Zimbabwe » Glossary

The amount stated on the face of the policy that will be paid on the death of the life insured or at the maturity of the policy.

A document formalizing a facultative reinsurance cession of reinsurance.

An arrangement in which the cedent chooses the risks to reinsurance be ceded and the reinsurer is obliged to accept. It shares many characteristics with treaty reinsurance.

Reinsurance arrangements under which each risk to be reinsured is offered to and is accepted or rejected by the reinsurer. So-called facultative reinsurance arrangements are, therefore, only permissive and do not obligate the ceding company to cede or the reinsurer to accept.

Is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction

A type of life insurance policy covering several members of a family under one policy. The insurance is payable upon each death. The advantage of this policy is in reducing administration and collection expenses by having one policy instead of several.

Hereditary information about the life assured used as one of the underwriting criteria in a life or health policy. Information concerning the ages and state of health of the parents and brothers and sisters of a life to be insured. If any have died, information is required as to the age at death and cause of death. Information is also required of any tuberculosis or insanity in the family. Family history has considerable bearing on the insurability of a person for life insurance purposes.

A combination of whole-life insurance and reducing-term (10-, 15-, or 20-year period) insurance of a predetermined appropriate amount. If the insured dies prior to the end of the specified term period, such as 20 years, a monthly income is payable for the balance of the specified period and at the end of the period the income ceases and the sum insured is payable.

This offers cover to the employer against dishonesty of an employee. This is also known as a fidelity bond.

The financial advisor is the person who assists one in drawing up a financial plan by taking into account one\'s risks and investment goals. He or she should have the relevant product knowledge and insight to advise one on the best method of attaining those goals. A financial advisor may or may not be attached to a specific assurance company. They get paid a commission on the products sold.

Captures the financial structure of a company, considering factors such as total debt to assets, interest cover and market leverage.

Programmes designed to assist investors to meet their financial goals.

These refer to possible losses in financial markets and can be grouped into market, credit, liquidity, operational and legal risks.

The shares these funds invest in are those of financial services companies, including banks, assurance companies, brokerages and related investments, where the nature of activities is predominantly financial. These funds may be more volatile than general equity funds. The benchmark is the JSE Financial Index.

A statutory body that functions as the regulator for the financial services industry.

This is a method of valuing policyholder liabilities which is basis of valuation (FSV) intended to give a conservative but realistic view of the overall financial position of a life insurer. It allows for premiums that will be received in future as well as future expected claims, interest rates, expenses and other relevant factors. The results are shown in the actuarial balance sheet included in the audited annual financial statements. The insurer’s statutory actuary issues an opinion on this balance sheet. The financial soundness basis is used to determine an insurer’s solvency under the Long-term Insurance Act.

Financial and Industrial Index in South Africa.

The self insurance portion of a risk financing insurance policy.

The fire department of an insurance company handles fire and allied perils insurance and house-owners’ and householders’ insurance.

See property insurance.

Various measures taken by the insured to reduce the risk of damage from fire. This includes fire resistant contraction material, fire walls (walls separating parts of a building) and fire proof materials.

Wall separating parts of a building to contain the spread of a fire.

The person who dies before another one. It will be either the husband or the wife in a marriage.

The name given to an ordinary surplus treaty, which means that the surplus must be allotted to the treaty first and in priority to any other surplus reinsurance treaty. Sometimes a second surplus treaty, and a third surplus treaty are in place and these would receive a share of the surplus only after the first surplus treaty had received the full amount to which it was entitled. See surplus reinsurance.

 The use of government spending to influence macroeconomic conditions.

Contracts in which an insurance company/financial institution pays a fixed amount of money per period.

Payments to a beneficiary that are paid in fixed, preset amounts and are not variable.

These unit trusts have to be 85 percent invested in gilts, fixed deposits or other high-income earning securities in foreign markets. They may hold 15 percent in cash or in the local market.

Fixed interest funds invest in bond and money market instruments. Income is a feature of these funds and bond investments may also bring capital growth.

A security invested for a defined term where interest and capital repayments are fixed at the outset.

A bank account into which money is deposited for a fixed period at a fixed rate of interest. The notice period for a fixed-deposit account is longer than for a call account.

Investments made for a period at a guaranteed interest for that period (eg, bonds). Interest is generally paid twice a year, and at the end of the term the capital is repaid.

In excess of loss reinsurance, a predetermined fixed premium for the risks involved, not subject to any subsequent adjustment.

A policy that provides coverage on a number of motor vehicles.

Unitised products allow varying contributions from many investors. The investors are usually allowed to purchase or sell units at their own discretion and even switch between a range of unitised products.

These are funds that invest in a flexible combination of assets in the equity, bond, money market and property markets, in order to maximise total returns (comprising capital and income growth) over the long term. These funds are often aggressibley managed, with assets being shifted between the various markets to reflect changing economic and market conditions, in order to maximise returns. Fund managers have no material restrictions governing their asset allocation decisions. The portfolio managers have total discretion in exercising their views of the market and will restructure and reposition the portfolio as the market changes. There is no benchmark yet.

An inland marine policy that covers property without regard to its location at the time of loss.

Rates that will change given varying underlying fundamentals e.g. the prime rate

A clause in a reinsurance treaty contract which expresses the intention to set up a partnership so that the reinsurer shares whatever fortune, good or bad, befalls the ceding company.

