S – Glossary of Insurance Terms
This page provides a glossary of insurance terms and definitions that are commonly used in the insurance business. New terms will be added to the glossary over time.
The definitions in this glossary are developed by the NAIC Research and Actuarial Department staff based on various insurance references. These definitions represent a common or general use of the term. Some words and/or phrases may be defined differently by other entities, or used in a context such that the definition shown may not be applicable. naic.org
Salvage – value recoverable after a loss.
Statutory Accounting Principles (SAP) – a set of accounting principles set forth by the National Association of Insurance Commissioners used to prepare statutory financial statements for insurance companies.
Securitization of Insurance Risk – a method for insurance companies to access capital and hedge risks by converting policies into securities that can be sold in financial markets.
Security – a share, participation, or other interest in property or in an enterprise of the issuer or an obligation of the issuer.
Self-Insurance – type of insurance often used for high frequency low severity risks where risk is not transferred to an insurance company but retained and accounted for internally.
Separate Account – segregated funds held and invested independently of other assets by an insurer for the purpose of a group retirement fund.
Short-term Disability – a company standard defining a period of time employees are eligible for short-term disability coverage, typically for 2 years or less.
Short-Term Medical – policies that provide major medical coverage for a short period of time, typically 30 to 180 days. These policies may be renewable for multiple periods.
Situs of Contract – the jurisdiction in which the contract is issued or delivered as stated in the contract.
Social Insurance – compulsory insurance plan administered by a federal or state government agency with the primary emphasis on social adequacy.
Soft Market – a buyer’s market characterized by abundant supply of insurance driving premiums down.
Special revenue bond – any security, or other instrument under which a payment obligation is created, issued by or on behalf of a governmental unit to finance a project serving a substantial public purpose and not payable from the sources in connection with the payment of municipal obligation bonds.
Specified Disease Coverage – coverage that provides primarily pre-determined benefits for expenses of the care of cancer and/or other specified diseases.
Specified/Named Disease – policies that provide benefits only for the diagnosis and/or treatment of a specifically named disease or diseases. Benefits can be paid as expense incurred, per diem or as a principal sum.
Standard Risk – a person who, according to a company’s underwriting standards, is considered a normal risk and insurable at standard rates. High or low risk candidates may qualify for extra or discounted rates based on their deviation from the standard.
State Children’s Health Insurance Program – policies issued in association with the Federal/State partnership created by title XXI of the Social Security Act.
State of Domicile – the state where a company’s home office is located.
State Page – Exhibit of Premiums and Losses for each state a company is licensed. The state of domicile receives a schedule for each jurisdiction the company wrote direct business, or has amounts paid, incurred or unpaid.
Statement Type – refers to the primary business type under which the company files its annual and quarterly statement, such as Life, Property, Health, Fraternal, Title.
Statement Value – the Statutory Accounting Principle book value reduced by any valuation allowance and non-admitted adjustment applied to an individual investment or a similar group of investments, e.g., bonds, mortgage loans, common stock.
Statutory Accounting – method of accounting standards and principles used by state regulatory authorities to measure the financial condition of regulated companies and other insurance enterprises. This method tends to be more conservative than the Generally Accepted Accounting Principles used by most businesses. Compliance with solvency and other standards is determined using financial documents prepared in accordance with Statutory Accounting Principles.
Stock Insurance Company – business owned by stockholders.
Stop Loss/Excess Loss – individual or group policies providing coverage to a health plan, a self-insured employer plan, or a medical provider providing coverage to insure against the risk that any one claim or an entire plan’s losses will exceed a specified dollar amount.
Structured Securities – loan-backed securities that have been divided into two or more classes of investors where the payment of interest and/or principal of any class of securities has been allocated in a manner that is not proportional to interest and/or principal received by the issuer from the mortgage pool or other underlying securities.
Structured Settlements – periodic fixed payments to a claimant for a determinable period, or for life, for the settlement of a claim.
Subrogation – situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party.
Subrogation Clause – section of insurance policies giving an insurer the right to take legal action against a third party responsible for a loss to an insured for which a claim has been paid.
Subsequent Event – events or transactions that occur subsequent to the balance sheet date, but before the issuance of the statutory financial statements and before the date the audited financial statements are issued, or available to be issued.
Substandard Risk – (impaired risk) risks deemed undesirable due to medical condition or hazardous occupation requiring the use of a waiver, a special policy form, or a higher premium charge.
Superfund – federal act mandating retroactive liability for environmental pollution where responsible party maintains accountability for environmental clean-up regardless of length of time since polluting event occurred.
Surety Bond – a three-party agreement whereby a guarantor (insurer) assumes an obligation or responsibility to pay a second party (obligee) should the principal debtor (obligor) become in default.
Surplus – insurance term referring to retained earnings.
Surplus Line – specialized property or liability coverage available via nonadmitted insurers where coverage is not available through an admitted insurer, licensed to sell that particular coverage in the state.
Swap – an agreement to exchange or net payments as the buyer of an Option, Cap or Floor and to make payments as the seller of a different Option, Cap or Floor.