Dictionary

Abandon
A maritime law institution that enables the insured to cede all the rights regarding subject of insurance (ship or cargo) alongside with a request to pay full sums insured. Abandon is used especially when the ship disappears without trace or was a subject of a disaster so severe that it is not repairable. The condition tu use the abandon is that the subject of insurance is a total loss of the subject of insurance.

Act committed
A term connected to a timeframe of coverage (vide trigger). Under act committed trigger, claims that are a result of actions or omissions that took place during the period of insurance are covered. The moment of the actual damage or claim is irrelevant as long as the period of prescription has not passed.

Insurance agent
An insurance intermediary between the insurer and the policyholder. Acts solely in the interest of the insurer with who he has a binding agency contract. In Poland, agents are registered by Komisja Nadzoru Finansowego. Work of an insurance agent is regulated under insurance intermediary act of 22 of May, 2003.

Actuary
A natural person performing tasks in the area of insurance and financial mathematics and statistics for the insurer. Among key tasks of the actuary are calculation of technical reserves for accounting purposes, advising on risk acceptance policy, reinsurance adequacy and effective risk management. In Poland, actuaries are registered by Komisja Nadzoru Finansowego, their work is regulated under insurance and reinsurance act of 11 of August, 2015.

ALOP (Advanced Loss of Profits) / DSU (Delay in Start Up)
A policy that covers lost profit being a result of an insured damage under construction/erection all risks policy (CAR/EAR). In order to conduct such a policy, there is a need to insure the underlying risk under construction or erection all risks policy. Insurance gross profit, that can be lost as a result of a delay in completion of works is the subject of insurance.

Casco insurance
A voluntary insurance of motor vehicles against damage or theft. Casco policy enables to cover repair costs or indemnifies the owner of the vehicle in case of a need of replacement. Being a voluntary insurance, scope of cover under casco policy varies from insurer to insurer. Under Polish practice, change of owner of the vehicle usually terminates the policy.

General average
A term applied in art. 250 § 1 of Maritime Law Act of 18 of August, 2001. It refers to extraordinary efforts or expenses that were taken reasonably in order to save the ship, cargo and freight from a common perril) such as sacrifice of a part of the cargo. Costs of general average are commonly borne by all stakeholders of a sea journey. The calculations are made by dispatchers.

BI (Business interruption)
A financial lines policy aimed at covering profits lost as a result of an insured property damage. In order to conduct such a policy, there is a need to insure underlying risks under property all risks or named perils policy. Insurance gross profit that is generated during the maximum indemnity period is the subject of insurance and basis to calculate sums insured.

Bonus
A reduction of premium based on a fixed table. Can reflect certain qualities of the insured, such as a good claims history.

Insurance broker
An independent insurance intermediary between the insurer and the policyholder. Acts solely on behalf and in the best interest of the policyholder and is often considered as an “insurance attorney”. In Poland, insurance broker is registered by Komisja Nadzoru Finansowego. Each natural person performing insurance brokerage duties needs to pass an exam in front of the financial markets supervisor. Work of an insurance brokers is regulated under insurance intermediary act of 22 of May, 2003.

CAR (Construction all risks)
Construction all risks insurance is a technical lines product. Aimed at covering claims connected to a construction project. Consists of two main sections: property damage and liability. Most often, there is a wide array of insureds including the investor, general contractor, subcontractors, suppliers etc. In Poland it is often based on Munich Re standard wording and additional clauses.

Cargo
Property insurance aimed at covering goods in transit on insured’s risk if he is using own transport or professional carrier. Coverage starts on the start of loading and ends when the cargo is unloaded at destination, including temporary storage during transit and loading procedures connected to a change of means of transport.. Scope of cover can include theft, robbery, damage during inland, air or sea transit and is most often based on international standards created by the Institute of London Underwriters (please refer to Institute Cargo Clauses).

Claims made
A term connected to a timeframe of coverage (vide trigger). Under claims made trigger, claims that brought during the period of insurance are covered. The moment of the actual damage or action or omission that led to it is irrelevant.

