Fixed interest securities issued by governments (gilts), financial institutions and companies (corporate bonds) to investors. The issuer pays a fixed rate of interest for a fixed number of years (e.g. 7.5 per cent for five years), at the end of which the capital is repaid. Bonds are traded in the open market in the same way as shares. Insurance companies and pensions funds are substantial investors in UK government bonds. Distinguish BONDS (SURETY BONDS) and BONDS (INVESTMENT INSURANCE).

A surety bond involves three parties, a surety, a principal (often a contractor) and an obligee (often a project owner). The surety guarantees under seal that the principal will carry out his obligations or alternatively compensate the obligee for losses due to the contractor’s breach. In the construction industry this is known as a performance bond. The surety has recourse against his principal (the obligor). A retention bond is required when the developer releases the amount retained for defects before the contractor has completed the defects. A pre-payment bond guarantees any advance payment for the contractor’s mobilisation. Bid bonds guarantee that the contractor’s bid or tender is made in good faith and he is capable of entering into the contract. If the contractor fails to proceed, the surety pays for the project owner’s costs in scrutinising another tender. Payment bonds guarantee payment for project labour and materials. See COURT BONDS; LOCAL AUTHORITY BONDS; GOVERNMENT BONDS.

UK: 1. A non-guaranteed benefit added to with profits life policies periodically from the divisible surplus. Once allocated, the bonuses are guaranteed and become payable at the same time as the sum insured, i.e. they are reversionary bonuses. A uniform simple reversionary bonus is proportionate to the sum insured; a uniform compound reversionary bonus is proportionate to the sum insured and accrued bonuses. Interim bonuses are added to policies becoming claims in between two declarations. A terminal bonus is added when the policy ends by death or maturity. 2. See NO CLAIM BONUS.
***
MEDICAL,USA: Payment a physician receives beyond any salary, fee-for-service payments, capitation, or returned withhold from a managed care plan. Bonuses and other compensation that are not based on referral or utilization levels (such as bonuses based solely on quality of care, patient satisfaction, or physician participation on a committee) are not considered in the calculation of substantial financial risk.
***
The benefits paid in addition to the sum insured. The system awards discounts for claim free policy/ies for a certain continuous period. This goes on increasing up to a certain limit for continuous claim free years.
***
UK: the share of surplus allocated to holders of with-profits policies.

Declaration by a life insurer as to the rate at which bonuses will be allotted to ‘with profits’ policies. The periodic declarations are usually annual and the amount declared depends on the insurer’s decision as to the amount they wish to take from profit as divisible surplus. See NO CLAIM BONUS.

The amount added to a life insurance premium to distinguish ‘with profits’ policies from those without profits. The higher payment entitles the policyholder to participate in any divisible surplus available for bonus distribution at any bonus valuation.

A reserve created by life insurers for the payment of future bonuses to with profits policyholders.

A type of gross premium valuation that allows explicitly for future bonuses under with profits contracts. The terms bonus reserve valuation and gross premium valuation are regarded as alternative phrases. For some purposes (certain solvency investigations) a gross premium technique will be used with no allowance for future bonuses.

The sacrifice by an employee of all or part of his bonus payment. His employer pays an equivalent amount into an executive pension plan for the employee.

A motor insurance system that gives discounts for claimsfree driving and makes surcharges for claims. See NO CLAIMS BONUS.

Insurance against inability to collect money owing, following the destruction of books by an insured peril. Cover includes the cost of reproducing records and tracing debtors. Bad debts, being a credit risk, are not covered. The sum insured is the estimated maximum debt outstanding at any one-time subject to average and the premium is adjustable at the end of year. As book debts relate to preinterruption transactions they are not covered under business interruption insurance.
***
Insurance against loss through inability to collect debts due because accounting records have been destroyed.