Weighted index of the largest 40 companies listed on the Paris Stock Exchange.
A compilation of experience based on transactions recorded during a given calendar year.
A bank account from which deposits can only be withdrawn after the bank has been given notice, varying from 24 hours to 60 days. The longer the notice period, the higher the interest.
An option contract that gives the holder the right (but not the obligation) to purchase a specified number of shares of a specified stock at strike price, on or before the expiration date of the contract
replaced
A deal giving the holder the right, without the obligation, to buy a particular underlying asset at the strike price any time before the expiration date
A deal giving the holder the right, without the obligation, to buy a particular underlying asset at the strike price on the expiration date
The return or interest offered by banking institutions on money in a call account.
A complete termination of an existing policy prior to its expiration. Usually only the insured may cancel a policy if all premiums due have been paid.
Clause in a policy which allows the insurer to cancel after due notice.
When a policy is cancelled as of the effective date.
A cancellation on which the earned premium is calculated in the exact proportion that the elapsed period of the policy bears to the policy term. For example an annual policy in force for six months would have a pro-rata earned premium of 50% of the earned premium
The process of terminating a policy prior to the expiration date and issuing a new policy to supersede the one terminated. The new policy is usually written for a period of one year to avoid a short-rate premium charge. Most changes in the insurance agreement between the insurer and insured are made by an endorsement attached to the policy, but the cancellation rewrite method may be used for this purpose and also extend the time of the insurance agreement.
A cancellation on which the earned premium is calculated at a ratio higher than the proportion that the elapsed period bears to the full policy term. For example, an annual policy in force for six months may have a short rate earned premium of 60% of the annual premium.
A disease manifested by the presence of a malignant tumor characterized by the uncontrolled growth and spread of malignant cells, and the invasion of normal tissue. The term cancer also includes Leukemia Hodgkin’s disease but excludes tumors in the presence of any human immuno-deficiency virus, all skin cancers(other than invasive malignant melanoma), carcinoma in situ and all cancers described as pre-malignant or showing early malignant change.
The amount of insurance or reinsurance available from an individual underwriter or from the entire insurance market in a particular locality or country.
This is the total amount that you have saved for retirement. This money should be then be invested to earn interest to enable you to draw a regular monthly income, or pension.
The amount provided in addition to the liabilities determined by an actuary in respect of mortality and morbidity, in order to provide for random fluctuations in experience and adverse fluctuations or trends in any of the variables about which assumptions were made in the financial soundness basis of valuation. The existence of such an amount does not guarantee the company against future financial difficulties.
Also known as Capital Growth. The growth in the market price of an investment.
The assumptions of the CAPM include those made by Modern Portfolio Theory and also the following additional assumptions: i) all investors have the same one-period horizon ii) all investors can borrow and lend unlimited amounts at the same risk-free rate iii) the market for risky assets are perfect i.e. information is freely available to all investors and no investor believes that they can affect the price of a security by their own actions. iv) all investors have the same estimates of the expected returns , standard deviations and covariances of securities over the one-period horizon. v) all investors measure in the same currency, e.g. pounds or rands, or in real or nominal terms. A direct consequence is that all investors will have the same portfolio of risky assets. They only need to decide how much to invest or borrow at the risk free rate. An economic theory that describes the relationship between risk and expected return, and serves as a model for the pricing of risky securities. The CAPM asserts that the only risk that is priced by rational investors is systematic risk, because that risk cannot be eliminated by diversification. The CAPM says that the expected return of a security or a portfolio is equal to the rate on a risk-free security plus a risk premium multiplied by the assets systematic risk. Theory was invented by William Sharpe (1964) and John Lintner (1965).
This is a new prospective tax on capital gains. Should be implemented from October 2001.
All investments held by insurance companies are divided into four funds according to the status of the beneficial owner of the investments. The four funds are the Individual Policyholders Fund for natural persons, the Company Policyholders Fund for companies and close corporations, The Corporate Fund for the funds of the insurance company itself and the Untaxed Policyholders Fund for untaxed funds such as retirement annuities. In the case of life assurance policies and endowment policies, the respective funds will be liable for CGT at the following rates: Individual PF Inclusion Rate 25% Tax Rate 30% Effective Rate 7.5% Company PF Inclusion Rate 50% Tax Rate 30% Effective Rate 15% Corporate Fund Inclusion Rate 50% Tax Rate 30% Effective Rate 15% Untaxed PF Inclusion Rate 0% Tax Rate 0% Effective Rate 0% If a policy is not taxed within one of these four funds, the maturity value of such a policy will be subject to CGT. This includes all policies underwritten by offshore companies and might create serious cash flows problems for immigrants who retain their policies taken out in their country of origin. The maturity value of SA policies will not be taxable in the hands of the original owner or beneficiary. The tax free benefit is however lost as soon as the policy is ceded and ownership of the policy changes. In such an event the proceeds less the base cost (premiums & purchase price paid) will be subject to CGT. This will affect especially 2nd hand policies, because the end result is that such policies will be subject to double CGT taxation. This does not per se result in traded policies being bad investments that need to be cancelled. It still provides high levels of flexibility and liquidity. It is a sound investment to diversify risk, may have good growth potential and has an acceptable cost structure. Even with the additional CGT liability it may still produce a competitive aftertax income.