Credit rating
An indicator of financial standing of an entity (enterprise, institution, government, local authority etc.) or a security. Most likely it gauges a possibility of bankruptcy. Ratings are granted by specialist agencies. In most cases, ratings are divided into low-risk “investment” and high-risk “speculative” ratings.

Cut through clause
A clause that enables the reinsurer to pay indemnity directly to the insured, bypassing the insurer.

Retrospective date
An instrument in liability insurance that sets the date from which the insurer is liable.

Abandon
A person acting on behalf of vessel operator that is to assess if there is a common average. If so, the dispatcher calculates the losses and divides them into stakeholders. In Poland, dispatchers operate on Minister of Infrastructure regulations.

EAR (Erection all risks)
Erection all risks insurance is a technical lines policy. It is aimed at covering damages connected to erection, assembly and testing of machinery. It is divided into two sections: property damage and liablility. Most often, there is a wide array of insureds including the investor, general contractor, subcontractors, suppliers etc. In Poland it is often based on Munich Re standard wording and additional clauses.

EC (Extended Cover)
A term connected with named perils property damage policies meaning coverage wider than the basic FLEXA (vide: FLEXA). Extended Cover enables to include perils such as hail, vehicle crash, flooding, avalanche, soil subsidence, water damage etc. Named perils policies are focused on definitions of covered risks.

Policy expiry
Cease of coverage after the period of insurance ends. The policy or other document (such as general terms and conditions) can specify other cases when the policy expires. Such cases might be a cancellation of contract by one of the sides, complete damage of the subject of insurance, change of ownership of subject of insurance, death of the insured in life insurance.

ICC (Institute Cargo Clauses)
Standard conditions that describe scope of cover in cargo policies. From widest to narrowest, they divide into A, B and C variants.

ERM (Enterprise Risk Management)
A holistic approach to risk within the enterprise focused on measuring total risk in the company and adjusting it to the risk appetite of the entity.

FLEXA
A basic property damage scope of cover that includes fire, lightning, explosion and aircraft crash.

Integral franchise
A minimum value of claim below which the insurer is free from indemnity. Once exceeded, the indemnity is paid in full (not reduced). Aimed to reduce administrative costs of the policy.

Deductible
A fixed sum that is deducted from every indemnity. Aimed to reduce moral hazard.

Bonding company
An entity that issues bonds based on a contract with the debtor. Most often a bank or an insurance company.

Beneficiary
An entity that is granted a bond and can receive the guarantee sum once the conditions mentioned in the document are met.

IBNR (Incurred But Not Reported)
A type of technical insurance reserve for claims that incurred but are not reported yet.

ICC A
One of three institute cargo clauses. ICC A is the widest variant, based on all risks system excluding intentional damage, faulty packaging, unseaworthiness of the vessel, war, strikes and lockouts.

ICC B
One of three institute cargo clauses. ICC B includes fire, explosion, vessel crash with a sandbank, ship sinking, pitchpoling, keel over, derailing of a train, vehicle crash, unloading, earthquake, volcanic eruption, lightning, general average, falling overside, water ingress into the vessel, container or storage facility, loss of package during loading works.

ICC C
One of three institute cargo clauses. ICC C is the narrowest version that includes fire, explosion, vessel crash with a sandbank, ship sinking, pitchpoling, keel over, derailing of a train, vehicle crash, unloading, general average or falling overside.

IHC
Please refer to ITC – International Hull Clauses

Incoterms
An array of international rules used on sale of goods. The rules divide costs and risk of certain phases of transaction between the buyer and the seller. They were first published in 1936 and they have been updated multiple times. The main groups of the rules are as follows:
Group E – the seller deliveres the goods in his location. The transportation (including loading) is organized on the risk and expense of the buyer.
Group F – the seller is obliged to deliver the goods to a given location (for example: harbour), further transport is organized on the risk and expense of the buyer.
Group C – transportation and insurance costs are covered by the seller. He is also obliged to timely load the goods.
Group D – the seller is responsible for the goods until they are delivered at the destination.


