4.4 Legal risk - Scor

D
DECENNIAL INSURANCE
Decennial insurance provides insurance coverage to building owners and construction companies against losses
caused by structural defects in new buildings resulting from inherent defects in design, construction or the materials
employed. In a number of countries, including France, such coverage is required as a matter of law. It is generally
granted for a period of ten years after construction is completed.
DEFERRED ACQUISITION COSTS (DAC)
Costs associated with the acquisition of new contracts, mainly commissions, are recorded as assets and amortized on
the basis of the residual term of the contracts for Non Life business and on the basis of the recognition of future margins
for Life contracts. DAC is subject to impairment resting conducted within the liability adequacy test.
DEFERED TAX ASSET
Defined under IAS 12 as amounts of income tax recoverable in future accounting periods due to temporary difference or
Net Operating Losses (NOL) carry forward
DEPOSIT, FUNDS WITHHELD
Amounts which may be deposited with the ceding company to guarantee the reinsurer’s liability. Income from securities
deposited accrues to the reinsurer.
DERIVATIVE FINANCIAL INSTRUMENT
A financial instrument or other contract with the three following characteristics: a) value changes in response to a
change in the underlying (e.g. interest rate, price, foreign exchange rate); b) requires no or minimal net investment, and
c) is settled at a future date.
DIRECT INSURANCE
A policy taken out with an insurer by an individual or a company to cover a risk (property, service or person). This policy
can either be underwritten directly with one of the insurer’s agents or via a broker who receives a commission.
E
EIA
Equity Indexed Annuity
EMBEDDED VALUE
Frequently used measure of the value of expected future cash flows in life insurance and life reinsurance from the
shareholder’s point of view, expressed as the value of net assets plus the present value of expected profits on the
insurance portfolio less cost of capital and administrative expenses.
ENTERPRISE RISK MANAGEMENT (ERM)
Enterprise Risk Management is a process, effected by an entity's Board of Directors, management and other personnel,
applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and
manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity
objectives.
EVENT
Aggregation of claims having a common origin and affecting either a single insured under more than one policy, or more
than one insured.
F
FACULTATIVE REINSURANCE
Reinsurance on an item-by-item or risk-by risk basis. Facultative reinsurance is usually written for very large-line risks. It
may be either proportional or non proportional.
FAIR VALUE
The price for which an asset could be exchanged between knowledgeable, willing parties in an arm’s-length transaction.
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