Glossary and acronyms

Glossary of insurance related terms used by Lloyd's and market participants. The following definitions are intended for general guidance. They do not override or qualify any definition that appears in any Lloyd’s byelaw or regulation, in any contract or in any other document.

Filter glossary terms

Open market basis

See open market business.

Open market business

Insurance business that may be offered to and placed with any managing agent that is willing to underwrite it on behalf of its managed syndicate. It excludes business that is underwritten pursuant to a binding authority.

Open market correspondent

A firm that produces business to a Lloyd’s broker for placement on an open market basis. Lloyd’s requires that firms in certain overseas territories must be approved or registered by its attorney in fact or general representative before they can produce business to one or more sponsoring Lloyd’s brokers for placement on an open market basis.

Open year of account

A year of account of a syndicate which has not been closed by reinsurance to close. There are two types of open year of account; naturally open years of account and run-off accounts. Syndicates are required to keep each year of account open for a minimum of three years before it may be closed by reinsurance to close. In normal circumstances a syndicate will therefore have three naturally open years of account at any point in time: the third year of one year of account, the second year of the following year of account; and the first year of the next year of account. Thus in 2005 the 2003 year of account is in its third year, the 2004 year of account is in its second year and the 2005 year of account is in its first year. Where the liabilities attaching to a particular year of account of a syndicate (including any prior year of account closed into that year) cannot be quantified after three years then that year of account will be left open until such time as a reinsurance to close may be effected or all the liabilities attaching to that year of account are extinguished.

Order

This may refer to - (a) the communication by a broker to an underwriter of a client’s acceptance of his quotation; or (b) the amount of the sum insured that is covered by a particular slip where more than one slip is used to arrange cover.

Outwards reinsurance

The reinsurance of a syndicate or of an insurance company as distinct from inwards reinsurance.

Overall premium limit (or overall premium income limit) (OPL)

In relation to a member, the limit for the time being prescribed on the amount of insurance business which is to be underwritten on his behalf from time to time, such limit being expressed as the maximum permissible amount of his premium income allocable to any year of account.

Overriding commission

A commission that is paid by a reinsurer to the reassured to cover the latter’s overheads in administering the reinsurance.

Overwriting

Where a syndicate exceeds its allocated capacity. Depending on the scale of the problem the managing agent of the syndicate may be required to cease underwriting some or all new business and the members may be required to make available additional funds at Lloyd’s to cover the overwriting.

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.

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