PRISM Glossary and Terms
As defined by the Casualty Actuarial Society.
Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.
Value of property at the time of its loss or damage, determined by subtracting depreciation of the item from its replacement cost.
A report on the loss experience and risk exposure of an organization based on a certain period of time, which utilizes statistical analysis in order to make future projections. These projections can include estimating future losses, developing loss rates for the coming year, determining ultimate outstanding liability, as well as others. These reports are used to make decisions regarding financial planning, valuation, pricing and risk management for an organization.
An annual actuarial subsidy of up to $2,000 helps offset the cost of actuarial studies for members in the following programs: Excess Workers’ Compensation, General Liability 1 & 2, and Medical Malpractice Program 1. Reduced rates for the actuarial services are provided through the contract with Bickmore Actuarial.
An endorsement to the MOC that extends coverage to a third party whereby the member has agreed to indemnify the third party in a contract.
A public entity that is indirectly participating in a PRISM major program as an additional named covered party named on another PRISM member's Memorandum of Coverage.
Reinsurance provided by a reinsurer licensed or authorized in the jurisdiction in question. A company is admitted when it has been licensed and accepted by appropriate insurance governmental authorities of a state or country.
A public entity who is participating in a PRISM Miscellaneous or Ancillary Program. Affiliate members do not need to sign the PRISM JPA Agreement, but do sign a premium purchasing agreement.
The term used to describe the cumulative amount of all losses for a period of time.
A form of excess of loss reinsurance that indemnifies the reinsured against the amount by which the reinsured's losses incurred (net after specific reinsurance recoveries) during a specific period (usually 12 months) exceed either an agreed upon amount or an agreed upon percentage of some other business measure, such as aggregate net premiums over the same period or average insurance in force for the same period. This form of reinsurance also is known as STOP LOSS REINSURANCE, STOP LOSS RATIO REINSURANCE, or EXCESS OF LOSS RATIO REINSURANCE.
A financial arrangement with the JPA's excess carrier that caps the aggregate to a predetermined limit at which point the excess carrier would begin to reimburse for losses within the JPA's self-insured retention or pooled layer.
A financial arrangement with the JPA's carrier on the primary layer that caps the pool layer to a predetermined limit at which point the primary layer carrier would drop down and reimburse the Program for losses within the JPA's SIR or pooled layer.
The national membership association of public entity pools. Formed for educational, information gathering and advocacy purposes, to unite the pooling community to achieve excellence in pooling management, operations and services.
As defined by the American Institute for CPCU and Insurance Institute of America.
As defined by the American Institute for CPCU and Insurance Institute for America.
An insurer or reinsurer domiciled outside the U.S. but conducting an insurance or reinsurance business within the U.S.
Insurance that covers all property losses except for those specifically excluded.
The process of incrementally charging the cost of an asset to expense over its expected period of use.
Minor Programs that fall under Employee Benefits, including: Vision, Employee Assistance Program (EAP), Life and Disability Program, Retiree Individual Medicare Eligible Program (RIME), Personal Lines Insurance Program (PLIP).
A professional evaluation of the current market value of a property or building.
A clause within a reinsurance agreement providing that if the ceding company and the reinsurer fail to agree, then they select neutral arbitrators with the authority to bind both parties to a solution. Resolving differences without litigation.
As defined by the American Institute for CPCU and Insurance Institute for America. A professional designation awarded by the Insurance Institute of America (IIA) upon successful completion of four national exams. An ARe will gain an in-depth understanding of the reinsurance business as well as a familiarity with primary insurance company exposures, coverages, and operations.
As defined by the American Institute for Chartered Property and Casualty Underwriters (CPCU) and Insurance Institute of America. One of the premier insurance designations of the property-casualty insurance industry. This insurance designation is held by distinguished employees of the insurance industry including risk managers, risk officers, risk advisers, insurance agents, brokers, and underwriters.
As defined by the American Institute for CPCU and Insurance Institute of America.
As defined by the Insurance Educational Association.
An additional amount charged a member if it is determined that the initial contribution paid is not adequate to fund the losses incurred.
A captive insurance company established by members of an association to underwrite their own collective risks. An association captive usually only insures members of the sponsoring association.
The transfer of in-force insurance liability by an insurer to a reinsurer (or vice versa) by the payment of the unearned premium reserve on those policies alone, or by the concurrent transfer of liability for outstanding losses under those policies by the payment of the outstanding loss reserve by the insurer to the reinsurer (or vice versa). The former is a premium portfolio, the latter a loss portfolio.
The dollar amount of a loss where the next layer of insurance begins to pay for the loss.
Designed to afford bodily injury and property damage liability coverage associated with owned, non-owned and hired vehicles. May include medical payments, uninsured/under-insured motorists’ liability coverages.
Usually a first party coverage; however, some entities have Bailment or care, custody and control liability exposures such as garages, maintenance facilities that service vehicles of others, and parking lots.
Budgeted revenues are equal to or exceed budgeted expenses.
A fixed income instrument that represents a loan made by an investor to a borrower.
A report providing premium or loss data with respect to identified specific risks, which is furnished to the reinsurer by the reinsured. This report typically includes the insured's name, premium basis, premium and the amount of coverage.
