J, K, L

Question 1

Joint Underwriting Association (JUA)

Answer 1

a loss-sharing mechanism combining several insurance companies to provide extra capacity due to type or size of exposure.

Question 2

Key-Persons Insurance

Answer 2

a policy purchased by, for the benefit of, a business insuring the life or lives of personnel integral to the business operations.

Question 3

Lapse

Answer 3

termination of a policy due to failure to pay the required renewal premium.

Question 4

Liability

Answer 4

a certain or probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or to provide services to other entities in the future as a result of a past transactions(s) or event(s). Three essential characteristics include: a) It embodies a present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand; b) The duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice; and c) The transaction or other event obligating the entity has already happened.

Question 5

Limits

Answer 5

maximum value to be derived from a policy.

Question 6

Line of Business

Answer 6

classification of business written by insurers.

Question 7

Long Duration Contracts

Answer 7

contracts, excluding financial guaranty contracts, mortgage guaranty contracts and surety contracts, that fulfill both of the following conditions: (1) the contract term is greater than or equal to thirteen months and (2) the insurer can neither cancel nor increase the premium during the contract term.

Question 8

Loss

Answer 8

physical damage to property or bodily injury, Including loss of use or loss of income

Question 9

Loss Adjustment Expense (LAE)

Answer 9

expected payments for costs to be incurred in connection with the adjustment and recording of losses. Can be classified into two broad categories: Defense and Cost Containment (DCC) and Adjusting and Other (AO). Can also be separated into (Allocated Loss Adjustment Expense) and (Unallocated Loss Adjustment Expense for ratemaking purposes.

Question 10

Loss Frequency

Answer 10

incidence of claims on a policy during a premium period.

Question 11

Loss of Use Insurance

Answer 11

policy providing protection against loss of use due to damage or destruction of property.

Question 12

Loss Payable Clause

Answer 12

coverage for third party mortgagee in case of default on insured property, secured by a loan, that has been lost or damaged.

Question 13

Loss Ratio

Answer 13

the percentage of incurred losses to earned premiums.

Question 14

Loss Reserves

Answer 14

an estimate of liability or provision in an insurer’s financial statement, indicating the amount the insurer expects to pay for losses incurred but not yet reported or reported claims that haven’t been paid.

Question 15

Losses Incurred

Answer 15

includes claims that have been paid and/or have amounts held in reserve for future payment

Question 16

Losses Incurred But Not Reported (IBNR)

Answer 16

an estimated amount set aside by the insurance company to pay claims that may have occurred, but for some reason have not yet been reported to the insurance company.