ITC-Hulls (Institiute Time Clauses – Hulls)
Institute clauses that specify casco coverage for water vessels for a given time. They are based on London practice and are applicable in most of the world. Since 2002 IHC clauses are also applicable for a wider scope of cover.

Waiting period
A limitation of cover based on time that starts at the policy inception. During the waiting period scope of cover can be limited.

Average adjuster
A person that acts on behalf of the insurer on a foreign territory based on a contract. His role is to adjust claims that occur on his territory. Apart from that, he provides information to the insured.

Komisja Nadzoru Finansowego (KNF)
An financial markets supervisior operating from 19th of September 2006. The role of KNF is to provide common supervision on capital, insurance and banking sectors. Its operations are regulated under Financial Markets Supervision Act of 21 of July, 2006. And Insurance and Pension Supervision Act of 22 of May, 2003.

Bill of lading
A proof of receipt of a given cargo into a vessel. A holder of the bill of lading can receive the cargo in the destination harbour. A bill of lading is a security, if it is lost, the goods are withheld until a hard copy is delivered.

Reduction of sums insured
An instrument under which the sums insured are reduced every time an indemnity is paid. If the sums insured drop to zero, the policy expires.

CMR Convention
International road transport convention was created on 19 of May, 1956 and remains the basic document to regulate liability of road carriers in international transport. CMR Convention was signed by 46 countries at this point – including nearly all European countries, former Soviet republics, Morocco, Tunisia, Mongolia and Iran. CMR convention is applied when the carrier is performing paid road transit, start and destination of the journey are in different countries and at least one of them signed the convention. Carrier’s country of origin is not a factor here.

Goodwill
A sum of money paid be the insurer if he is not positive whether the indemnity should be paid or not. Paying goodwill is a way to avoid legal expenses and improve corporate image. Paying goodwill is not equal to confirming liability from an insurance contract. There are two main types of goodwill:
a) Dispensive, where the insured failed to meet all obligations of the insurance contract and possibly lost the right to the indemnity but the insurer does not take it into consideration.
b) Marketing, where a sum of money is paid based on trade motives, to strengthen relationship with a given client or gain a positive image on the market.


Courtage/commission
Derived from French language, it is a remuneration of the intermediary for help with sale or purchase. In Polish practice it is a remuneration of an insurance or reinsurance broker for placing a given risk with a given insurer. Paid by the insurer as a fixed percentage of the premium.

LEG (The London Engineering Group)
An association of insurance and reinsurance professionals on London market. Its goal is to deal with current problems of technical insurance.

Loss manifestation
A term connected to a timeframe of coverage (vide trigger). Under loss manifestation trigger, claims based on damage that manifested or was discovered during the period of insurance are covered. The moment of the claim (taking prescription date into consideration) or action or omission that led to the damage it is irrelevant.

Loss occurrence
A term connected to a timeframe of coverage (vide trigger). Under loss occurrence trigger, claims based on damages that took place during the period of insurance are covered. The moment of the claim (taking prescription date into consideration) or action or omission that led to the damage it is irrelevant.

Maximum indemnity period
A period of time set in an insurance contract as a maximum do be indemnified under business interruption policy. This period is intended to start when a property damage that interrupts operations take place and last until operations and ability to generate business is restored. Usually it is set between 6 and 24 months.

Malus
An increase of premium based on a fixed table. Can reflect certain qualities of the insured, such as a bad claims history.

ICC (International Chamber of Commerce)
A NGO that represent interests of business entities against governments and international organizations. One of its key roles is to standardize international trade and act as an arbitrage organization. Created in 1919 as an association of thousands of businesses and chambers of commerce from over 130 countries. ICC created Incoterms (International Commercial Terms) – a set of rules for international trade. Polish ICC Committee was set up on 21 of March, 2000.