A formal statement of estimated income and expenses based on future plans and objectives.
The premium needed to cover losses based on historical experience for a proposed reinsurance agreement.
When a participating entity purchases additional coverage for a specific operation or exposure in a program. This is handled via an endorsement to the Memorandum of Coverage (MOC).
A premium baring endorsement issued to a member to extend coverage to an operation(s) that was otherwise excluded by the Memorandum of Coverage (MOC). Types of buybacks may include but are not limited to Dam coverage, Transit coverage, Charter School coverage, Hang gliding coverage, Racing coverage, Lead coverage, Subsidence coverage, Contamination coverage, Prior acts (nose) coverage, 4850 differential coverage.
Association of insurance and risk management pools in California. CAJPA performs regulatory and legislative lobbying as well as accreditation of JPA's to promote financial stability and best management practices.
The maximum limit an insurer or reinsurer will make available, per policy, based on its current underwriting standards. It is a reflection of its surplus condition, its reinsurance or retrocession treaties, and also an expression of not just how much it has available, but how it wants to allocate its risk financing strength across various classes of business, coverage lines, or individual risks.
Regulated insurance company formed to insure the risks of its parent or related entities.
Capital assets include furniture, equipment, and software, tenant improvements, building, with an individual cost of $5,000 or more.
An insurance company that is wholly owned and controlled by its insureds; its primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting and investment profits.
A form of reinsurance that provides coverage for losses resulting from a catastrophic event such as conflagration, earthquake or windstorm. Catastrophe loss generally refers to the total loss of an insurance company arising out of a single catastrophic event. These losses typically must exceed a specified amount and number of insurers and locations.
Co-sponsored by The International Foundation of Employee Benefit Plans (IFEBP) and the Wharton School of the University of Pennsylvania).
When a company transfers risk to another company.
Premiums paid to an insurance company and claims costs that are transferred to another entity in connection with a reinsurance arrangement.
An amount paid by a reinsurer to the ceding company to cover the ceding company's acquisition and other expenses. The cedent's acquisition costs and overhead expenses, taxes, licenses and fees, plus a fee representing a share of expected profits sometimes expressed as a percentage of the gross reinsurance premium.
The original or primary insurer; the insurance company that transfers its risk to a reinsurer.
An entity participating indirectly in a program where the parent manages and administers their participation.
Certified by the American Board of Industrial Hygiene.
Organized to develop, analyze and disseminate information on risk management in California's public sector, especially self insured entities and Joint Powers Authorities.
Internet-based claim system utilized by PRISM, formally known as SIMS.
Method of determining whether or not coverage is available for a specific claim. A claims-made policy states that a claim must be made during the policy period or the extended reporting period, if applicable.
The provision in a contract of insurance or reinsurance that coverage applies only to losses that occur and claims that are made during the term of the contract. (Losses occurring before the contract term are sometimes covered by the addition of "prior acts" coverage to the contract. Losses reported after the contract term are sometimes covered by the addition of "tail" coverage.) Once the policy period is over in claims made coverage, the approximate extent of the underwriter's liability is known. On the other hand, the traditional "occurrence" liability insurance method provides coverage for losses from claims that occurred during the policy period, regardless of when the claims are assessed. With the traditional "occurrence" liability coverage method, the underwriter may not discover the extent of liability for years to come from losses asserted to have occurred within the policy period. With claims made coverages that are renewed, however, losses that occurred during any period when the policy was in force are again covered if reported during the renewal term. In summary, the traditional method is similar to claims made if the latter has added to it both "prior acts" and "tail" coverage.
Reinsurance that is not exposed on a policy limit basis, (i.e., the deductible on the treaty is equal to or exceeds the reinsured's maximum net exposure on any one policy). Therefore, such treaties protect against the infrequent loss involving two or more insured's in the same loss occurrence. Stated another way, it is a casualty excess of loss agreement with a retention higher than the limits on any one reinsured policy. The agreement is thus only exposed to loss when two or more casualty policies (perhaps from different lines of business) are involved in a common occurrence in an amount greater that the clash cover retention. (See also "Contingency Cover").
Defined by Chartered Life Underwriter Institute.
A clause in a reinsurance agreement, which provides for estimation, payment and complete discharge of all future obligations for reinsurance losses incurred regardless of the continuing nature of certain losses.
The confidence level is a percentage estimate of the ultimate pool layer costs. The actuary's expected costs are shown at slightly more than average (approximately 55%). About half the time, the actual costs will be lower than the actuary's estimates and half the time the actual costs will be higher. To be more conservative, pools set aside additional sums of money to increase the chance that enough funds are available to pay claims. For example, if the actuary's estimate at the 70% confidence level is $1M, then there is a 30% chance that losses will exceed $1M.
Reinsurance protection against an unusual combination of losses. (See also "Clash Cover").
A payment to the ceding company in addition to the normal ceding commission allowance. It is a fixed percentage of the reinsurer's net profits after a charge for the reinsurer's overhead, derived from the subject treaty.
Where there is more than one reinsurer sharing a line of insurance on a risk in excess of a specified retention, each reinsurer contributes towards any excess loss in proportion to his original participation in such risk.
