40 - Definitions Flashcards
Provision
Denotes the value of a liability that is known or assumed to exist at the accounting date
Reserve
An amount over and above the provisions that is available to meet additional liabilities either in respect of future events or in respect of past events for which provisions may prove inadequate.
Accrual rate
the rate at which rights build up for each year of service in a defined benefit scheme
Accrued benefits
The benefits for service up to a given point in time, whether vested rights or not
Accumulation of risk
When a portfolio of business contains a concentration of risks that might give rise to exceptionally large losses from a single event.
Acquisition costs
Costs arising from the writing of insurance contracts including:
- direct costs such as acquisition commission or the cost of drawing up the insurance document or including the insurance contact in the portfolio
- indirect costs such as advertising costs or the actuary’s/underwriter’s expenses connected with the establishment of the premium rating table.
Active member
A member of a benefit scheme who is at present accruing benefits under that scheme in respect of current service
All risks
A term for when cover is not restricted to specific perils
Anti-selection
When people take contracts because they believe/know that their risk is higher than the insurance company has allowed for in its premiums
Arbitrage
Buying and selling of two economically equivalent portfolios that have different prices so as to make a risk-free profit
Average earnings scheme
A benefit scheme where the benefit for each year of membership is related to the pensionable earnings for that year.
Balance of cost scheme
A defined benefits scheme to which beneficiaries make a defined contribution and the main sponsor pays the remainder of the unknown cost of providing the benefits
Bancassurance
An arrangement between a bank and an insurance company to allow the insurance company to sell its products to the bank’s clients
Bear market
A period of time during which investors are generally unconfident and stock market prices decline
Benchmark
A standard model portfolio against which a fund’s structure and performance will be assessed
Best estimate
An actuarial assumption which the actuary believes has an equal probability of under or over estimating the future experience
Bid price
The price at which a market maker offers to buy a security or buy back units from an investor
Break-up basis
A valuation basis that assumes that the writing of new business ceases and cover on current policies in terminated
Bond
A form of loan
Book reserve
A provision in a company’s accounts for a future benefit liability for which no funds have been set aside
Bulk rate
A premium rate applied uniformly per head on large benefit schemes across a membership type
Bulk transfer
The transfer of liabilities relating to a group of members from one scheme to another
Bull market
A period of time during which investors are generally confident and stock market prices increase
Cancellation
A mid-term cessation of a general insurance policy