The capital market is the market for long term securities.
This portfolio range is aimed at investors who seek to maximise their returns with a low risk investment strategy. This range caters for investors who have a low tolerance for negative returns or who have a short investment time horizon.
The income is reinvested and will be added to the capital.
See "Closed Fund".
An insurance company owned by a parent company or a group of companies and writing its owner’s insurance. Captive insurers are formed where insurance is not obtainable from the conventional market or where a company wishes to put its insurance program into a tax effective vehicle which improves the overall profitability of the group.
This may be either marine or aviation cargo. This covers the risk of damage or loss of goods while in transit.
The insurer which, for a consideration (the premium), provides insurance cover to the insured in accordance with the provisions of the policy.
A provision for outstanding, unpaid, notified claims based on individual estimates of the value of each unpaid claim.
Cash is a very short-term investment earning short-term interest, like treasury bills and bank deposits.
Short term deposits.
Writing business at an underwriting loss with a view to making an overall profit from investment income.
Also known as Money Market Instruments. Short-term debt instruments such as commercial paper, banker's acceptances, and Treasury bills that mature in less than one year.
A provision in a proportional treaty which allows the ceding company to make a call on its reinsurer’s for payment of a loss, which exceeds a predetermined amount, in advance of the normal account date (usually quarterly).
A portfolio that includes cash investments (see definition of "Cash Investments"). Returns are similar to those from cash in the bank.
The amount available in cash upon voluntary termination of a life policy by its owner before it becomes payable by death or maturity. See surrender value.
Insurance covering liability or third-party business; or A loss, notably a marine sinking.
Total claims on a long term insurer arising out of a single catastrophic event (e.g. fire, earthquake, storm, explosion or similar event).
Fire, earthquake, windstorm, explosion, and other similar events that result in substantial losses. Catastrophe losses (the whole loss of an insurance company arising out of a single catastrophic event) are usually protected by excess of loss reinsurance in order to limit any one such loss to a specific amount.
A form of excess of loss reinsurance against multiple losses arising from a catastrophic events such as a fire, earthquake, windstorm or explosion.
To transfer liability in connection with a risk, or a portion of it, from the original insurer to a reinsurer.
An insurer which transfers all or part of a risk to a reinsurer by means of a reinsurance contract. Sometimes referred to as the cedent.
An insurer that is structured with separate cells. Each cell, through a shareholders’ agreement, is separate and independent from the other cells in the insurer. The assets allocated to each cell may be used only to settle liabilities incurred by such cell and thus should not be attached by the creditors of the other cells. Positive returns on the net assets in the cell and on insurance business introduced by the cell owner to the insurer are attributable to the cell owner. However, the cell owner is held accountable for losses incurred in the cell.
Any person or entity that owns a cell in a cell captive insurer.
A statement of coverage issued in connection with group insurance. Each insured member of the group is issued a certificate certifying that a master policy or contract has been issued by the insurance company to cover the group. A summary of the terms of the policy applicable to an individual member is shown in the certificate.
Paper issued by a bank, acknowledging a future sum of money to be paid back to the holder of the paper.
Paper issued by a bank, acknowledging a future sum of money to be paid back to the holder of the paper.
The amount of insurance passed on to the reinsurer by the ceding company. A cession may be the whole or a portion of single risks, defined policies, or defined parts of business.
A policy taken out on the life of a minor by a person other than the life insured. The sum insured is limited by the Long-term Insurance Act to: _ R10 000 for an unborn or a minor before he or she attains the age of six years old; and _ R30 000 for a minor older than six years but less than fourteen years old.
Excessive trading of a client\'s account in order to increase the brokers commissions. This results in significant capital erossion from the client\'s portfolio, as selling and buying is always done at a premium.
Citi World Government Bond Index. The Citi WGBI is used as a benchmark for the international measurement of Bond Portfolios.