MLOP (Machinery Loss of Profit)
A financial lines policy aimed at covering profits lost as a result of an insured machinery breakdown. In order to conduct such a policy, there is a need to insure underlying risks under machinery breakdown policy. Insurance gross profit that is generated during the maximum indemnity period is the subject of insurance and basis to calculate sums insured.

Overinsurance
A situation where the policyholder declares sums insured greater than the value of a subject of insurance. In most cases, such a situation is irrelevant to actual coverage and indemnity. The only consequence is an inflated premium.

Conversion and refurnishing
The value of works on modifying a third party asset, for example a rented building. Can be insured.

Underinsurance
A situation where the policyholder declares sums insured lower than the value of a subject of insurance. For most policies, in case of a claim, such a situation results in a decrease of indemnity. Underinsurance should be avoided since it leads to a sub-standard cover.

Indemnity period
A period in business interruption insurance. Starts when a property damage that interrupts business occur. Ends when the business is fully restored and commercially viable. If it is longer than the maximum indemnity period indicated in the policy, the indemnity will be reduced.

P&I (Protection and Indemnity)
Vessel operator third party liability insurance. Can be purchased with commercial insurers or P&I clubs, similar to mutual insurance companies. Scope of cover can include various classes such as vessel crash, death among crew or passengers, environmental damage or freight loss.

PML (Possible Maximum Loss)
A maximum loss that can occur in a worst case scenario. Should be calculated by an underwriter based on experience on risks.

Historic vehicle
Under Polish Obligatory Insurance Act of 22 of May, 2003 it is a vehicle registered at a museum inventory that is at least 40 years old. This threshold is reduced to 25 years for rare or important vehicles that was recognized by an authorized expert.

Low speed vehicle
According to Polish Road Act of 20 of June, 1997, it is a vehicle equipped with an engine and fit for road movement which construction limits top speed to 25 km/h. Tractors, mopeds and railway vehicles are excluded from this category.

Polska Izba Ubezpieczen (PIU)
Polish Chamber Of Insurance is an obligatory association of insurers. Its goal is to represent its members against government. The Chamber is active on legislative proceedings, cooperates with a number of national and foreign NGO, prepares reports and opinions.

Polskie Biuro Ubezpieczycieli Komunikacyjnych (PBUK)
An association of insurers that offer obligatory car third party liability insurance in Poland. PBUK organizes loss adjustment of claims caused by drivers of cars registered in a Green Card Area country that occur on Polish territory. PBUK issues Green Card Certificates – documents confirming third party liability cover recognizable in other member countries.

RBNP (Reported But Not Paid)
A type of technical insurance reserve for claims that were reported to the insurer but have not been paid yet.

Insurance subrogation
A legal right that allows the insurer make a payment that is actually owed by another party (entity responsible for a claim) and then collect the money from the party that owes the debt after the fact. Subrogation is one of the ways that car insurance companies recover money that was paid out in claims.

Claim representative
A person that organizes loss adjustment on behalf of a foreign insurer in regard of obligatory car third party liability insurance. This institution is regulated under Obligatory Insurance Act of 22 of May, 2003.

Trade risks
A term connected to trade credit insurance. Trade risk include debtor’s default, prolixic delay, one-sided contract termination, refusal to accept goods with no actual grounds.

Non-trade risks
Risks that do not derive directly from market forces and processes. They include political risk, catastrophic events, moratorium.

Catastrophic risk
A risk of losses caused by forces of nature such as earthquake, cyclone, typhoon, flood, volcanic eruption, sea tides, hurricane, wide-area fire, nuclear damage. Catastrophic risk can result in a great number of individual losses of significant value spread on a wide territory.

Currency risk
A risk of fluctuation of exchange rates that can influence the value of debt or receivables. Can get very significant for volatile currencies, large volumes or long time periods.

Political risk
Risk of government decisions that influence the economy or some sectors. Can result in a foreign business partner’s non-ability to pay.

Prolixic payment delay risk
A situation where a debtor withholds the payment for a prolonged period of time. A definition of a prolonged period of delay can vary between insurers and contracts.

