A term used in connection with pension benefits. Where a person leaves employment before retirement age there is a reduction in the monthly benefit paid on a defined benefit pension.
The proportions of premium attributable to the periods of risk that relate to the current accounting period. It represents written premium adjusted by the unearned premium provision and portfolio premium adjustments at the beginning and end of the accounting period.
A company's profit divided by the number of shares issued.
Measures a company\'s historical earnings variability, looking at variability of annual earnings and cash flow.
This reflects the relationship between the earnings of a company's shares and the current share price.
The date and hour on which a policy or endorsement becomes effective; the inception date of the cover provided by a policy contract.
Interest on interest, showing the effect of compounding.
Efficiency measures whether investors are sufficiently compensated for an investment's volatility. The ratio is calculated as the total portfolio return divided by the volatility of the return.
All portfolios that for the given level of return have the lowest risk (standard deviation of return) of all portfolios and that for the given level of risk have the highest rate of return.
A portfolio is said to be efficient if for the expected return of that portfolio there is no other portfolio with lower risk (standard deviation of return) and for the risk involved in that portfolio there is no portfolio with a higher expected return.
The passing of electronically stored information between computers using telecommunications.
Insurance against damage or loss of computers and other electronic equipment.
The payment of a monetary obligation by transferring money directly to the account of the payee.
A calculation of the value of the profits that are expected to emerge from the portfolio of a life insurer at a point in time. This is usually calculated as the value of adjusted net assets plus the present value of profits from in-force business.
The financial markets of emerging economies.
In terms of the Basic Conditions of Employment Act, 1997, an employee means:
any person, excluding an independent contractor, that
works for another person or for the State.
any other person that in any manner assists in carrying
on or conducting the business of an employer.
An employee's own deposit to a retirement fund.
In relation to a retirement fund, is an employer participating in the fund.
This is the sum of the Employer's contributions towards retirement benefits (excluding costs). Refer to the fund's rules for more information.
These funds seek maximum capital appreciation by investing in South African "black chip" companies. These companies have substantial black control and actively contribute towards black empowerment via their labour practices, trade union representation and social and environmental involvement. These funds invest across all sectors of the JSE. There is no benchmark yet.
Documentary evidence of a change to an existing policy, for example, change of address, increase in sum insured, etc. An endorsement may result in an additional premium, a return premium or no premium adjustment.
An endowment is a policy, which is taken out for a specific term. Put simply, it is a disciplined savings plan in which you agree to save a certain amount each month for a specific period of time, normally five or ten years, and the life assurer agrees to pay out the investment returns by that date. Most endowments also offer choices of where you want the money invested and the risks you are prepared to accept. You can add life assurance to an endowment. At your death it will pay out the larger of either the agreed death benefit or the investment return.
A type of short-term insurance or reinsurance policy where the contract covers specified risks relating to the use of business machinery and equipment, excluding machinery and equipment for the conveyance of persons or goods, or the erection of buildings or structures and the installing of machinery or equipment.
Equity is ordinary shares in a company and gives the holder of such shares a share in the residual profits of a company, after claims.
Equity funds invest predominantly in shares listed on the Johannesburg Stock Exchange (JSE). Funds in this class have at least 75 percent of the market value of the fund in equities all the time. The domestic equity fund category is divided in sub-categories of; General Funds, Gold Funds, Mining & Resources Sector, Financial & Industrial Sector, Financial Sector Funds, Value Funds, Empowerment Funds, Large Cap Funds, Small Cap Funds, Small Company Funds, Other Theme Funds, Growth Funds, Technology Sector Funds and Consumer Sector Funds.
Foreign equity funds may invest in shares from equity markets across the globe. A maximum of 15 percent can be in cash or invested locally. General funds invest across all market sectors. The benchmark is the Morgan Stanely Captial World Index.
These are similar to these funds in the Domestic Equity category, except that these funds may invest in local and foreign markets.
These invest in local and offshore companies, whose operations involve, or are likely to benefit from, scientific or technological advances.
The clause in an insurance contract which stipulates that in the event of an inadvertent error or omission, the insurer shall not be prejudiced in the fulfillment of the agreement, provided that any error or omission shall be corrected as soon as discovered.
