Insurance Glossary
Comprehensive definitions of insurance terms, concepts, and technology - from FNOL to bordereaux to claims leakage. Written for insurance professionals who need to understand both the concept and how modern technology applies.
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Bordereaux
Detailed periodic reports that MGAs and coverholders provide to carrier partners, listing all policies written or claims processed.
Binding Authority
A delegated underwriting authority allowing an MGA or coverholder to bind coverage on behalf of an insurer within agreed parameters.
Basis Risk
The gap between what a parametric index trigger pays and the actual loss suffered by the insured, the primary limitation of parametric insurance.
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Claims Leakage
Avoidable claims payments that occur due to process failures, errors, or fraud - typically 5-10% of total claims spend.
Claims Triage
The process of prioritizing and routing incoming claims to the appropriate adjuster, team, or workflow based on severity and complexity.
Compliance Audit Trail
An immutable, timestamped record of all actions, changes, and decisions designed to meet regulatory requirements and support audits.
Consumer Duty (FCA)
The UK Financial Conduct Authority's regulatory framework requiring firms to act to deliver good outcomes for retail customers.
Captive Insurance
A self-insurance vehicle wholly owned by the insured entity, used to fund predictable losses and retain risk internally.
Cedant
The primary insurer or reinsurer that transfers risk to a reinsurer or retrocessionaire through a reinsurance arrangement.
Claims-Made Policy
A policy that covers claims reported during the policy period, regardless of when the insured event occurred.
Captive Fronting
An arrangement where an admitted insurer issues a policy on behalf of a captive, satisfying state licensing requirements while the captive bears the risk.
Coverholder
A company authorized by Lloyd's or another insurer to enter into insurance contracts on their behalf, within delegated authority limits.
Claims Reserving
The actuarial process of estimating total liabilities for reported but unsettled claims (RBNS) and unreported claims (IBNR).
Combined Ratio
Loss ratio plus expense ratio. A combined ratio below 100% indicates underwriting profitability; above 100% means claims and expenses exceed premiums.
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Delegated Authority
Authority granted by an insurance carrier to an MGA or coverholder to underwrite policies and/or settle claims on the carrier's behalf.
Document Orchestration
The automated coordination of document classification, extraction, validation, routing, and workflow triggering across insurance operations.
Digital FNOL
First Notice of Loss submitted through digital channels — mobile apps, web portals, SMS, or AI chatbots — eliminating manual phone-based intake.
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First Notice of Loss (FNOL)
The initial report made by a policyholder or claimant when a loss event occurs, marking the formal start of the claims process.
Facultative Reinsurance
Reinsurance placed on individual risks submitted to the reinsurer for acceptance or rejection on a case-by-case basis.
Follow the Fortunes
A reinsurance principle requiring reinsurers to pay claims in the same manner as the cedant settled them, provided the cedant acted in good faith.
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Indemnity Period
The time period during which an insurance policy provides coverage for losses, or the duration over which business interruption losses are calculated.
Intelligent Document Processing (IDP)
AI-powered technology that automatically classifies, extracts, validates, and routes information from unstructured documents.
IBNR (Incurred But Not Reported)
Estimated liability for losses that have already occurred but have not yet been formally reported to the insurer.
Index Trigger
The parametric measurement — such as a weather station reading or satellite index — that must be met or exceeded to trigger a parametric insurance payout.
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Loss Adjustment Expenses (LAE)
The costs incurred by an insurer when investigating and settling a claim, separate from the actual claim payment amount.
Loss Reserve
Funds set aside by an insurer to pay for future claims that have been reported but not yet fully settled.
Loss Ratio
Incurred losses divided by earned premiums, expressed as a percentage — the primary measure of claims cost efficiency for insurers.
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Policy Administration System (PAS)
Core insurance software that manages the policy lifecycle - quoting, underwriting, rating, issuance, endorsements, and renewals.
Placing Broker
A specialist reinsurance or London Market broker who presents risks to underwriters and manages the placement process on behalf of cedants.
Parametric Insurance
Insurance that pays a predetermined amount when a measurable trigger (rainfall, earthquake magnitude, wind speed) is met, regardless of actual loss amount.
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Reinsurance
Insurance purchased by an insurance company from another insurer to reduce its exposure to large losses or catastrophic events.
Retrocession
The reinsurance of a reinsurer — when a reinsurer cedes part of the risk it has assumed to another reinsurer.
Run-Off
The management and settlement of existing insurance liabilities from business lines no longer actively underwritten.
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SLA in Claims Processing
Service Level Agreements defining target timeframes and quality standards for each stage of claims handling, from FNOL to settlement.
Straight-Through Processing (STP)
Automated claims processing from intake to payment without manual intervention, typically for low-complexity, high-frequency claims.
Subrogation
The legal right of an insurer to pursue a third party that caused an insurance loss, recovering the amount paid to the insured.
Surplus Lines Insurance
Insurance coverage placed with non-admitted carriers when standard admitted carriers cannot or will not provide coverage.
Slip Policy (London Market)
The contractual document in the London Market recording agreed insurance terms, signed by the leading underwriter and followed by other participants.
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Takaful Insurance
Islamic insurance based on cooperative principles and mutual assistance, structured to comply with Sharia law.
Third Party Administrator (TPA)
An organization that processes insurance claims and performs administrative services on behalf of insurers or self-insured employers.
Treaty Reinsurance
A standing reinsurance agreement covering all risks within a defined class of business automatically, without individual submission.
Telematics
Technology that collects driving behavior data — speed, braking, mileage, location — from vehicles to enable usage-based insurance pricing.
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