Zimbabwe » Glossary

Estimates the importance of labour costs in the operations of the company.

The termination of a life policy because of non-payment of premiums in cases where the policy has been in force for an insufficient period to acquire a surrender value.

The rate at which insurance policies terminate through failure of the insured to continue making premium payments. It is usually expressed as a ratio of the number of policies on which insured failed to make premium payments during a given period to the total number of policies at the beginning of the period in which those lapses occurred.

A policy terminated because of non-payment of premiums

These funds seek long-term growth by investing in companies with a large market capitalisation. The market capitalisation is the total value of all shares issued by a company. These companies fall within the top 40 shares on the JSE (in terms of market capitalisation). The benchmark is the JSE Top 40 Index.

A division or level of an excess of loss reinsurance programmed. Each layer of the programmed operates consecutively and each may be underwritten by a different reinsurer.

Lehman Brothers Global Aggregate Index. The LBGAI is used as a benchmark for measuring the performance of Global Bond Portfolios.

The insurer with the largest share of risk (particularly on collective policies).

A legacy is a preferential bequest of specific assets before other inheritances (for instance, the residue of the entire estate) can be taken into account. There is also a pre-legacy which is regarded as one having priority over an ordinary legacy. Such bequests are usually stated first of all when inheritances are detailed in the will.

The liability imposed by law for negligence that results in injuries or death or damage to someone else’s property.

Reflects the effects of changing laws or regulations on a portfolio, its composition and the rights of members to its assets.

The ratio at a given date of the actuarial value of a fund’s assets to the actuarial value of its liabilities.

Insurance for which the cost is distributed evenly over the period during which premiums are payable.

A term insurance policy where the sum insured remains constant over the term of the policy.

A speculative position where the amount of cash that it is necessary to invest is less than the principal amount at risk, for example shorting a call option. Leverage will magnify both positive and negative returns.

Liabilities are present obligations of an entity arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits.

This covers the person insured against liabilities incurred to third parties for property damage or bodily injury or other specified damages. Insurance protecting the insured against financial loss arising from liabilities imposed upon him in connection with financial loss, injury or death to a third party. It includes product defect liability, employers liability (to employees) and professional indemnity.

The legal authority granted by the Registrar of Insurance for an insurer to operate as an insurer.

A sum payable at defined intervals during the continued lifetime of an individual.

The person on whose life the assurance has been arranged, and this individual need not be the owner of the policy

The average number of years of life remaining for persons of a particular age according to a particular mortality table.

Comprises amounts set aside in the business that, together with future premiums in respect of existing unmatured policies and other future income, are available to meet the costs of expected benefit payments and future expenses in respect of such policies.

A contract providing for a payment of a specified sum of money to the policy owner or a named beneficiary upon the death (not being death by accident or specified sickness only) of the life insured or on the happening of any contingency dependent on the termination or continuance of the life of the life insured. Life policies provide benefits on death and living benefits such as surrender proceeds if an insured continues to live.

The person on whose death or disability the insurance proceeds will become payable.

A company which carries on life insurance business.

Life insurance for the whole of life with the sum insured of (55, 60, 65, 70, 75) insurance payable only on death, with premiums payable only to a specified age or until the prior death of the insured. It is possible to arrange for premium payments to almost any desired age, but the ages shown in parentheses (to the left) are the most common ages.

There are two principal methods by which life insurers obtain reinsurance cover and protection: _ The co-insurance basis is analogous to quota share reinsurance and is often also referred to as original term business. _ The risk premium basis is analogous to term life insurance and often takes the form of facultative reinsurance. In the case of sub-standard lives and sums insured for which it normally obtains reinsurance cover, a life company generally will not issue a policy without first obtaining confirmation that the life reinsurer will accept its share of the risk. It would also normally impose any special conditions regarding extent of cover and amount of premium loading which the life reinsurer might consider necessary before issuing the policy and thus accepting the risk.

The maximum amount for which an insurer is liable on any one loss. This is sometimes referred to as limit of indemnity.

The term describes a ceding company’s retention, its gross capacity, or the maximum amount which may be reinsured under a reinsurance contract.