Amount payable to a winning plaintiff by a losing defendant in terms of a court order.
Liability of persons for negligent acts and/or omissions other than breach of contract.
A demand on the insurer by the insured or beneficiaries under a policy for the payment of benefits under a policy.
A demand on the insurer for indemnification for a loss incurred from an insured peril.
A statistical comparison of claim provisions outstanding at any particular date with the total payments made on such claims from the original provision date to the development date plus estimated losses still unpaid at the date of development.
All data relating to each loss or claim are placed together and are referred to as a claim file.
A term used in motor insurance to describe the category in which the insured falls for the purpose of calculating the premium. It is determined by claims experience. See no claim bonus.
The party making a claim under an insurance policy. The claimant may be the insured. Under liability policies the claimant is a third party.
A clause which binds the ceding company to notify the reinsurer of all claims exceeding a stated amount or percentage of the deductible, and to accept the reinsurer’s assistance and guidance in negotiating their settlement. These clauses are found in most excess of loss treaties
The internal and external expenses incurred in the investigation, adjustment, and settlement of claims. Provision is made for such expenses in case basis claim provisions.
These are the claims costs for an accounting period made up of: _ claims paid for the period, including claims handling expenses, _ less outstanding claims at the end of the preceding accounting period including IBNR, _ plus outstanding claims at the end of the current accounting period including IBNR.
Claims resulting from accidents or occurrences which have taken place, but of which the insurer has not received notice or report of the loss. An estimate is made of the amount of these claims based on previous experience. Also referred to as losses incurred but not reported (IBNR's).
Amounts provided to cover the estimated ultimate cost of settling notified claims arising out of insured events that have occurred by the end of the accounting period, less amounts already paid in respect of those claims. Also referred to as outstanding claims but excluding IBNR's.
See losses made basis.
See losses occurring basis.
Ratios expressing the relationship between claims and premiums. Two ratios in common usage are: _ The paid claims ratio: paid claims divided by earned premiums and; _ The incurred claims ratio: incurred claims divided by earned premiums.
Claims resulting from accidents or occurrences which have taken place and have been recorded in the insurers accounts.
Indirect claim settlement expenses are expenses incurred in settling claims which cannot be attributed to specific claims. For example, the overhead expenses of the claims department.
The rate applied to similar risks to arrive at a premium.
A termination provision of a reinsurance treaty. It provides that by returning premium and loss portfolios to the ceding company the reinsurer shall have no further liability for loss, either as a result of occurrences taking place after the date of termination, or in respect of outstanding losses notified prior to the date of termination. The clean cut provision simplifies accounting procedures.
The quoted price of a bond excluding accrued interest.
The process by which trades between users of an exchange are confirmed and net positions of each user struck so as to determine the amounts of money each user owes to other users.
A close corporation is a seperate legal entity apart from its members which can acquirerights and obligations in its own name.
A fund that won't accept new investments. In the case of a retirement fund, it means that new members may not join the fund.
Final details regarding a risk enabling a policy to be issued.
Price of the last transaction of a particular stock completed during a day's trading session on an exchange.
A simplified system of allocating cessions to a proportional treaty. Insurances are classified into a limited number of groups, each with predetermined retention and reinsurance proportions, so that apportionment of premiums and losses may be made on such groups of cessions rather than by individual risks.
Co-insurance is an arrangement whereby two or more insurers share the insurance of a particular risk, each acting as a direct underwriter. This arrangement may be effected by each insurer issuing its own policy for its own proportion, or as is more often the case, by participating in a collective policy.
Is an arrangement whereby two or more insurers enter into a single contract with the insured to cover risk in agreed proportions at an overall premium.
Partial payment of the loss by the insured.
More than one person or institution appointed to administer the assets in a trust (capital and income) for the benefit of the beneficiary until termination of the trust.
Addition to an existing will. It must comply with the same laws as applicable to wills.
A financial record used to record receipts of premium in assistance (life) business.
A policy issued by the lead insurer on behalf of a number of insurers who share the risk.
Physical contact of a motor vehicle with another object (including another vehicle) resulting in damage.
Cover provided to a person renting a motor vehicle for motor vehicle comprehensive insurance where the renting company has waived the right to proceed against the vehicle driver for damage caused while the vehicle was rented.
A state of unconsciousness with no reaction to external stimuli or internal needs, persisting with the use of a life support system, resulting in a neurological deficit which is of a permanent nature.
The aggregate of the expense and claims ratios.
An insurance contract entered into in respect of the assets and liabilities of business enterprises as opposed to individuals. Also referred to as corporate insurance.