A clause in some policies which provides for an incremental specified increase in sum insured over the period of risk. Escalation clauses are generally limited to an index such as the consumer price index.
Property or money held by a third party until the agreed upon obligations of a contract are met.
A document provided by a bank in options trading to guarantee that the underlying security is on deposit and available for potential delivery.
The excess of admissible assets representing the whole or part of a long term fund over the liabilities, as determined by an investigation by the actuary.
All a person\'s assets and liabilities.
Estate duty is the tax payable on the dutiable value of an estate.
These are estate plans you implement to reduce estate duty, income tax, VAT, etc.
Is the Illustrative Maturity Value @ 6% of the fund at the end of the term i.e. at maturity. This takes into account the remaining term, the premiums to be paid as well as any contribution increases. It is important to realise that this is a projected figure and is subject to change as the fund performance in the underlying portfolio changes. Life Offices may adjust the projection rate from time to time depending on actual performance of fund portfolios over time.
The time interval over which funds assess an investment manager's performance.
An Event-Driven fund is a fund that seeks to make a profit by anticipating special situations or corporate events (e.g. mergers, takeovers, reorganizations) to capitalize on price fluctuations or imbalances. This is primarily a trading strategy with a short term holding period and low expected volatility. This strategy does not depend on the direction of the market. Derivatives are used to hedge out interest rate risk and to leverage returns.
Personal information presented by an applicant for life insurance to the life insurance company from which the company determines the acceptability of the life to be insured and any premium loading or special conditions in the event that the proposed life to be insured is ‘substandard’. Evidence of insurability usually consists of statements by the life to be insured in the proposal, a medical examination, or non-medical data submitted in lieu of an examination, letters from family doctors, etc.
Ex is Latin for "without", so this is a share or bond sold without the right of receipt of the next due interest payment.
A share sold without the right to receive the next dividend payment due.
Literally ‘an act of grace’. If a claim is paid in full or in part by an insurer without admission of liability and without waiver of right, it is paid ex gratia.
Clauses which exclude certain perils as being insured events. See exclusions.
A policy condition whereby the insured is required to pay a portion of the loss, as stipulated in the policy (for example the first R2 000 of a motor vehicle damage claim). The insurer would pay the balance over that amount.
Cover above the primary amount of insurance given by a short-term company. See excess layer.
Interest earned by a life insurance company in excess of that assumed in premium and reserve calculations. Excess interest is usually allocated to policyholders as one component of their bonuses. It is also allocated to those supplementary settlement agreements that are computed on the basis of interest only.
Layer of risk (used in short-term companies) which is removed from the primary layer of cover where the frequency claims will occur.
Reinsurance cover which, subject to a specified limit, indemnifies the ceding company against loss in excess of a specified deductible. It embraces various types of reinsurance such as any one risk reinsurance, any one event reinsurance, catastrophe reinsurance, aggregate excess of loss reinsurance and stop loss reinsurance. Such treaties do not usually apply to specific policies but to aggregate losses incurred under all policies subject to the particular risks reinsured. The premium is usually a percentage of the net premiums written by the original insurer for the risks subject to the reinsurance.
A formal marketplace in which shares, options and futures on shares, bonds, commodities, and indexes are traded.
The price at which one country's currency can be converted into another currency. If one US Dollar can be bought in South Africa for R8, this is the Rand/US Dollar exchange rate.
Provisions in a policy or treaty that excludes certain types of risk from coverage under the policy or treaty. Two of the more common exclusions are in connection with aviation and war (e.g. ‘insurance is payable upon death except if resulting from piloting an airplane’)
To validate by signing.
An executor should be nominated, and it should be stated clearly whether he shall have power of assumption, and also whether he is exempt from furnishing security, if that is the testator\'s wish. Only persons as determined in the regulations to the Administration of Estates Act may be assumed as co-executors. The executor is the person or institution nominated in the will and whom the Master of the Higher Court will appoint in due course to administer the estate. This is a specialized field and needs knowledge and experience. A trust company which is nominated as executor provides security, knowledge and continuity as benefits for the client. An executor must always provide security, unless he is the parent, spouse or child of the deceased of the will, or a court of law has exempted the executor from providing security. Where an institution like a trust company is nominated as the executor, it will be regarded as a mistake in the will if exemption to provide security is not provided for. The reason being that the estate is reliable for the costs. All a person\'s assets and liabilities.