The amount paid by a PRISM member to receive a specified type of insurance coverage for a defined period of time.
In the GL2 Program, the portion of a loss that is allocated to, or paid by, the member funded pool. Exposure to assessment is mitigated by an aggregate stop loss policy. Loss costs exceeding the retained amount are paid by the reinsurance carrier.
An aggregated pool layer above which a carrier will reimburse the Program for losses that exceed the aggregate attachment point on a per claim basis.
A County that has signed and executed the PRISM JPA agreement who is participating in a PRISM program.
An information summary of coverage data per participant. (Formerly known as Policy Data Sheet information).
The start date of an entity's participation within a particular program as specified on the Memorandum of Coverage.
The last date of an entity's participation within a particular program as specified on the Memorandum of Coverage.
As defined by the American Institute for CPCU and Insurance Institute of America.
As defined by The National Alliance for Insurance Education Research.
The primary purpose of CSAC is to represent county government before the California Legislature, administrative agencies and the federal government. CSAC places a strong emphasis on educating the public about the value and need for county programs and services
A public agency who is a member of the California State Association of Counties.
California State Association of Counties Excess Insurance Authority, now known as PRISM, is a Joint Powers Authority initially formed by CSAC to administer and manage the pooled coverage programs for the Members of CSAC. CSAC and CSAC EIA are separate legal entities and not affiliated.
As defined by the Board of Certified Safety Professionals.
Cumis refers to a lawsuit against the Cumis Insurance Society in which they were found to have controlled the defense attorney to the detriment of their insured. The court determined that the Society should have assigned separate counsel to represent the exclusive interests of the insured. The need for cumis counsel arises in situations where there are significant coverage issues and defense counsel is conflicted between his duty to his client and the obligations to the insurance carrier.
A copy of transaction data stored on a server specifically structured for query and reporting.
Amount of a loss that is the member's responsibility. The Program will pay the loss costs and invoice or charge the member after for the deductible amount. Currently, the carrier on the Primary Layer is responsible for costs associated with claims adjusting. Those costs are not considered towards satisfaction of the member's deductible.
PRISM's Deductible Buy Down option in the General Liability 1 Program for members to buy down their higher Self-Insured Retention to a lower deductible.
A defendant's denial to a complaint or cause of action.
A type of ANCP participating in a PRISM program.
Amount of premium paid at the beginning of the coverage period, which is then adjusted to a final premium amount at the end of the coverage period. This is most common in workers' compensation, where premiums are based on estimated payroll amounts at inception and adjusted based on actual payroll amounts afterwards.
A specialized property insurance policy written to provide coverage for perils not covered in a standard property policy or in the JPA's Memorandum of Property Coverage. In particular, it is most often used to provide coverage for earthquake and/or flood losses.
Intended to protect nonprofit board members, officers, and directors for faulty decisions, which imperil the entity. Usually written to include entity reimbursement for legal actions and personal liability of specific wrongdoers.
The assumed interest rate used to calculate the present value of future claim liabilities. Also used in calculating premium needed to fund claim payments.
The first date on which an insured event occurred.
An insurer conducting business in its domiciliary state from which it received its charter to write insurance. (As opposed to a foreign company, an insurer conducting business in a state other than its domiciliary state; or an alien company, one domiciled outside the U.S. but conducting business within the U.S.)
PRISM's Captive, Excess Insurance Organization is a pure captive; it is 100% owned by PRISM and will only take on the risk of its parent organization.
Employee Benefits
Included as part of a worker's compensation insurance policy. Covers liability for losses arising out of injuries to employees that are not covered by statutory workers' compensation benefits.
Written to protect an entity from liabilities arising from allegations of discrimination, failure to promote or hire, harassment, ADA responsibilities, wrongful termination, etc.
PRISM's pool of highly-experienced individuals with backgrounds in Risk Management, Finance, Human Resources, Loss Prevention, IT, and Risk Control.
Proprietary fund type used to report an activity for which a fee is charged to external users for goods or services.
Any State or local government department, agency, special purpose district or instrumentality of a State or local government.
Also referred to as "Pollution" and "Pollution Legal" Liability; can be written to protect an entity from actions resulting from contamination of air, water, and property. First party (damage to owned property) and third party (liability for damage to others) protection can often be combined.
Damages, other than bodily injury or property damage, caused by protection for the misfeasance, malfeasance or nonfeasance of public officials, employees and volunteers. May also include incidental medical personnel (paramedics), police and fire personnel, architects and plan checkers, engineers, and on staff attorneys.
A provision in insurance agreements which is intended to neutralize any change in liability or benefits as a result of an inadvertent error by either party. To the extent possible the parties are placed in the position they would have been if the error had not occurred.
PRISM's Excess Workers' Compensation Program.
A payment made for which the company is not liable under the terms of its policy. Usually made in lieu of incurring greater legal expenses in defending a claim.
