Market agreement between participating motor insurers. Where two motorists are involved in an incident and third parties are injured, the insurers agree not to apportion blame but share third party claims equally. Any injury to the driver of either vehicle or any injury to any employee of the insured is excluded by the agreement.

Lloyd’s system whereby an underwriting year is not closed until the end of the third year following inception of the underwriting year and all premiums and claims for that year are accounted to that year. An account opened on 1 January 2003 will be open until 31 December 2005. A reserve for outstanding claims liability is then carried forward to the next open year by a reinsurance to close. Lloyd’s is now moving to ‘annual accounting, the approach used by insurance companies.

Minimum conditions that a firm must satisfy to gain and retain FSA authorisation to undertake regulated activities. The conditions relate to: legal status; office location; claims representative; sources; suitability. re

A payment per unit of deviation recorded in a weather index. For example, £2,500 per Heating Degree Day is the tick, meaning a payout based on £2,500 times the number of HDDs in excess of the strike. See WEATHER DERIVATIVES.

Option to use the proceeds of a pension plan to buy an annuity from the insurer concerned at its current market rate as an alternative to taking the guaranteed annuity option. See also OPEN MARKET OPTION.

a form of reinsurance that includes a timing risk, that is the risk that the reinsurer might become liable before sufficient funds had accumulated to meet the liability; an early form of financial reinsurance and arguably not insurance at all.

Discounting mechanism using an aggregate excess of loss cover. The reinsurer agrees to pay the cedant a fixed schedule of payments at future dates in return for an initial premium representing the net present value of the scheduled losses. The contracts are a form of financial reinsurance with little or no risk transfer. The principal uncertainty is date of settlement and this makes the arrangement attractive to long-tail insurers.

The charterer has the use of the vessel for a specified time. The shipowner supplies the crew and the provisions.

An excess or deductible expressed in terms of hours or days as opposed to a monetary amount. Under an engineering consequential loss policy it is customary to exclude the first 24 hours (or some other period) of any period of interruption following damage to or breakdown of plant or machinery.

Form of business interruption insurance that pays an amount for each day’s stoppage of the business. The system is used on occasions in some engineering consequential loss policies based on time lost following machinery breakdown.