Insurance Glossary

The sum of an insurer's loss ratio and expense ratio. A combined ratio below 100% indicates an underwriting profit; above 100% means the insurer is paying out more in claims and expenses than it collects in premiums.(Loss Ratio + Expense Ratio)

Underwriting expenses (commissions, admin, technology) divided by net premiums earned. Measures operational cost efficiency.(Underwriting Expenses / Net Premiums Earned × 100)

Net income divided by stockholders' equity. Measures how efficiently a company generates profit from shareholder capital.(Net Income / Stockholders' Equity × 100)

Total debt divided by stockholders' equity. Measures financial leverage — how much of the company is funded by debt vs. equity.(Total Debt / Stockholders' Equity)

The cyclical pattern of P&C insurance market conditions alternating between 'hard' markets (high prices, strict underwriting) and 'soft' markets (low prices, loose underwriting). Cycles typically last 5-10 years.

Insurance for insurance companies. Primary carriers transfer portions of their risk to reinsurers in exchange for premiums. This protects carriers from catastrophic losses.

Catastrophe modeling: using statistical and simulation techniques to estimate potential losses from natural disasters (hurricanes, earthquakes) and man-made events.

An insurance company that underwrites risk — it issues policies, collects premiums, and pays claims. Carriers bear the financial risk of the policies they write.

Managing General Agent / Managing General Underwriter: a specialized intermediary that has been delegated underwriting authority by a carrier. MGAs price, bind, and sometimes handle claims on behalf of the carrier.

The Affordable Care Act mandates that health insurers spend at least 80% (individual/small group) or 85% (large group) of premium revenue on medical claims and quality improvement. Insurers failing to meet these thresholds must rebate the difference to policyholders.

In the US, insurance is primarily regulated at the state level (not federal). Each state has its own insurance department, rate approval process, and consumer protection rules. The NAIC coordinates across states.

An annual report required by the SEC from all publicly traded companies. Contains audited financial statements, management's discussion and analysis (MD&A), risk factors, and business descriptions.