Loss exposure - ✔✔ANSWER✔✔-any condition or
situation that presents a possibility of loss, whether or not
an actual loss occurs
Premium - ✔✔ANSWER✔✔-the price of the insurance
coverage provided for a specified period
Indemnify - ✔✔ANSWER✔✔-to restore a party who has
sustained a loss to the same financial position that party
held before the loss occurred
Insured - ✔✔ANSWER✔✔-any person or organization
who is insured under an insurance policy
Property-casualty insurance - ✔✔ANSWER✔✔-one of the
two main sectors of the insurance industry encompassing
numerous types of insurance, most of which cover the
financial consequences of damage to one's own property
or legal liability to others
,Life-health insurance - ✔✔ANSWER✔✔-one of the two
main sectors of the insurance industry encompassing
numerous types of insurance that cover the financial
Stock insurer - ✔✔ANSWER✔✔-an insurer that is owned
by its stockholders and formed as a corporation for the
purpose of earning a profit for the stockholders
Mutual insurer - ✔✔ANSWER✔✔-an insurer that is owned
by its policyholders and formed as a corporation for the
purpose of providing insurance to them
Surplus-lines insurer - ✔✔ANSWER✔✔-a non-admitted
insurer that is eligible to insure risks that have been
exported by a surplus lines licensee in accordance with a
surplus lines law
Reinsurance - ✔✔ANSWER✔✔-the transfer of insurance
risk from one insurer to another through a contractual
agreement under which one insurer (the reinsurer) agrees,
in return for a reinsurance premium, to indemnify another
insurer (the primary insurer) for some or all of the financial
consequences of certain loss exposures covered by the
primary's insurance policies
Pure risk - ✔✔ANSWER✔✔-a chance of loss or no loss,
but no chance of gain
Speculative risk - ✔✔ANSWER✔✔-a chance of loss, no
loss, or gain
,Solvency - ✔✔ANSWER✔✔-the ability of an insurer to
meet its financial obligations as they become due, even
those resulting from insured losses that may be claimed
several years in the future
Income statement - ✔✔ANSWER✔✔-the financial
statement that reports an organization's profit or loss for a
specific period by comparing the revenues generated with
the expenses incurred to produce those revenues
Earned premiums - ✔✔ANSWER✔✔-the portion of the
written premiums that apply to the part of the policy period
that has already occurred
Underwriting income - ✔✔ANSWER✔✔-income an insurer
earns from premiums paid by policyholders minus incurred
losses and underwriting expenses
Balance sheet - ✔✔ANSWER✔✔-the financial statement
that reports the assets, liabilities, and owner's equity of an
organization as of a specific date
Policyholder's surplus - ✔✔ANSWER✔✔-an insurer's
assets minus its liabilities, which represents its net worth
Loss adjustment expenses - ✔✔ANSWER✔✔-the
expense that an insurer incurs to investigate, defend, and
settle claims according to the terms specified in the
insurance policy
, Assets - ✔✔ANSWER✔✔-types of property, both tangible
and intangible, owned by an entity
Liabilities - ✔✔ANSWER✔✔-financial obligations, or
debts, owned by a company to another entity usually the
policyholder in the case of an insurer
Investment income - ✔✔ANSWER✔✔-interest, dividends,
and net capital gains received by an insurer from the
insurer's financial assets, minus its investment expenses
Loss reserve - ✔✔ANSWER✔✔-an estimate of the
amount of money the insurer expects to pay in the future
for losses that have occurred
Unearned premium reserve - ✔✔ANSWER✔✔-an insurer
liability representing the amount of premiums received
from policyholders that are not yet earned
Loss ratio - ✔✔ANSWER✔✔-a ratio that measures losses
and loss adjustment expenses against earned premiums
and that reflects the percentage of premiums being
consumed by losses
Expense ratio - ✔✔ANSWER✔✔-an insurer's incurred
underwriting expenses for a given period divided by its
written premiums for the same period
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