A physical or mental condition that existed prior to the effective date of the insured’s health-based insurance. The policy usually excludes claims where a condition, the subject of medical treatment or consultation within one year prior to policy inception, has contributed to the claim. If, after two years of insurance, a pre-existing condition has not necessitated further treatment, the exclusion will not usually apply.

Satellite insurance providing all risks’ insurance from the completion of the assembly until the launch. The policy operates while the satellite is in storage and transit and also covers third party risks. The cover continues until the intended time of the launch engine’s ignition. If the launch is aborted the policy may become operative once again.

A single premium, high income bond, typically for five years, under which the full return of capital depends on a stock market-measure (e.g. FTSE 100) performing to a minimum level over the life of the product. If the index/measure under-performs investors may not receive a full return of capital; the return drops ever lower as the index/measure continues to fall (the ‘precipice effect’). The FSA requires firms to give clear explanations of the risks involved and follow certain other requirements.

Weather derivative with a reference point based on an expected rainfall level in a specific location over a defined period. If the point is exceeded, certain entities, e.g. a theme park, will suffer poor sales and receive a payout based on the accumulated deviations above the rainfall index multiplied by the tick. If the actual rainfall level does not exceed the reference point (or strike) there is no payout; the only cost to the firm is the premium paid in return for the protection granted. See PRECIPITATION SWAPS; SNOWFALL COVER.

Two parties exchange payments streams by reference to an underlying index based on rainfall or snowfall. A snow-clearing local authority could enter into a swap with a ski resort. In the event of snow above the reference point, the extra cost of snow clearing is funded out of the income stream of the ski resort. The converse would also apply. The upside risk of one party pays the downside risk of the other.

Liability for injury/ damage arising from ownership or occupation of premises. The ‘premises risk’ is covered under public liability insurance. For some types of business, e.g. hotels and cinemas, it is the central risk. In other cases, e.g. electrical contractors, the risk is minimal as most work is done away from the premises. See also PUBLIC ACCESS RISKS; OCCUPIERS’ LIABILITY ACT 1957; OCCUPIERS’ LIABILITY ACT 1984.

A note sent by a broker to an insurer or policy signing office when the broker’s client has been debited with the premium or credited with a return premium.
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A note sent to an insurer or a policy signing office by an insurance broker when the broker’s client is debited with the premium or credited with a return premium.

UK: As premiums are payable in advance it follows that at any one time, e.g. end of the financial year, most policies will have an unexpired term to complete. The premium earned is the pro rata share of the premium relating to the period that has expired.
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Portion of the premium for a single Policy or group of policies, that an Insurer is entitled to recognize as earned revenue because a similar portion of the coverage period has elapsed. For example, under an annual Policy, one-third of the total premium is earned after the first four months of coverage.
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That part of a premium that relates to so much of the period of insurance as has already run.