A generic term describing reinsurance which, subject to a specified limit, indemnifies the ceding company against all or a portion of the amount in excess of a specified retention. The term includes various types of reinsurance, such as catastrophe reinsurance, per risk reinsurance, per occurrence reinsurance, and aggregate excess of loss reinsurance. It should never be confused with "surplus share", which always refers to a pro rata form of reinsurance. Also known as NON-PROPORTIONAL REINSURANCE.
Insurance that is purchased to provide higher limits than the primary policy provides.
The portion of a loss that is allocated to, or paid by, excess insurance.
Insurance coverage which does not provide for payment to the insured until underlying insurance coverage has paid its limits or the insured has paid its self-insured retention.
Joint purchase insurance purchased to provide higher limits than the primary policy or pool layer provides. Policy terms may differ and policy covers the member not the pool.
The percentage of premium used to pay all the costs of acquiring, writing and servicing insurance and reinsurance.
The loss record of an insured or of a class of coverage. Classified statistics of events connected with insurance, of outgo, or of income, actual or estimated. What figures show to have happened in the past.
When used in reinsurance agreements, refers to damages awarded by a court against an insurer which go beyond the coverages of the insurance policy, typically due to the insurer's bad faith, fraud, or gross negligence in the handling of a claim.
The reinsurance of part or all of (the insurance provided by) a single policy, with separate negotiation for each cession. The word "facultative" connotes that both the primary insurer and the reinsurer have the faculty or option of accepting or rejecting the individual submission (as distinguished from the obligation to cede and accept, to which the parties agree in treaty reinsurance).
A reinsurance contract that describes how individual facultative reinsurances shall be handled.
An independent, private-sector, not-for-profit organization based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP).
As defined by the Casualty Actuarial Society.
Written as financial guarantees of employees' honesty. Personnel with money handling responsibilities are considered exposures to loss.
Covers board members, executives and other decision making personnel with responsibilities for pension funds, retirement plans and employee benefit monies for negligent decisions that result in losses to such funds.
A form of reinsurance which considers the time value of money and has loss containment provisions, and is transacted primarily to achieve financial goals, such as capital management, tax planning, or the financing of acquisitions.
Insurance coverage that begins with the first dollar of a covered loss. The insured does not have a deductible or self-insured retention to meet before coverage begins as long as the loss is for a covered peril.
A percentage rate applied to a ceding company's premium writings for the classes of business reinsured to determine the reinsurance premiums to be paid the reinsurer.
The clause stipulating that once a risk has been ceded by the reinsured, the reinsurer is bound by the same fate thereon as experienced by the ceding company.
A U.S. reinsurer conducting business in a state other than its domiciliary state, where it is known as a domestic company (as opposed to a alien reinsurer: one domiciled outside the U.S. but conducting business within the U.S.).
Most commonly refers to the practice of a non-admitted insurer (or an insured with a captive insurance company) contracting with a licensed insurer to issue an insurance policy for regulatory or certification purposes. This fronting insurer assumes little or no loss exposure; instead, financial arrangements are made to guarantee claims administration and payments. The fronting insurer is usually paid a percent of the premium.
A term used to provide "guaranteed" replacement cost coverage, which will pay the full cost to replace damaged property regardless of the "limit" carried. Applies to buildings and personal property.
A source of money that is allocated for a specific purpose.
Refers to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB).
The Governmental Accounting Standards Board (GASB) is the independent, private-sector organization based in Norwalk, Connecticut, that establishes accounting and financial reporting standards for U.S. state and local governments that follow Generally Accepted Accounting Principles (GAAP).
Provides coverage for claims from third parties alleging damages due to negligence on the part of the member arising out of personal injury, property damage, public officials errors and omissions, employment practices liability, and automobile liability.
Provides coverage for claims from third parties alleging damages due to negligence on the part of the member arising out of personal injury, property damage, public officials errors and omissions, employment practices liability, and automobile liability.
An entity participating indirectly in a program where their parent is a child of a second entity that is participating directly in the program.
In the GL2 Program, the portion of a loss that was allocated to, or paid by, the member funded pool. Once the pool pays a predetermined amount, exposure to claims is transferred to the reinsurance carrier.
This is the ultimate expected total value of any claim. It includes the amount already paid, plus the estimated amount yet to be paid (reserves).
The percentage of losses incurred to premiums earned.
A loading to provide for increased medical costs and loss payments in the future due to inflation.
A reference guide to aid in the review of insurance related topics in contracts.
(A) "...a cooperative group of governmental entities joining together to finance an exposure, liability or risk" (GFOA); (B) "An organization of public entities joined together to provide alternative risk financing/transfer mechanisms to themselves and other public entities through which particular types of risk are underwritten with contributions (premiums), losses and expenses shared in agreed rations. Intergovernmental Risk Pool includes, but is not limited to pools, authorities, joint power authorities, associations, agencies and trusts" (AGRiP Bylaws). (C). "A pool is a separate and distinct legal entity composed of public entity members that have joined together to finance an exposure, liability or risk" (AGRiP Public Entity Risk and Benefits Pool Taxonomy).
A reinsurance broker who negotiates contracts of reinsurance on behalf of the reinsured, receiving a commission for placement and other services rendered.
