Terms

1. Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. An insurer is a company selling the insurance. The insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.
2. Reinsurance is a means by which an insurance company can protect itself against the risk of losses with other insurance companies. Individuals and corporations obtain insurance policies to provide protection for various risks (hurricanes, earthquakes, lawsuits, collisions, sickness and death, etc.). Reinsurers, in turn, provide insurance to insurance companies.
3. Captive insurance companies are limited purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups, they sometimes also insure risks of the parent company's customers. A captive is a risk management technique where a large corporation can finance losses by making payments to a wholly owned subsidiary called a captive insurer who then pays the losses. If the captive only insures its single parent corporation and/or subsidiaries owned by the parent it is called a pure captive. Captives are located in many places offshore from the United States, including Bermuda, Cayman Islands, Vermont, Guernsey, Luxembourg, Barbados, and the British Virgin Islands.
4. Combined ratio = loss ratio + expense ratio. Loss ratio is calculated by dividing the amount of losses (sometimes including loss adjustment expenses) by the amount of earned premium. Expense ratio is calculated by dividing the amount of operational expenses by the amount of earned premium. A lower number indicates a better return on the amount of capital placed at risk by an insurer.
5. URIE = unincorporated reciprocal inter-insurance exchange.
6. SSA = subscriber savings account.