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Brokers and Carriers terms
The industry itself: deals, results and people.
Captive agentAn insurance agent who sells for a single insurer or insurance group, as opposed to an independent agent who places business with several carriers.Independent agentA licensed agent who works for an agency, not an insurer, sells policies from several carriers, and usually owns the client relationship and renewals.Managing general agent (MGA)An agency or underwriting firm that an insurer authorizes by contract to quote, bind and issue policies for a defined book, sometimes handling claims too.Surplus lines brokerA specially licensed broker who places coverage with non-admitted insurers after the admitted market has declined, and handles the required filings and taxes.AM Best ratingAM Best's letter-grade opinion of an insurer's financial strength and ability to pay claims, widely used by lenders and contracts as a minimum standard.Combined ratioAn insurer's claims costs plus operating expenses as a share of premium; below 100% means an underwriting profit and above 100% an underwriting loss.Earned premiumThe share of a policy's premium that matches the coverage period already elapsed, which an insurer can book as revenue and keep if the policy ends early.Exposure baseThe measure of a business's size or activity, such as payroll, sales or square footage, that is multiplied by a rate to produce a premium.Hard marketThe phase of the insurance cycle when premiums rise, coverage tightens and insurers cut capacity and become pickier about who they will insure.Incurred but not reported (IBNR)An estimate of losses that have already happened, but that the insurer or plan has not yet been told about or has not fully valued.Loss adjustment expenseWhat an insurer spends to investigate, defend and settle claims, apart from the claim payments themselves. Split into allocated and unallocated expense.Loss ratioIncurred claim costs divided by earned premium, shown as a percentage; the basic gauge of whether the premium collected is covering claims.Loss runAn insurer-issued report listing every claim on a policy over a period, with dates, amounts paid, reserves held and whether each claim is open or closed.Reciprocal exchangeAn insurer organized as an association of policyholders, called subscribers, who insure one another and are managed by an attorney-in-fact.Soft marketThe phase of the insurance cycle when capacity is plentiful and insurers compete on price, so premiums flatten or fall and terms loosen.Statutory surplusAn insurer's admitted assets minus its liabilities under regulatory accounting rules, the capital cushion that stands behind policies beyond its loss reserves.UnderwriterThe insurer's risk evaluator who decides whether to offer coverage, on what terms and at what price, within the authority the company grants.UnderwritingHow an insurer selects, prices and sets terms for risks, and the profit or loss it earns on that business before investment income.Written premiumThe total premium on policies an insurer issues or renews in a period, counted when written, whatever share of the coverage period has passed.Representations and warranties insuranceInsurance for a business sale that pays the buyer's loss if the seller's statements about the company in the purchase agreement prove untrue.