A debt instrument issued by a commercial entity acknowledging a future sum of money to be paid to the holder of the paper.
Commission is the fee paid to an agent for the agent’s services and is calculated as a percentage of the premium generated on the insurance policy.
Food, metal, or other fixed physical investments that investors buy and sell.
A term used to describe the joint interests of a ceding company and its reinsurer(s). The term is commonly used in relation to the provision of joint reinsurance protection to both parties, for example excess of loss protection for ‘common account’ covering both parties’ interests.
A clause which provides, if mutually agreed by the parties, for the estimation and complete discharge of payment to the ceding company by the reinsurer of all future obligations or reinsurance loss or losses incurred, regardless of the continuing nature of certain losses. This clause is utilised mostly in non-proportional liability reinsurance treaties.
The present value of an estimated future series of payments over a period of time.
A company is a lega entity, seperate from its shareholders, which can acquire legal rights and obligations in its own name.
A company-owned policy is a policy effected by an employer, company or close corporation on the life of an employee or director.
Indices which, in terms of applicability to portfolios are useful for comparison with a portfolio.
A company that writes both short-term and life business. In South Africa only reinsurer’s are allowed to be composites. The financial records and assets of the life and short-term portions of the business are kept separate in terms of legislation.
Compound interest is the accumulation of interest monthly, quarterly or annually including ‘interest on interest’. Interest is sometimes payable in respect of insurance and reinsurance contracts.
Primarily insurance which covers any loss of, or damage to vehicle insurance an insured motor vehicle (including motor cycles, caravans and trailers) arising from an accident, fire or theft. Also included in this class of business is third party and property damage arising from motor vehicle accidents.
Third party insurance providing for compensation for death insurance or injury caused by motor vehicles provided for in the Compulsory Motor Vehicle Insurance Act 56 of 1972.
Insured intentionally withholding information from the insurer. If the insurer proves this it has grounds to void cover.
Coverage against the same hazard existing at the same time as other insurance (i.e. duplicate coverage).
The clauses in an insurance policy which specify what may or may not be done by the insured before and after the occurrence of a loss in terms of the policy.
A loss not directly caused by damage to property, but arising as a result of such damage. For example, lost production and loss of profits following a factory fire.See loss of profits insurance.
The steps taken by a life insurer to keep policies in force.
The initial, lump-sum amount paid into an investment or a vehicle which provides income.
A financial statement that shows all the assets, liabilities, and operating accounts of a company and its subsidiaries.
Measures the prices of consumer goods and services and the pace of inflation. Central Statistics publishes the CPI every month.
Funds in the consumer sector seek capital appreciation by investing primarily in companies engaged in the manufacture and distribution of consumer goods, or in companies where a significant portion of profits is derived from the underlying consumer market. There is no benchmark yet.
The rate for fire insurance applicable to the contents of a building, as differentiated from the rate on the building itself.
Is the amount set aside in terms of the Short-term Insurance Act to cover abnormal losses flowing from abnormal or unusual events such as earthquakes, floods and tidal waves. Charges are made against the reserve onlyas approved by the South African Registrar of Insurance.
An allowance due to the ceding company based on a predetermined percentage of profit realized by the reinsurer under a specified reinsurance contract or contracts. See policy bonus.
A beneficiary who is entitled to benefits only after the death of a primary, or basic beneficiary.
A contingent liability is: 1.) A possible obligation that arises from past events and whose existence will only be confirmed if a future event occurs, or 2.) A present obligation that arises from past events but which cannot be measured with sufficient reliability.
The insurance or reinsurance policy. The agreement between the insurer and the insured.
This is a class of insurance sometimes known as insurance (CAR) contractors works insurance. CAR covers the insurance of materials, buildings, structures, works and other property in the course of construction. The policy can be extended to include the contractor’s plant and equipment on site. This class of business is normally classified as engineering for regulatory reporting purposes.
A basic principle of insurance according to which each of several insurers of the same risk contribute a proportion of loss.
The amounts paid or payable by a member and/or the member’s employer in terms of the rules of the fund.
A fund to which members make contributions, deducted from weekly wages or monthly salaries.
Lack of care on the part of the individual injured or suffering loss which helped to cause or aggravate the accident or loss.
The right to change the beneficiary and to exercise all other benefits, options and privileges conferred by the policy. Control is usually synonymous with ownership.
