an independent organisation set up under the Financial Services and Markets Act 2000, covering firms and activities regulated by the Financial Services Authority, which replaced a number of former complaints handling schemes.
Insurance Encyclopedia
Financial Ombudsman Service (FOS)
A ‘free to consumers’ dispute resolution service with three divisions: banking and loans, insurance and investment. Firms are bound when the Ombudsman makes decisions in favour of the consumer up to £100,000 plus interest, above which the Ombudsman may recommend full payment. Decisions are not binding on the consumer. FOS can also direct firms to take any steps deemed just. The FOS is funded by a general levy on all firms covered by its service. Membership is compulsory for all authorised firms. The Pensions Ombudsman operates separately.
Financial planning
Investment service that reviews an individual’s or family’s economic picture and then determines a course of action to obtain financial goals within a certain period of time. This can include budgeting, planned accumulation of income through various investments, risk analysis, minimizing taxes, and estate planning. Also called total-needs programming .
Financial Planning Certificate (FPC)
CII qualification accepted by the FSA as proof that a candidate has the level of knowledge required to become a financial adviser. Holders are eligible to join the Society of Financial Advisers.
Financial policy statement
Document signed by patients stating liability in paying for medical services received. This protects the physician’s right to collect payment for professional services provided to patients.
Financial promotion
Regime introduced under FSMA, s.21. A financial promotion is the communication, in the course of business, of an invitation or inducement to engage in an investment activity. It is unlawful if it is not made by an authorised person or has not been approved by such a person. ‘Communication’ embraces all forms of communication in place of previous separate rules for insurance advertisement, unsolicited calls, etc.
Financial quota share
A form of reinsurance that enables a cedant to increase its statutory surplus by the amount of the ceding commission in the reinsured unearned premium reserve. Surplus relief arises because statutory accounting requires insurers and reinsurers to charge immediately all acquisition costs to the accounting period in which the business is written, even when the premium is unearned at the end of the period. Referred to as pre-paid acquisition costs in the unearned premium reserve, or the equity in the unearned premium reserve.
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UK: Cedant and reinsurer share the risk in agreed proportions. The cover applies to future and current years. Reinsurance commission is on a sliding scale starting with 30 per cent commission for a loss ratio of 70 per cent. For every loss ratio change of 1 per cent, the commission changes by 1 per cent. A commission that increases with the loss ratio helps the cedant when it is most needed. If the cedant has an expense ratio of 30 per cent then the cedant will have an underwriting result of zero regardless of the actual loss ratio for the year. This improves the solvency margin.
Financial record
See: Account, Financial Accounting Record , ledger card , and ledger .
Financial reinsurance
REINSURANCE: A form of reinsurance that considers the time value of money and has loss containment provisions transacted primarily to achieve financial goals, such as capital management, tax planning, or the financing of acquisitions. Also see Finite Reinsurance.
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A form of reinsurance that considers the time value of money and has loss containment provisions. One of its objectives is the enhancement of the cedant’s financial statements or operating ratios, e.g., the combined ratio loss portfolio transfers and financial quota shares.
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UK: There is no clearly accepted definition but financial reinsurance is more concerned with the time value of money and financial goals than risk transfer. The intention is to stabilise the cedant’s balance sheet and provide capital support. The cedant pays a premium to cover defined losses on a multi-year basis up to an agreed maximum. A profit share element converts a conventional treaty into financial reinsurance. The cedant benefits from credit enhancement by improving key ratios such as the combined ratio. Specific financial reinsurance products include: time and distance policies; loss portfolio transfers; spread loss treaty; adverse development cover; blended cover.
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REINSURANCE: This is a form of reinsurance involving less underwriting risk transfer and more investment or timing risk transfer from the cedant. These contacts are often on a multi-line, multi-year basis. They typically absorb at least the cost associated with claims differing from expected claims experience, and often carry excess of loss terms and multiple options Premiums usually reflect the time value of money to a large extent than traditional excess of loss contracts.
Financial responsibility
Liability for payment of a patient’s medical bill to the provider of service.