The restriction of the liability assumed by the carrier under the policy to a specified amount or amounts also called limit of liability.

A term applied to bodily injury and property damage insurance. A policy written with standard limits restricts the liability of the insurer to a specified amount. line In treaty reinsurance a line is equal to a ceding company’s retention. The capacity of a surplus treaty is normally described in terms of the number of lines it contains. The term is also loosely used to describe: _ a class of business, and _ an underwriter’s interest in a risk.

The general classification of business as utilised in the insurance industry, e.g. personal accident, etc.

A slip used for the convenience of brokers and signed in relation to an individual class of insurance business. The insurer receives an individual declaration for each risk ceded, and is bound to accept the risk.

The linked or market-related contract provides a benefit that, to a greater or lesser extent, is determined by the investment performance of the underlying investments. The "underlying investments" may be specific investments that are demarcated to support those linked or market-related policies and may even be of a particular type, for example a property investment. Then the profits or bonuses accruing under the linked or market-related systems are not subject to averaging. The rates of accrual therefore vary far more greatly from year to year. Generally speaking the mechanics of a linked or market-related policy are as follows. A portion of the premium is taken to provide for the benefit on death - very similar in principle to a term insurance policy. The balance remaining after deducting expenses is invested in the assets that support the linked or market-related policies. Guaranteed minimum values are sometimes offered by life insurance companies to underpin the quantum of benefits to be provided by these linked or market-related policies. Such guarantees will reduce the chances of financial loss to policyholders. A wide variety of market-related policies are offered by life insurers. The underlying investment may be in unit trusts, shares, property, fixed-interest instruments or a specified managed fund that may be split between several kinds of investment outlets. An advantage of these linked or market-related policies is that they enable the policyholder to participate directly in the investment performance of a portfolio of his choice. Also, most linked or market-related policies provide some flexibility regarding maturity dates, which may be extended. Early surrender of the policy is also possible. This enables the policyholder to orchestrate his withdrawal from the policy to coincide with beneficial investment conditions.

A policy, the benefits of which are calculated according to the value, from time to time, of certain specified categories of investments.

Linked product companies (also called linked product providers or product factories) are administrators as they simply channel investor funds through their own umbrella investment vehicles into underlying unit trust funds of various companies. The broad categories of these umbrella investment vehicles are retirement products (e.g. retirement annuities), specialist plans (e.g. capital guarantee products) and general investments. Usually liked product companies do not give advice on investments. The investor should, therefore, work through a reputable financial advisor. The linked product company facilitates the switching of the underlying investments for a substantially reduced fee. However, overall investment costs may be higher due to the aggregate costs of the linked product company`s management fees, the management fees of the underlying management company and the commission of the financial advisor. A feature of investing in a linked product company is its computer software system which provides instant report backs on what you are invested in and how your investment is performing. However, the investor should be confident that the linked product company has made adequate provision for computer failure, as well as security provisions.

Cash (other than the required 5% holding) available for investment in a portfolio.

This refers to the selling of the assets of a company, close corporation or a partnership, the payment of the the liabilities and the pay over of the residue to the shareholder, member or partner.

The ease with which a security can be sold in the market or a position can be closed out without influencing the market. Measures the relative turnover of a company\'s shares.

Also known as Quoted Company. A company whose equities are listed on the JSE Securities Exchange.

Property listed on the official securities exchange that trades as listed shares. The income distribution is paid as interest and taxed as interest.

Shares listed (or quoted) on the JSE, providing information on listed companies, and strict regulations for the protection of minority shareholders from fraudulent activity.

Insurance of farm animals other than horses (bloodstock) against death due to accident or disease.

A broker that has been given the responsibility by Lloyd’s of placing insurance at Lloyd’s.

An association of persons grouped together in syndicates providing insurance which is incorporated by the Lloyd’s Act of 1x7 1(34 Vict. C21).

A group of underwriters with Lloyd’s of London who specialise in underwriting particular risks. Lloyd\'s underwriter An individual member of a Lloyd’s syndicate.

Large Manager Watch (Alexander Forbes Published survey).

The average return of the ten largest South African portfolio managers.

If funds are ranked in order of performance, the median fund is the asset manager in the middle of the range.