Financial Advocate
A governmental organization aimed at representing clients against financial institutions. His main task is to process motions and complaints and provide advice for clients in case of a dispute. Financial Advocate can take actions on behalf of a client if his complaint is not handled correctly by the financial institution.

Pure premium
Part of a premium aimed at covering pure insurance risk. Pure premium plus administrative cost charges result in a gross premium, a figure payable by the policyholder in exchange for coverage. Pure premium is also called net premium.

Standstill cover
A clause in construction/erection all risk policies that grants cover when the construction works are ceased.

Stowarzyszenie Polskich Brokerow
Ubezpieczeniowych i Reasekuracyjnych (SPBUiR) A professional association of Polish insurance and reinsurance brokers brought to life in 1992. Its main goals is to ensure integration of the professional society, taking part in legislative works, improving competence and ethical level of members and developing international cooperation. From the beginning, in close relationship with BIPAR (Bureau International des Producteurs d'Assurances et de Reassurances), an international NGO gathering 50 organizations from 30 countries (including all EU members), based in Brussels. Biggest SPBUiR achievements are a design of obligatory professional indemnity insurance for brokers, design of Ethical Code for brokers and organization of yearly gatherings of the society.

Mutual insurance
A form of insurance business organized around the idea of mutual help. Allowed in Polish Insurance Act, Mutual insurance companies are aimed at providing coverage to their members. Insured entities are also members of the mutual insurance company and are obliged to cover costs of its operations – including extra contributions in case of a large claim.

Trigger
A term connected to liablity insurance. It defines the timeframe of cover. Most commonly used triggers are: Act committed, loss occurrence, loss manifestation and claims made. The concept of triggers require extra attention when designing insurance program in order to avoid gaps in cover.

Policyholder
A person that enters an insurance contract with the insurer and is obliged to pay the premium. He does not have to be the same person as the insured – who is granted cover under the contract.

Professional Indemnity insurance
A third party liability insurance aimed at professionals rendering services. The scope of cover includes claims being a result of errors and omissions while rendering services.

Ubezpieczeniowy Fundusz Gwarancyjny (UFG)
An institution brought to life in 1990, now regulated under Obligatory Insurance Act of 22 of May, 2003. Its key role is to pay indemnity to persons that have a claim against an uninsured vehicle owner or an uninsured farmer. UFG also pays the indemnity if the person responsible for an accident ran from the site.

Insured
An entity that is granted insurance coverage based on a contract conducted by the policyholder. Isured is entitled to receive indemnity in case of an insured event.

Insurer
A legal person that performs insurance business. Based on an insurance contract, the insurer is ready to pay indemnity in case of an insured event. He receives premium, being a remuneration for such a readiness.

Beneficiary under the insurance contract
An entity that is entitled to demand the insurer to pay a given sum of money. Beneficiary is present in most life insurance contracts, insurance bonds and in third party liability insurance (being the damaged party).

Co-insurance agreement
A special form of an insurance contract. The aim of a co-insurance contract is to commonly insure a larger risk by two or more insurers who divide risk and premium under given percentage shares. In most cases, one of the insurers is a pool leader who provides the product, handles negotiations, administrative tasks and claims adjustment.

Reinsurance agreement
A contract between the insurer and reinsurer where the insurer transfers part of the risk for a part of the premium and the reinsurer agrees to compensate claims. Can apply to a whole portfolio, part of it or to a single risk.

Underwriting
A set of actions aimed at assess the risk and agree on insurance terms or to reject it.

FORI
Factor of relative importance. Used to determine which part of insurance gross profit is generated by a single machine. It is used to properly set up MLoP sums insured.

Fortuitous event
A future event, uncertain and out of control of the insured that can result in property damage, personal interest impairment or a need for an increased capital outlay of the insured.

Green card
A proof of obligatory vehicle owner third party liability insurance that is recognized in Green Card Area Countries. In Green Card Area, the claims are adjusted based on rules applicable to the country where the claim occurs.