A pension fund where the sole investment medium is a pension fund policy with an insurance company registered under the Insurance Act and where the Registrar of Pension Funds has exempted the fund in terms of Section 2(3)(a) of the Pension Funds Act as envisaged in paragraphs 1 and 2 of the Regulations.
The price at which an underlying security can be sold to (for a put option) or purchased from (for a call option) the issuer of an option.
See life expectancy
This is the active return we would have expected to achieve, given the portfolio’s beta and market risk premium.
The deaths which would occur in a group if the actual mortality experience should coincide exactly with the mortality assumptions.
This measures how well a manager is making use of available information. It is calculated by dividing expected active return by the expected active risk. It measures the active return achieved for every unit of active risk taken by the manager.
Expected amount of loss which is used in calculating premiums.
Expectation of illness or injury. The likelihood of this is shown in an actuarially calculated morbidity table. Such tables are used in calculating insurance premiums.
Expectation of death. The likelihood of this is shown in an actuarially calculated mortality table. Such tables are used to calculate premiums.
The portion of the annual premium which is intended to cover expenses incidental to the business of insurance, such as sales expenses, taxes, general administration, salaries and underwriting profit.
The excess of expenses incurred over that expected and allowed for in the determination of premium rates.
The percentage of management expenses to earned premium. This is sometimes combined with commissions and also called the expense ratio.
Refers to the losses or loss ratio record of a particular risk, of a particular cover, or of a particular insurer.
Premium on a policy is determined by claims experience.
A person with extensive and proven knowledge and experience of estate planning, wills, trusts and deceased estates as well as all laws and estate planning techniques that are involved.
This is the possibility of loss. It is criterion used in measuring the extent of a risk assumed by an insurer. From the statistical standpoint of rate calculation for short term insurance, exposure is the product of the amount of insurance at risk and the policy period expressed in years. For example, the exposure in the case of R1 000 payroll policy written for a year is R1 000 x 1, or R1 000; if written for six months, the exposure is R1 000 x 0,5 or R500. Exposure serves as a basis for determining the loss cost, or pure premiums on expired policies per R1 000 of insurance per annum. The unit of exposure for an individual comprehensive motor vehicle is one year. The term is also used generally to represent the state of being in danger of loss from a particular hazard or the hazard threatening a risk.
A form of temporary life insurance available as a non- (extended-term insurance) forfeiture option. It provides for continuing the face amount of the policy (subject to certain adjustments) as term insurance for whatever period.
One of the options available to a life insured in the event he or she defaults on premium payments. Under this option, the cash surrender value of the policy at the date of default may be used to purchase insurance for a further period.
Extension of a manufacturer’s warranty for a specified period, generally for a single premium. This may cover motor vehicles or other manufactured items.
Insurers and pension funds are not only in aggressive competition with one another, but also with other contractual savings schemes (such as unit trusts). Over the years there has been a growing tendency for life insurers to compete more aggressively for personal savings. The need for this change became acute because of the rising level of inflation. Contributors to insurance policies saw the value of their contributions turned over to them at a low rate of return in the form of depreciated money. In an attempt at finding the answer to this challenge, South African life insurers began to link an increasing proportion of policyholders\' funds to growth assets, such as equities and property. The change in the approach of life insurers to the competition for savers\' funds was also evident from the development of the single-premium insurance bond towards the end of the 1960s. Prior to this insurance had been concerned primarily with the monthly or annual contractual saver and, while single-premium policies were issued, they were mainly extensions of the types of contracts then available. The single-premium bond, however, was geared not to the regular contractual saver but to those who had already accumulated capital. Partly as a result of income tax concessions, and partly because of a concerted attempt by insurance companies to tap the savings market, life insurance premiums and pension-fund contributions have become the most important channels for personal savings. As large investment institutions the insurers and pension funds are an important source of long-term funds for the public sector. They also hold a substantial number of shares listed on the JSE and are involved in most major property developments around the country.
An additional charge, over and above the regular standard premium for the insurance, to pay for some extra risk inherent in the situation. See premium loading.
Protection against increased expenses in carrying on a business and necessitated by occurrence of a loss covered by the policy.