Amounts or percentages added to the ‘pure premium’ of an insurance rate to provide for expenses, contingencies, or profit or to adjust the premium rate for sub-standard risks.

See policy loan.

The maintenance of assets in such places and in such currencies as are suitable to meet the related liabilities.

An excess of purchases over sales of an asset. Also, if an investor is in a situation where he benefits from an increase in the value of an asset, currency or sector, he is said to be “long” the asset, currency or sector.

Any bond with a maturity of over 10 years. However, when bond traders talk about what "the long bond" did in recent trading, they are normally referring to frequently traded long shares.

Short-term insurance business under which claims are typically not intimated or settled within one year of the occurrence of the events giving rise to the claims. It includes product liability, marine and professional indemnity insurance.

The Long-term Insurance Act No. 52 of 1998, which provided for the registration of long-term insurers, the control of certain activities of long-term insurers and intermediaries and for general matters connected with the long-term insurance industry.

The statutory annual return submitted by every long-term company to the Financial Services Board within four months after its financial year end. The return deals with matters such as statutory solvency, investment returns, actuarial assumptions and risk management.

An entity registered or deemed to be registered under the Long-term Insurance Act.

The Long/Short Equity strategy is one that invests in equities both long and short based on opportunities identified in individual companies or sectors. Unlike market neutral portfolios, these portfolios will generally have some market exposure and usually in the long direction. They generally invest in equity and fixed income securities taking directional bets on an individual security, sector or country level. An example of a long directional bet is to go long shares/sectors/countries that they think will go up and short shares/sectors/countries they think will go down. They generally use leverage at a low level. A common transaction in this type of fund is to long the strongest share in a sector and short the weakest share in the same sector. They can take positions along the whole risk-return spectrum and try to distinguish their performance from that of the asset class as a whole.

The liability incurred, or the damage suffered by a claimant. The event of the liability, or loss, is the basis for the amount which the claimant seeks to recover from the insurer. Such terms as ‘losses incurred’ and ‘losses paid’ refer to the aggregate amounts of the losses incurred or paid by an insurer.

A person who acts on behalf of the insurer, or the insured, to investigate the circumstances of a loss and to recommend the amount to be paid. Also known as Loss Assessor.

The difference between the estimated amount of loss(es) as initially reported to the insurer and the amount of an evaluation at a later date or the amount paid in the final settlement(s).

Number of times loss (claims) occurs. This is used in calculating premium rates.

A form of consequential loss insurance which compensates the insured for loss of earnings resulting from the interruption of business, usually as a result of fire or flood. See business interruption insurance.

The clause in an insurance policy that designates to whom the loss is payable.

The transfer from one reinsurer to another of the liabilities for outstanding losses for a consideration

Activities undertaken to prevent losses from occurring. This is a form of risk management

Claims expressed as a percentage of premiums. Two ratios in common use are: _ Paid loss ratio – paid claims divided by written premiums; and _ Incurred loss ratio – incurred claims divided by earned premiums. Loss Ratio Stabilisation Cover. See stop loss reinsurance.

A provision set aside for payment of losses intimated but not yet paid. This is sometimes referred to as loss reserve Intimated not finalised (INF).41.

A provision for losses resulting from accidents or but not reported (IBNR) occurrences that have taken place, but on which the company has not yet received notices or reports of loss. These may also be termed claims incurred but not reported

Extent of loss relative to sums insured. This is used in calculating premium rates along with loss frequency.

Under a retrospective rating plan, an amount added to actual losses to provide for the expenses of an insurance company in handling claims.

This is a method of determining whether a loss falls within the cover of an insurance policy. The insurer is responsible for losses notified (made) during the policy period irrespective of when the claim occurred. This basis should be contrasted with the losses occurring basis. Also known as claims made basis.

This is a method of determining whether a loss falls within the cover of an insurance policy. Losses arising during the period when a policy is in force are covered irrespective of when the claim is submitted. This basis should be contrasted with the losses made basis. Also known as claims occurring basis.

The aggregate of loss payments during a given period, less deductions for all credits.

In life insurance this is a single payment instead of a series of installments.