informed decision not to become involved in a risky situation

risk control: the reduction of losses through training, installation of safety measures and institution of safety policies

risk control: the process that involves reducing the possibility that a loss will occur and reducing the severity of losses that do occur


risk factors: characteristics that can be measured or observed which indicate risks that are potentially present

risk management: a strategy developed to reduce or control the chance of harm or loss; the process of identifying, evaluating, selecting and implementingacti ons to eliminate or reduce harm.

risk map: graphic representation of the likelihood of specific risks (frequency and severity)

risk reduction: loss control-frequency reduction

risk retention: the acceptance of losses through payment of deductibles, not insuring, and other methods where there is no risk transfer

risk sharing: in a group of policyholders, premium is allocated according to a predetermined formula

risk tolerance: the willingness of an entity to accept a specific level of risk in order to receive a future benefit

risk transfer: the risk of a loss is moved to another party via a contract

risk treatment: the selecting and implementing of available options for managing risk

RMIS: risk management information system

RMPE: Risk Management for Public Entities

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S

SAA: Surety Association of America

salvage: the amount for which an asset can be sold for at the end of its useful life

SARA: Superfund Amendments and Reauthorization Act

SCBA: self-contained breathinga pparatus

segregation: the placement of loss exposure units so that the loss in one unit is unlikely to occur at the same time as a loss in another unit

self-insurance: a system where an entity sets aside funds in order to pay for losses that would normally be covered by insurance

self-insured retention (SIR): the dollar amount that must be paid on a loss before insurance responds. Differs from a deductible in that it is not included as part of a liability policy's limits.

severity: the amount of damage inflicted by a loss

short term exposure limit (STEL): maximum exposure to a substance that is allowed within a continuous 15-minute exposure period

SIC: Standard Industry Classification

soft market: an insurance market cycle characterized by low rates, high coverage limits and good availability of coverage



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

see: immunity


SOX: Sarbanes-Oxley Act of 2002

special events insurance: coverage for events outside of an entity's everyday operations

specialty risk insurance: coverage for unusual exposures not normally underwritten by most insurers

Stafford Act: law designed to bring federal disaster assistance to state and local governments in a systematic manner

standard: a rule, established by a competent authority, which designates safe and healthful conditions or practices under which work must be performed to prevent injury, occupational illness, or property damage

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



strict liability: a person or entity is held liable because the act occurred.

submission: a proposal for insurance submitted to an underwriter

subrogation: an insurer who pays out to an insured under an insurance policy can gain the rights belonging to the insured against a third party who caused the loss.

summary judgment: The determination by a court that no factual issues are in dispute, and that the legal issues require the case to be decided in favor of one party or the other

Superfund: a program administered bythe Environmental Protection Agency for removal and remediation of solid wastes

surety bond: bond given to protect the recipient against loss in case the terms of a contract are not filled

surplus: the amount by which an insurer's assets exceed its liabilities

surplus line: risks that are placed with a non-admitted insurance carrier

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T

tail coverage: coverage for claims made after a claims-made liability policy has terminated

temporary partial disability (TPD): in worker's compensation, a disability level where the employee cannot perform their normal job function, but can work at reduced levels

temporary total disability (TTD): in worker's compensation, a disability level where the employee cannot perform any job function, but on a temporary basis

Tenant Users Liability Insurance Program (TULIP): an insurance policy that usually covers bodily injury or property damage claims arising from an outside party's use of the insured's facilities

termination: the formal ending of a reinsurance agreement

Third Party Administrator (TPA): a firm that, for consideration, handles administrative tasks such as claims, loss control and risk management consulting for an entity

threshold limit value (TLV): airborne concentrations of a substance that most workers can be subjected to day after day without adverse effect

Title IX of the Education Amendments of 1972: a federal law prohibiting discrimination in educational institutions on the basis of sex

Title VII of the Civil Rights Act of 1964: a federal law prohibiting employment discrimination on the basis of race, color, religion, sex or national origin

tort: a civil wrong, other than a breach of contract, that causes damage to property, a person's reputation or to a person's commercial interest

tortfeasor: party that is accused of committing a tort

total disability: the inability to perform the duties of a gainful occupation

treaty: an agreement between a reinsurer and an insurer on the types of businesses the reinsurer will accept from the insurer

trend: forecasting factor that accounts for increases over a period of time in the amount of losses incurred by an entity

TRIA: Terrorism Risk Insurance Act

TRIEA: Terrorism Risk Insurance Extension Act

trustee: a person appointed to manage the property of another

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U

ultimate loss: the sum total of the cost of a fully-developed loss

umbrella policy: a policy that provides coverage for catastrophic losses

underwriter: person who decides whether or not a particular risk is acceptable to an insurer

underwriting: the process an insurance company uses to determine whether to accept a risk

underwriting profit/loss: the gain or loss an insurer receives for providing coverage for a particular risk

uninsured/underinsured motorist coverage: automobile coverage for injury and damages incurred by the actions of a driver who has no insurance or who is underinsured

URMIA: University Risk Management and Insurance Association

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V

vicarious liability: liability of a principal for the action of its agent

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W

waiver: surrender of a right or privilege

workers' compensation: the system by which an employee is paid benefits due to a job-related injury or illness. Each state has its own eligibility criteria

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X

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Y

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Z