A method of determining the premiums payable under an insurance contract with the object of keeping the premium of each life insured or member of a pension scheme at a constant rate until there is a change in circumstances.

Financial statements that insurers must submit to the FSA after the end of the financial year in the prescribed format (volume 2 of IPRU (INS)). The returns are made up of: balance sheet and profit and loss account; general business revenue account and additional information; long-term business revenue account and additional information; abstract of the actuary’s annual valuation report; auditor’s report under Companies Act 1985, s.235, for companies incorporated in the UK or the equivalent for companies not so incorporated. Certificates must accompany the report from the directors, the appointed actuary and the auditors. The returns must also include statements about major reinsurers and cedants, the company’s policy on investing in derivatives and a statement of the controllers of the company. Companies engaging in cross-border EEA business must provide separate statistics on this business.

Lloyd’s carries out two annual solvency tests 1. Lloyd’s as a whole (as if a single insurance company) must demonstrate that the total eligible assets of members, coupled with centrally held assets such as the Lloyd’s central fund, exceed their liabilities by the required minimum margin. 2. Lloyd’s must also show that each member has sufficient assets to meet his liabilities and that any shortfall can be covered by centrally held assets. Also each member’s assets must exceed its liabilities by the prescribed margin. This is the higher of 16 per cent of total annual premiums or 23 per cent of average claims, incurred over a three-year period, less a credit for reinsurance recoverables. Lloyd’s must show that it has sufficient central assets to cover any aggregate shortfall from this test. See MEMBER’S MARGIN.

Lloyd’s practice of allocating a risk to the year in which it incepted, linked to the practice of syndicates reforming each year allowing members to leave or join. The syndicate underwriting the risk during the year of inception remains liable even though the year of insurance may straddle two years of account. The year of account is closed after 36 months by a reinsurance to close. The annual venture approach will come to an end when Lloyd’s introduce GAAP accounting; premiums will then be apportioned to particular calendar years with premiums for unexpired periods being carried forward.

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This term refers to the reconstitution of a syndicate as an annual business venture where insurance and reinsurance business is written on a year of account basis.

The taxation of annuity and pension payments. The annuitant is taxed on only that part of his or her annuity which is regarded as interest. The balance, a return of capital, is taxfree. Retirement annuities (pensions) are taxed as earned income, but part of the benefits can be commuted to a tax free lump sum, often used to purchase an immediate life annuity a part of which is a return of capital and therefore tax free.

A motor insurance policy that has no special restriction as to the persons entitled to drive. The standard car policy permits driving by the insured and any other person driving on his order or with his permission.

An exclusion in English v. Western (1940) 2 All ER 515 was construed by the Court of Appeal as meaning any member of a household of which the insured is head’. The exclusion did not apply when a sister sued her brother for injuries. They were members of the same household but the brother was not its head. The Court applied the contra proferentem rule.

The definition of the conditions under which a reinsurer or insurer becomes liable for a loss or multiple related losses under an excess of loss treaty or underlying policy. Most definitions provide for the aggregation of individual losses arising from the same event or originating cause to be treated as a single claim so that the (re)insured bears only one deductible. Where weatherrelated losses persist over a period the hours clause defines the loss occurrence. Latent disease liability claims may produce multiple claims over a period due to continued exposure of workers to the same harmful working conditions. Insurers may seek (perhaps with difficulty) to define the continuing working conditions as the single event or originating cause. See CLAIMS SERIES CLAUSE.