Conventional policies operate in such a way that policyholders are protected from the investment and mortality risks. This is achieved by the pooling of monies. After administration fees have been deducted from premiums, what is left is credited to the life fund where it is invested on behalf of policyholders. Dividends and interest earned on investments are also added back to the fund as well as capital profits made from dealing in investments. Claims are met from the fund. At intervals not exceeding three years the contractual liabilities undertaken by the insurance company by nature of the policies issued by it are valued against the accumulated fund. Good management, careful underwriting, and shrewd investments result in valuations showing a surplus of money in the fund over the liabilities that have to be met, i.e. the "profit". The major portion of this surplus or "profit" is available for distribution to with-profit policyholders. Mutual offices, which belong entirely to their policyholders, can distribute the full extent of their surplus to with-profit policyholders. Proprietary offices that have been set up using shareholders\' capital to provide the initial reserve funds take into consideration in the distribution of surpluses both policyholders and the dividends that they have to pay to their shareholders. The "profits" are allocated to each with-profit policy and are paid as bonuses in addition to the specified sum insured in the case of reversionary bonus policies (see section 1.2.2) and serve as an addition to the investment account for universal life policies.
The wrongful use or disposition of property by a person who is in lawful possession of it.
It is a bond that may be converted into something else on specified terms, usually into shares in the same company.
Term insurance is payable only if the death of the insured occurs within a specified period (the term period). This is temporary protection. Premiums are payable during the entire term period, or until the death of the insured, should it occur prior to the expiration date. It is possible to arrange for almost any desired number of years of term coverage. Convertible-term insurance contains a provision for conversion to a permanent plan of insurance. If the conversion is made within a specified time after issue, it is not subject to any further evidence as to the state of health of the insured. The converted policy requires larger premiums than the term policy and may require an additional conversion charge if the new insurance is datedprior to the date of conversion. These policies are rare inSouth Africa.
Measures the rate of change in bond duration with respect to changes in interest rates. Positive convexity occurs when durations shorten as interest rates rise or lengthen as interest rates decrease. Negative convexity occurs when durations lengthen as interest rates rise or shorten as interest rates decrease.
Surgery involving the coronary arteries requiring thoracotomy in order to restore an adequate blood supply to the heart muscle based on incontrovertible pre-operative evidence of a significant organic narrowing or occlusion of two or more coronary arteries by means angiography or other methods of imaging. Coronary artery disease requiring surgery does not include coronary angioplasty stents, laser relief for an obstruction, any other intra-arterial procedures or any prophylactic surgery.
A debt instrument issued by a corporate entity acknowledging a future sum of money to be paid to the holder of the paper.
A measure of how strong the relationship is between the value of two random variables (e.g. the price of two shares over time). Correlation is always between –1 and 1. A correlation of 1 means that two variables will move in perfect harmony, a correlation of –1 means that two variables will move in perfect disharmony. A correlation of 0 means that there is no relationship in the movement of two variables
A buyer or seller of an instrument. There are therefore two counterparties to a trade. A central counterparty stands between them, buying from the seller and selling to the buyer.
The actual annual interest payment on a bond, gilt, promissory note or other fixed income security. (usually paid six-monthly)
In the case of bonds, gilt, promissory notes or other fixed income securities, the fixed annual interest rate, usually payable twice a year.
The scope of the protection provided by an insurance or reinsurance contract.
Confirmation of insurance or reinsurance cover.
A single or recurring premium term life insurance policy taken out by borrowers. Its purpose is to cover payment of outstanding loan balances in the event of their dying, or on the happening of other specified events.
A company rating given by a credit agency, on the likelihood of the company defaulting on its debt. Credit ratings by reputable agencies are used to value investments relative to one another.
This is a class of insurance taken out by an insured to repay loans when the insured (borrower) is incapacitated through illness or injury.
Persons who claim what is due to them.
The creditworthiness of fixed interest investments indicates the ability of an issuer to repay the interest and capital of their debt. The more credit risk an investor takes, the higher the performance that can be demanded.
Insurance in respect of damage to crops in the event of hail, fire, flood, wind and lightning.
By pooling the money of a number of employees into one fund one is able to use some of everyone\'s money to the benefit of everyone. A little bit of mine helps you and a little bit of yours helps me.
Total deaths as a percentage of the total population for a stipulated period of time.
"Cum" is Latin for "with". This refers to assets sold along with the entitlement to receive the next dividend payment. Assets sold "ex-dividend" do not carry this entitlement.
Indicator of short-term debt paying ability that is determined by dividing current assets by current liabilities. The higher the ratio, the more liquid the company.
See clean cut
A statement of cover by a reinsurer under which protection is guaranteed to a party not privy to the reinsurance contract.
Companies that perform well when the cycle is in their favour, but are likely to struggle when cycles are not. For example, mining shares often perform well in a cycle when mining commodity prices rise.