Financial Times (FT)-Actuaries 100 index: "Dow average" of London.

A clause used to limit the scope of cover in the case of theft from fixed property. Both force and violence must be used to gain entry and exit.

Transactions that are concluded involving different currencies. Rates of exchange are established for various foreign currencies based on the demand, supply and stability of the foreign currency.

Reflects exposure to overseas earnings and economic events.

Foreign funds invest at least 85 percent of their assets outside South Africa at all times.

In South Africa, an insurer situated outside the Republic of South Africa.

The termination of a life insurance policy for non-payment of the due premium in cases where the surrender value of the policy has been fully applied against previous unpaid premium amounts.

This is the market price of a share divided by its expected future earnings.

A policy condition whereby no claim is admissible until the loss exceeds a specified amount, at which point the insurer pays the full amount of the claim.

Share indices where available shares on the market are used to weight price. Shares classed as not available are excluded (eg family holdings, etc).

The excess of the assets of the life insurer over its liabilities. frequency Number of times losses occur.

Mutual societies collecting contributions from members and paying benefits not defined as insurance benefits. The Friendly Societies Act governs these societies.

The acceptance of insurance or reinsurance business with the intention of passing it on largely or wholly to another insurer or reinsurer, i.e. acting as a conduit. A method whereby a direct insurer cedes all of the risk it undertakes on a particular policy to a reinsurer nominated by the insured.

Measures the general price movement of shares listed on the JSE.

A method of computing life insurance reserves where no portion of the first-year premium is used for accumulating the terminal reserve. The entire first-year premium (except for the one-year term cost of insurance) is available for expenses

An investment mandate that gives a manager total freedom to make all investment decisions.

A unit trust that has all its available cash held in shares rather than cash (except for the 5% minimum that by law must be held in cash).

This describes a smoothed bonus/guaranteed portfolio that allocates the entire bonus every year. Once bonuses are allocated, they can contractually never be taken back, even in a significant market downturn.

A common pool into which contributions and investments are made and benefits are paid.

business keep the accounts of each underwriting year open for two or more years so that all losses relating to a particular underwriting year are known and substantial agreement, if not actual discharge of all claim liabilities, is possible. Premiums, commissions, claims payments, reinsurance premiums and recoveries, expenses and all other transactions relating to a particular class of business for each open underwriting year are credited or debited to a separate insurance or underwriting fund for each open underwriting year. At the expiration of the period for which the fund is kept open the resulting profit or loss is taken up as income (or loss) by the insurer. If, during intermediate periods, it appears that the particular class of business for a particular underwriting year will result in an overall loss, the insurer transfers the amount of the estimated loss from the profit and loss account to the insurance fund concerned so that the balance of the fund is sufficient to meet its estimated outgoings until its final closure.

Represents the total amount of assets held by a defined contribution fund in a member's name, calculated in terms of the rules of the fund.

The excess of the actuarial value of liabilities over the actuarial value of assets, based on the valuation method used.

The person whose responsibility it is to oversee the allocation of the pool of money invested in a particular fund.

A fund of funds is a unit trust fund that invests in a range of other unit trusts. A dedicated fund manager makes the selection from any unit trust fund with specific performance objectives in mind. A fund of funds can offer reduced risk and lower volatility because of unit trust diversification. The cost of a fund of funds are higher than ordinary unit trust, as they are always invested in at least five underlying unit trusts. The investor should ideally look for a diversification of management styles of the underlying funds.

A type of long-term insurance or reinsurance policy where the contract undertakes to provide policy benefits for the purpose of funding in whole or in part the liability of a fund to all its members.

The excess of the actuarial value of assets over the actuarial value of liabilities, based on the valuation method used.

The Fund Value is a measure of what the investment is worth in terms of the amount invested and the compound growth on that investment as well as any bonuses that may have accrued to the investment. The Fund Value is purely an indication of the value of the investment and is used as a benchmark only. It is not a market related value, nor is it a value which may be realised. Only at the end of the term of an investment will the fund value closely approximate the maturity value of the investment.

Analysis that uses information concerning the security, its issuer and general economic and investment conditions in order to determine the “true” or “fundamental” value of a security

A pension fund in which all liabilities, including payments to be made to pensioners in the immediate future, are completely funded.

The situation in which a ceding company retains a deposit of the premium due to reinsurer’s. It withholds a portion of the premiums due as a guarantee that a reinsurer will meet its loss and other obligations. Also referred to as deposits retained. Funds withheld is one way of putting the security in place for foreign reinsurance to be regarded as approved reinsurance under both of the Insurance Acts.

Put simply, funeral cover is very similar to life assurance, but specifically aimed at covering your funeral costs. If you have enough life assurance you normally do not need to take out funeral cover, but should you have nothing else; this is a way to ensure that your next of kin are not burdened with additional financial problems after your death.

A life policy with a low sum assured intended to pay for the burial costs on the death of the insured. Also referred to as an assistance policy.

Markets that trade in futures and options contracts. These contracts are regularly bought and sold, with the price paid for the original contracts rising and falling as the view of the markets change.

A deal, traded on a recognized exchange, to buy or sell some financial instrument or commodity for settlement on a specified future date for a specified price.