A provision in reinsurance agreements, which identifies the intermediary negotiating the agreement. Most intermediary clauses shift all credit risk to reinsurers by providing that the cedent's payments to the intermediary are deemed payments to the reinsurer; and the reinsurer's payments to the intermediary are not payments to the cedent until actually received by the cedent.
The United States Constitution and state Constitutions require that a private citizen be compensated if property is "taken" by a public entity. When the property is taken proactively it is called eminent domain. When the property is taken "accidentally", without due course, it is called inverse condemnation. Negligence need not be proven. The claimant's legal expenses are payable in addition to actual damages.
The difference between what PRISM is currently earning and what was actuarially projected would be earned on funds when premium was calculated, that is the difference between actual earnings rate and discount rate.
Joint Powers Authority is an entity permitted under Law whereby two or more public authorities may jointly exercise any power common to all (in this case, the power to arrange insurance to cover their exposures).
A mathematical concept which postulates that the more times an event is repeated (in insurance, the larger the number of homogeneous exposure units), the more predictable the outcome becomes. In a classic example, the more times one flips a coin, the more likely that the results will be 50% heads, 50% tails.
A horizontal segment of the liability insured.
The reinsurer who negotiates the terms, conditions, and premium rates and first signs on to the slip; reinsurers who subsequently sign on to the slip under those terms and conditions are considered following reinsurers.
A financial guaranty issued by a bank that permits the party to which it is issued to draw funds from the bank in the event of a valid unpaid claim against the other party.
The most that will be paid in a loss.
A term used to describe certain types of third party liability exposures (e.g., malpractice, products, errors and omissions) where the incidence of loss and the determination of damages are frequently subject to delays that extend beyond the term the insurance or reinsurance was in force. An example would be contamination of a food product that occurs when the material is packed but which is not discovered until the product is consumed months or years later.
The process of change in amount of losses as a policy or accident year matures, as measured by the difference between paid losses and estimated outstanding losses at one point in time, and paid losses and estimated outstanding losses at some previous point in time. In common usage it might refer to development on reported cases only, whereas a broader definition also would take into account the IBNR claims.
The total losses to the ceding company or to a reinsurer resulting from a single cause.
The transfer of incurred losses to a third party. The assuming party hopes to profit by investing the sale price it has received over the length of time it requires to settle the claims it has assumed. A financial reinsurance transaction in which loss obligations that are already incurred and will ultimately be paid are ceded to a reinsurer. In determining the premium paid to the reinsurer, the time value of money is considered, and the premium is therefore less than the ultimate amount expected to be paid.
Proportionate relationship of incurred losses to earned premiums expressed as a percentage.
The costs associated with settlement of a specific claim, other than the claim payment itself i.e., legal fees, appraisal fees and court costs.
The process of change in amount of losses as a policy or accident year matures, as measured by the difference between paid losses and estimated outstanding losses at one point in time, and paid losses and estimated outstanding losses at some previous point in time. In common usage, it might refer to development on reported cases only, whereas a broader definition also would take into account the IBNR claims.
As defined by the American Academy of Actuaries.
A PRISM program with a pooled/shared risk element, where entities have agreed to pool their costs together to share the risks of providing compensation for specified losses. With the benefit of economies of scale, these programs in turn transfer these risks to companies in the global reinsurance market.
Health, Dental
GL1, GL2, EWC, PWC, Property, MedMal, MROCIP
A licensed individual, partnership or corporation holding specific contractual authority to perform supervisory underwriting and/or managerial functions on behalf of insurers in a designated geographical area and whose principal source of premium volume derives from retail sub-producers not owned by the managing general agent.
A County or Public Entity participating in the PRISM JPA.
The start date of the Entity's Premium Purchase Agreement.
The start date that an Entity executes a new JPA agreement after previously withdrawing from PRISM.
The start date of the Entity's JPA agreement.
The date the Entity's JPA agreement is withdrawn.
A group purchase program where public entities jointly purchase coverage at a reduced rate and do not pool funds to retain risk among the membership.
Minor Programs that fall under Property and Casualty, including; Aircraft (CAMP), Airport (CALIP), Master Crime (Crime), CyberLiability (Cyber), Optional Excess Liability (OEL), Pollution Liability, Watercraft, Aviation, Catastrophic Inmate Medical Insurance (CIMI), Master Course of Construction(COC), Fiduciary Liability Insurance Program (FLIP), Special Liability Insurance Program (SLIP), Special Property Insurance Program (SPIP), Special Events Program (Special), Vendor/Contractors Program (VenContract), Master Rolling Owner’s Protective Professional Indemnity (MROPPI), Equipment Maintenance Management Program (EMMP).
Memorandum of Coverage is issued by PRISM to each participating entity within a program, for each coverage period within the Program's life. The MOC specifies what is covered in regards to the Entity's participation, for the duration of the memorandum period.
Memorandum of Understanding is the overarching agreement entered into by and between PRISM and participating Members to define the operation of a Program. There is one MOU for each major program that remains for the life of the program, amended from time to time.
PRISM's Master Rolling Owner Controlled Insurance Program.
Assets plus Deferred Outflow of Resources less Liabilities and Deferred Inflow of Resources. Net Position represents investment in capital assets as well as unrestricted fund balance available for future operations or distribution.
