Glossary

Particular average

A partial loss of a ship or cargo which is caused by an insured peril and which is not a general average loss. The term partial loss may be used instead.

Peril

A harmful event which may be covered under a contract of insurance or reinsurance as an insured peril or excluded from it.

Personal accident insurance

A type of insurance which provides for the payment of specified sums in the event that the insured suffers some bodily injury as a result of an accident.

Personal lines insurance

Insurance which is sold to individual consumers such as buildings, contents and travel insurance. This term is used in contrast to commercial lines.

Personal reserve fund

A reserve of cash or investments held on behalf of a member and comprising part of his funds at Lloyd’s. The reserve, which is held within the premiums trust fund of the member, may be built up by setting aside a proportion of past profits or by the setting aside of funds from other sources. It is separate from any special reserve fund the member may have.

Placement (of cover)

Where a broker effects an insurance or reinsurance contract with underwriters on behalf of its client.

Placing broker

This term may refer to an individual broker or a broking firm that places cover directly with one or more underwriters. Compare producing broker.

Placing slip

See slip.

Policy

The wording of a contract of insurance or reinsurance.

Policy holder

The person who is insured under a contract of insurance.

Policy limit

Another term for limit of indemnity. It refers to the maximum amount payable under a policy of insurance or reinsurance, either overall or with reference to a particular section of the policy.

Pre-emption

Where a managing agent increases the underwriting capacity of a syndicate, for example when it expects to write more business in future. The participations of the members of the syndicate are increased proportionately to the extent the managing agent’s pre-emption offer is taken up.

Premium

The amount charged by an insurer or reinsurer as the price of granting insurance or reinsurance cover, as stated before or after the subtraction of brokerage and other deductions.

Premiums trust fund (PTF)

The premiums and other monies that members receive in respect of their underwriting at Lloyd’s are held by their managing agents in trust for them subject to the discharge of their underwriting liabilities. The premiums trust funds comprise a sterling fund, Lloyd’s American Trust Fund, Lloyd's Dollar Trust Funds, Lloyd's Canadian Trust Fund and the Lloyd’s Asia Trust Fund. These premiums trust funds are available to fund overseas regulatory deposits, claims, return premiums, underwriting expenses and (once a year of account has been closed) any profit that is payable to the member.

Prior years

Earlier years. This term usually refers to earlier years of account which have been closed into another year of account by reinsurance to close.

Pro rata cancellation

When an insurance contract is terminated mid-term by an insurer, the return premium will usually be calculated on a pro rata basis. For example this means that if a 12 month contract is cancelled 4 months before its expected expiry date then the insured would receive back 4/12 of its premium.

Producing broker

This term may refer to (a) the individual broker who obtains a proposal for insurance or reinsurance for the broking firm for which he works; or (b) a broking firm or individual broker that is responsible for introducing a proposal for insurance or reinsurance to another broking firm. The original producing broker will be the person who deals directly with the client. The term producing broker is often used in contrast to the term of placing broker although it is common for individual brokers and broking firms to undertake both functions.

Profit commission

A commission that is payable according to a pre-determined formula as an incentive and reward for profitable underwriting. The following are examples of profit commission: (a) the commission paid to a coverholder by a managing agent for underwriting a profitable account; (b) the commission paid by a Member to a managing agent in respect of the profitability of its syndicate in a given year of account; and (c) the commission paid by a reinsurer to an insurer in respect of a profitable reinsurance treaty.

Proportional Reinsurance

A type of reinsurance in which the reinsurer shares similar proportions of the premiums earned and the claims incurred by the reassured plus certain associated expenses. Compare non-proportional reinsurance. Quota share treaties and surplus line treaties are examples of proportional reinsurance.

Proposal form

A standard form which is prepared by an insurer and which contains a number of questions which a person seeking insurance is required to answer for the purpose of enabling the insurer to decide whether or not it is willing to grant cover and, if so, the terms on such cover. See duty of disclosure.