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N - O - P - Q - R - S - T - U - V - W
FACULTATIVE REINSURANCE
- A reinsurance policy
that provides an insurer with coverage for specific individual
risks that are unusual or so large that they aren’t covered
in the insurance company's reinsurance treaties. This can include
policies for jumbo jets or oil rigs. Reinsurers have no obligation
to take on facultative reinsurance, but can assess each risk individually.
By contrast, under treaty reinsurance, the reinsurer agrees to
assume a certain percentage of entire classes of business, such
as various kinds of auto, up to preset limits.
FAIR ACCESS TO INSURANCE REQUIREMENTS PLANS / FAIR PLANS
- Insurance
pools that sell property insurance to people who can’t buy it in the voluntary
market because of high risk over which they may have no control. FAIR Plans,
which exist in 28 states and the District of Columbia , insure fire, vandalism,
riot, and windstorm losses, and some sell homeowners insurance which includes
liability. Plans vary by state, but all require property insurers licensed in
a state to participate in the pool and share in the profits and losses. (See
Residual market)
FARMOWNERS-RANCHOWNERS INSURANCE - Package policy that protects
the policyholder against named perils and liabilities and usually covers homes
and their contents, along with barns, stables, and other structures.
FEDERAL FUNDS - Reserve balances that depository institutions
lend each other, usually on an overnight basis. In addition, Federal funds include
certain other kinds of borrowings by depository institutions from each other
and from federal agencies.
FEDERAL INSURANCE ADMINISTRATION / FIA - Federal agency in
charge of administering the National Flood Insurance Program. It does not regulate
the insurance industry.
FEDERAL RESERVE BOARD - Seven-member board that supervises
the banking system by issuing regulations controlling bank holding companies
and federal laws over the banking industry. It also controls and oversees the
U.S. monetary system and credit supply.
FIDELITY BOND - A form of protection that covers policyholders
for losses that they incur as a result of fraudulent acts by specified individuals.
It usually insures a business for losses caused by the dishonest acts of its
employees.
FIDUCIARY BOND - A type of surety bond, sometimes called
a probate bond, which is required of certain fiduciaries, such as executors and
trustees, that guarantees the performance of their responsibilities.
FIDUCIARY LIABILITY - Legal responsibility of a fiduciary
to safeguard assets of beneficiaries. A fiduciary, for example a pension fund
manager, is required to manage investments held in trust in the best interest
of beneficiaries. Fiduciary liability insurance covers breaches of fiduciary
duty such as misstatements or misleading statements, errors and omissions.
FILE-AND-USE STATES - States where insurers must file rate
changes with their regulators, but don’t have to wait for approval to put
them into effect.
FINANCIAL GUARANTEE INSURANCE -
Covers losses from specific financial transactions and guarantees that investors
in debt instruments, such as municipal bonds, receive timely payment of principal
and interest if there is a default. Raises the credit rating of debt to which
the guarantee is attached. Investment bankers who sell asset-backed securities,
securities backed by loan portfolios, use this insurance to enhance marketability.
(See Municipal bond insurance)
FINANCIAL RESPONSIBILITY LAW
-
A state law requiring that all automobile drivers show proof that they can pay
damages up to a minimum amount if involved in an auto accident. Varies from state
to state but can be met by carrying a minimum amount of auto liability insurance.
(See Mandatory auto insurance)
FINITE RISK REINSURANCE - Contract under which the ultimate
liability of the reinsurer is capped and on which anticipated investment income
is expressly acknowledged as an underwriting component. Also known as Financial
Reinsurance because this type of coverage is often bought to improve the balance
sheet effects of statutory accounting principles.
FIRE INSURANCE
- Coverage protecting property against losses
caused by a fire or lightning that is usually included in homeowners insurance or commercial
multiple peril policies.
FIRST-PARTY COVERAGE - Coverage for the policyholder’s
own property or person. In no-fault auto insurance it pays for the cost of injuries.
In no-fault states with the broadest coverage, the personal injury protection
(PIP) part of the policy pays for medical care, lost income, funeral expenses
and, where the injured person is not able to provide services such as child care,
for substitute services. (See No-fault;
Third-party coverage)
FIXED ANNUITY - An annuity that guarantees a specific rate
of return. In the case of a deferred annuity, a minimum rate of interest is guaranteed
during the savings phase. During the payment phase, a fixed amount of income,
paid on a regular schedule, is guaranteed.
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FLOATER
- Attached to a homeowners
policy, a floater insures movable property, covering losses wherever they may
occur. Among the items often insured with a floater are expensive jewelry,
musical instruments, and furs. It provides broader coverage than a regular
homeowners insurance policy for these items.
FLOOD INSURANCE
- Coverage for
flood damage is available from the federal government under the National Flood
Insurance Program but is sold by licensed insurance agents. Flood coverage
is excluded under homeowners insurance policies and many commercial property policies.
However, flood damage is covered under the comprehensive portion of an auto
insurance policy. (See Adverse selection)
FORCED PLACE INSURANCE - Insurance
purchased by a bank or creditor on an uninsured debtor’s behalf so
if the property is damaged, funding is available to repair it.
FOREIGN INSURANCE COMPANY - Name
given to an insurance company based in one state by the other states in which
it does business.
FRAUD - Intentional lying or
concealment by policyholders to obtain payment of an insurance claim that would
otherwise not be paid, or lying or misrepresentation by the insurance company
managers, employees, agents, and brokers for financial gain.
FREE-LOOK PERIOD - A period of
up to one month during which the purchaser of an annuity can cancel the contract
with no penalty. Rules vary by state.
FREQUENCY - Number of times a
loss occurs. One of the criteria used in calculating premium rates.
FRONTING - A procedure in which
a primary insurer acts as the insurer of record by issuing a policy, but then
passes the entire risk to a reinsurer in exchange for a commission. Often,
the fronting insurer is licensed to do business in a state or country where
the risk is located, but the reinsurer is not. The reinsurer in this scenario
is often a captive or an independent insurance company that cannot sell insurance
directly in a particular country.
FUTURES - Agreement to buy a
security for a set price at a certain date. Futures contracts usually involve
commodities, indexes or financial futures. |