The National Flood Insurance Program is administered by the Federal Emergency Management Agency in the Department of Homeland Security.
Insurance companies not licensed in a state may engage in business in the state if an admitted, properly filed company issues the policy and reinsures losses to the non-admitted reinsurer.
Reinsurance is non-admitted when placed in a non-admitted company and therefore may not be treated as an asset against reinsured losses or unearned premium reserves for insurance company accounting and statement purposes.
A provision of an insurance policy that requires it to pay for a claim caused during the policy period regardless of when it is presented. With regard to limits on occurrences, property catastrophe reinsurance agreements frequently define adverse events having a common cause and sometimes within a specified time frame. (See also "Claims Made Basis").
Method of determining whether or not coverage is available for a specific claim. An occurrence basis policy covers events that occur while the policy is in force, regardless of when a claim is actually made.
The claims administrator's estimate of the ultimate expected value of each claim. As monies are paid out for a claim, the outstanding reserve amount is decreased.
A condition in reinsurance agreements that allows each party to net amounts due against those payable before making payment.
The arithmetic sum of two ratios: incurred loss to earned premium, and incurred expense to written premium. Considered the best simple index to current underwriting performance of an insurer.
An entity participating directly in a Program, and responsible for managing and administering the participation of multiple additional entities.
A statewide association in California for risk managers in the public sector.
Includes Quota Share, First Surplus, Second Surplus, and all other sharing forms of reinsurance where under the reinsurer participates pro rata in all losses and in all premiums.
Participation in a program can be either direct or indirect.
A process at the end of each fiscal year during which actual payroll is collected and Workers' Compensation deposit premiums are adjusted accordingly.
As defined by the National Society of Professional Engineers.
Retention and amount of reinsurance apply "per risk" rather than on a per accident or event or aggregate basis.
A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.
The party who complains or sues in a personal action. A claimant becomes a plaintiff by filing suit.
Historical coverage data from Connections/CHSI system. Refer to Coverage Data.
The year commencing with the effective date of the policy or with an anniversary of that date.
A joint underwriting operation of insurance or reinsurance in which the participants assume a fixed interest in all business written.
The insurance coverage within a pooled program that is retained by PRISM. Losses within this layer are paid by the Program.
The portion of a loss that is allocated to, or paid by, the self-insured pool. For example, the General Liability Program I pools, or self-insures the difference between a member's SIR and $5M of each occurrence. Loss costs exceeding this amount are paid by excess insurance.
Off-Permitting premium losses in respect of in-force business to run to their normal expiration upon termination of a reinsurance treaty.
In transactions of reinsurance, it refers to all the risks of the reinsurance transaction.
The amount paid by a PRISM member to receive a specified type of insurance coverage for a defined period of time. See also Contribution.
Written premium is premium registered to an insurer or reinsurer at the time a policy is issued. Premium for a future exposure period is said to be unearned premium for an individual policy. Written Premium minus unearned premium equals earned premium.
The method of spreading the cost of what PRISM needs to collect to pay claims within the pool, to pay for reinsurance and excess coverage and to cover administrative expenses. Costs are determined by the programs allocation methodology policy adopted by the governing committees with the goal of allocating premium in a fair and equitable manner.
When the terms of a policy provide that the final earned premium be determined at some time after the policy itself has been written, companies may require tentative or deposit premiums at the beginning which are re-adjusted when the actual earned charge has been later determined.
The portion of the premium calculated to enable the insurer to pay losses and allocated claim expenses or the premium arrived at by dividing losses by exposure and in which no loading has been added for commission, taxes, and expenses.
A national association for risk managers in the public sector. Formed for educational and information gathering purposes.
PRISM, formerly known as CSAC EIA, is a member-directed risk sharing pool of public agencies committed to providing risk coverage programs and risk management services.
A public agency that has signed the PRISM JPA agreement.
A generic term describing all forms of reinsurance in which the reinsurer shares a proportional part of the original losses and premiums of the ceding company. Also known as PARTICIPATING REINSURANCE and PROPORTIONAL REINSURANCE.
Reinsurers that offer reinsurance to other than affiliate companies. The majority of professional reinsurers provide complete reinsurance and service at one source directly to the ceding company.
A provision found in some reinsurance agreements that provides for profit sharing. Parties agree to a formula for calculating profit, an allowance for the reinsurer's expenses, and the cedent's share of such profit after expenses.
See Coverage effective date.
See Coverage expiration date.
The date PRISM first receives notice from a participant of their intention to withdraw from a program.
The date an entity rejoins a program after withdrawing.
This covers damage to property, sometimes called first party coverage.
The expense amount for pooled claims on the Statement of Revenues, Expenses and Changes in Net Assets (Income Statement).
A non-county public entity that has signed and executed the PRISM JPA agreement who is participating in a PRISM program.
Damages awarded separately and in addition to compensatory damages, usually on account of malicious or wanton misconduct, to punish the wrongdoer and possibly others. Sometimes referred to as "exemplary damages" when intended to "make an example" of the wrongdoer.
Any company that insures risks of its parent and affiliated companies.
PRISM's Primary Workers' Compensation Program
A form of pro rata reinsurance (proportional) in which the reinsurance assumes an agreed upon percentage of each insurance being insured and shares all premiums and losses accordingly with the reinsured. Quota share reinsurance is usually arranged to apply to the insurer's net retained account (i.e. after deducting all other reinsurance except perhaps excess of loss catastrophe reinsurance), but practice varies. A quota share reinsurer may be asked to assume a quota share of a gross account, paying its share of premium for other reinsurance protecting that gross account.
An agreement between two insurers to split the cost of claims within a coverage layer based upon a certain formula or percentage.
Entities within a particular program with similar exposures who are grouped together for rating and underwriting purposes.
An unincorporated association; reciprocal insurance is that which results from an interchange among subscribers of reciprocal agreements of indemnity, the interchange being effectuated through an attorney in-fact common to all subscribers.
The restoration of the insurance limit of an excess treaty to its full amount after payment by the reinsurer of loss as a result of an occurrence.
When the amount of reinsurance coverage provided under a treaty is reduced by the payment of a reinsurance loss as the result of one catastrophe, the reinsurance cover is automatically reinstated usually by the payment of a reinstatement premium.
An additional premium paid to replenish the limit consumed in the event of a loss.
Insurance purchased by PRISM from other insurers to reimburse the pool for covered losses. Losses revert to PRISM if the reinsurer is unable to meet its obligations. Reinsurance provides coverage to the pool, and is identical to what the pool covers.
An insurance company that accepts the risk transferred from another insurance company in a reinsurance transaction.
Rent-a-Captives offer the benefits of a captive insurance company without the capitalization requirements, administrative costs and legal ramifications associated with establishing and operating an insurance subsidiary, and can return underwriting profits and investment income to a participant.
The cost to replace damaged property with like kind and quality, with no deduction for depreciation, but still subject to a "limit".
The estimate of the total cost of a claim. Reserves may be estimated by category, such as personal injury, property damage, or medical costs.
The portion of risk that the pool self-funds.
The net amount of risk which the ceding company or the reinsurer keeps for its own account.
The ceding reinsurer in a retrocession, where the assuming reinsurer is known as the retrocessionnaire.
A reinsurance of reinsurance. The transaction whereby a reinsurer cedes to another reinsurer all or part of the reinsurance it has previously assumed.
The assuming reinsurer in a retrocession, where the ceding reinsurer is known as the retrocedent.
A method of establishing a premium on large commercial accounts. One in which the final premium is based on the insured's actual loss experience during the policy term, subject to a minimum and maximum premium, with the final premium determined by a formula.
A national professional organization to promote principles of risk management and assist risk managers in their daily activities.
The net negative impact of the exercise of a vulnerability, considering both the probability and the severity of occurrence.
Those risk management techniques designed to minimize the frequency and/or severity of claims. Risk control techniques include exposure avoidance, loss prevention, loss reduction, segregation of loss exposures, and contractual transfer to shift losses to others.
Techniques for generating funds to pay for losses that risk control methods do not entirely eliminate. There are two types of risk financing techniques-retention and transfer. Retention involves paying for losses using an organization's own assets. Transfer involves covering losses using an outside intermediary for a consideration (such as a payment of a premium).
One of the specialties within the general field of management, the process of managing an organization's activities to minimize the adverse effects of accidental losses on a cost-effective basis. Risk management has two components: risk control and risk financing.
A group self-insured program or group captive insurance company formed under provisions of the Liability Risk Retention Act of 1986, by or on behalf of businesses joined to insure their liability exposures. Such a group is exempt from most state laws, rules or regulations, except for the state in which it is domiciled.
A group of entities collectively purchasing a certain type and level of insurance to protect them from claims covered by that insurance. Pooling is designed to help provide more stable rates over the long-term horizon and also helps to reduce the cost of insurance by spreading fixed administrative costs over a larger group.
A term used to denote the physical units of property at risk or the object of insurance protection and not Perils or Hazard. The word is also defined as chance of loss or uncertainty of loss.
A systematic process for collecting, storing and analyzing data so that it can be converted into actionable information, such as key performance indicators.
Those rights of the insured that, under the terms of the policy, automatically transfer to the insurer upon settlement of a loss. Salvage applies to any proceeds from the repaired, recovered, or scrapped property. Subrogation refers to the proceeds of negotiations or legal actions against negligent third parties and may apply to either property or casualty coverages.
Coverage that may be purchased to provide earthquake limits at pre-determined pricing in the event of a catastrophic earthquake event.
Practice of an individual, group of individuals, employer or organization to pay for losses rather than transfer the cost to another. The entity may self- insure all or a portion of the expected losses.
An amount per occurrence, or in the aggregate, below where excess insurance attaches, for which the insured retains the responsibility for claim handling and payment.
A ceding commission, which varies inversely with the loss ratio under the reinsurance agreement.
A binder often including more than one reinsurer.
Designed to cover sponsorship of events, such as fireworks shows, festivals, community/entity celebrations; often written to protect other policies' loss integrity. Another type of special event coverage, known as a "tenants and users" policy, can be issued for third parties who rent or use facilities. (See also "TULIP").
The facultative extension of a reinsurance treaty to embrace a risk not automatically included within its terms.
Both admitted (or licensed) insurers and surplus lines insurers who underwrite specialized or hard to place insurance. "Surplus lines" is short for excess and surplus lines and is also referred to as non-admitted.
A captive insurance company in which the minimum capital and surplus required by applicable law is provided by one or more sponsors, insures the risks of separate participants through the contract, and segregates each participant's liability through one or more protected cells.
A form of reinsurance under which premiums are paid during good years to build up a fund from which losses are recovered in bad years.
Those principles required by state law that must be followed by insurance companies in submitting their financial statements to state insurance departments. Such principles differ from generally accepted accounting principles (GAAP) in some important respects (e.g. SAP requires that expenses must be recorded immediately and cannot be deferred to track with premiums as they are earned and taken into revenue.
A form of reinsurance under which the reinsurer pays some or all of a cedent's aggregate retained losses in excess of a predetermined dollar amount or in excess of a percentage of premium.
A cedent's premiums to which the reinsurance premium rate is applied to calculate the reinsurance premium.
A sub-member is an entity participating in PRISM programs via an PRISM JPA member. Furthermore, this “type” is assigned when applicable to major program participation. Entities defined as such could be eligible to participate in PRISM’s member services and/or serve on a PRISM Committee if the JPA gives consent. Said sub-member(s) is technically an ANCP also, but for reporting and proper identification for eligibility in programs/services this type is leveraged instead and only when the parent organization is a JPA.
The excess of assets over liabilities of an insurance carrier. Surplus determines an insurer's or reinsurer's ability to write business. PRISM refers to its "surplus" as Net Equity.
See "Specialty Lines Market". Surplus lines insurers have freedom from rate and form filing, but are generally subject to other state insurance department rules. Generally accept business only after it is declined in the standard market. Coverage placed with surplus lines insurers is generally not protected by state guarantee funds.
A form of proportional reinsurance where the reinsurer assumes pro rata responsibility for only that portion of any risk, which exceeds the company's traditional retentions.
An association of individuals or organizations to pursue certain insurance objectives. For example, individual underwriters in Lloyd's of London associate in separate syndicates to write marine insurance, reinsurance life insurance, etc., entrusting the administrative details of each syndicate to a syndicate manager.
The range of net position that various governing committees decide is appropriate. Committees use an actuarially determined confidence level discounted for investment income and a variety of target ratios (such as gross premium to equity target ratio) to determine the target equity range.
One section of this act redefined income related to the insurance of US based risks as US source income instead of foreign source income. Another section made income from the insurance of related risks in foreign countries taxable in the current year. The net effect of these two changes was to eliminate most tax advantages for an offshore single parent captive.
The major change imposed by this act affected offshore group captives in that the definition of a U.S. shareholder was changed from an ownership interest of 10 percent or more to any shareholding interest.
An entity that is hired to handle the administration of claims processing.
The values shown on an insured’s schedule or appraisal for property coverage. Only those items shown on the schedule are covered for loss.
Various programs have many different insurance placements or segregation of members into types, which PRISM categorizes as "towers" to illustrate the separation or layering of the various placements.
The portion of risk, insured or reinsured, by a private insurer or reinsurer and not retained by the pool.
A standing agreement between reinsured and reinsurer for the cession and assumption of certain risks as defined in the treaty. While most treaty reinsurance provides for automatic cession and assumption, it may be optional or semi-obligatory and is not necessarily obligatory. The treaty contains provisions defining the terms of the agreement including specific risk definition, data on limits and retention, and provisions for premium payment and duration.
The necessary adjustment of historical statistics (both premium and losses) to present levels or expected future levels in order to reflect measurable changes in insurance experience over time, which are caused by dynamic economic and demographic forces, and to make the data useful for determining current and future expected cost levels.
Terrorism Risk Insurance Act of 2002, and the Terrorism Risk Insurance Program set up in the U.S. Department of Treasury to implement the Act.
A liability insurance policy available to provide coverage for special events but sponsored or organized by parties that do not own the property and who may not have insurance. Coverage protects both the sponsor and the property owner for losses that may occur during the event.
In the context of risk financing, costs that cannot be associated with specific claims, but are related to claims paid or in the process of settlement, such as salaries and other internal costs of the pool's claims department. This amount is calculated for the entire life of the claim.
The total cost of a claim. The difference between incurred loss and Ultimate Net Loss is the loss development or IBNR. The actuary may estimate that losses may develop or become larger because of inflation, changes in law etc.
That portion of the original premium that applies to the unexpired portion of risk.
Refers primarily to underground fuel tanks; used most often in reference to Underground Storage Tank Pollution Liability Program. It also includes coverage for government mandated clean.
A licensed broker providing specialized insurance products to retail insurance agents and brokers. A wholesale broker will utilize insurers who can consider accounts that the retail agent cannot place with their standard markets. These insurers underwrite specialized or hard to place insurance.
A statutory coverage designed as the "sole remedy" for workers injured in the course and scope of their duties.
The first layer above the cedent's retention wherein moderate to heavy loss activity is expected by the cedent and reinsurer.