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Ab initio cancellation

From Latin, meaning the cancellation of an insurance or reinsurance contract by an insurer or reinsurer, from its beginning, based on the misrepresentation and or non-disclosure of material facts by the policyholder or ceding insurer.

Underwriting cycle

A term describing the business or economic cycle of insurance, the underwriting cycle refers to the regular pattern of rising profits and increasing premiums; followed by reducing profits and decreasing premiums.

Underwriting management agency (UMA)

An entity that is authorised by an insurance company to accept classes of risk on the insurer’s behalf as if it was the insurer, or simply an agent of the insurer; the UMA performs an underwriting function on behalf of an insurer and shares in the profit from the underwriting activity.

Underwriting margin

An insurer’s underwriting profit expressed as a percentage of its premium.

Underwriting result

An insurer’s underwriting profit or loss calculated by deducting the claims incurred, net of commission and management expenses, from the premiums earned; it reflects how well the insurer is pricing for the risks it takes on board; but not a reflection of how efficiently the insurer is run.


The process that an insurer or underwriter follows to decide whether the risk presented by a potential insured is acceptable and, assuming the risk is acceptable, the setting of an appropriate premium or additional terms and conditions for the risk to be placed on cover.

Uneconomical to repair

An asset is uneconomical to repair when the cost of parts, the availability of parts, the repair duration and other costs associated with the repair are high in relation to the value of the asset; in such cases the insurer or assessor will decide to compensate the insured per the policy terms with a new asset.

Write-off or total loss

An asset is classified as written-off when the damage cannot be repaired, due to being too extensive or a safety risk, or if the cost of repairing the damage exceeds a certain percentage of the value of the asset, which varies from one insurer to the next.

Policy benefits

All benefits that accrue to the policyholder upon entering into a contract of insurance with an insurer; these can also be seen as the money or services that the insurance company pays or gives to the policyholder for the loss or damages the policyholder suffers following an insured risk event.

Policy wording

The policy wording, or insurance contract, is a lengthy document that sets out the terms and conditions of the agreement between the policyholder and the insurer.

Policyholder Protection Rules (PPRs)

Part of the primary insurance regulation, the PPRs were issued under both the Short-term and Long-term Insurance Acts to stipulate the conduct expected of the insurance firms regulated under each Act.


The individual, business or juristic entity that is entitled to the policy benefits under the insurance policy.


A term in insurance referring to the combining of the premiums received from multiple policyholders in a single pool of capital; the concept of ‘pooling of risk’ is central to insurance as it introduces the scale necessary for an insurer to provide affordable premiums and allows for the pooling of similarly risky policyholders to ensure fairness. It is also important in predicting losses, as the law of large numbers predicts that the real claims experiences tend to the theoretical experience the more insureds there are.


The amount the policyholder pays to the insurance company to cover the risk insured against, or the price he or she pays for the insurance cover; it can also be referred to as the amount the insurer or ceding insurer pays to a reinsurer.


The period within which policyholders must institute legal proceedings, by way of serving a summons, on an insurer to enforce their rights; it is usually calculated as a period of three years from the date of repudiation of a claim. See time-barring.

Professional indemnity (PI) insurance

An insurance policy that protects professionals who provide advice or services to their customers from legal costs and claims for damages to third parties which may arise out of an act, omission or breach of professional duty; professionals include accountants, doctors, dentists, engineers, lawyers etc. It is a requirement of South Africa’s Financial Intermediary and Advisory Services Act that financial services providers in the financial advice industry take out PI cover.


A document which suggests the terms and conditions of an insurance contract; the proposal is usually completed by someone wanting to obtain insurance cover such as the potential insured or an insurance broker or underwriting management agency (UMA) on the potential insured’s behalf.

Proximate cause

This is an event sufficiently related to a legally recognisable injury, loss or damage as to be held to be the cause of that injury, loss or damage; it is the event that gives rise to the loss event that the policyholder is insured against.

Public liability cover

Public liability insurance covers an individual, business or juristic entity against damages that it becomes liable to pay following an incident which occurred while going about, or in connection with, the policyholders’ business. See Broadform liability.


The traditional process following by a non-life insurer to gather the information necessary to modify its existing rating manuals or create new ones. See risk pricing.

Ratio, acquisition cost ratio

The sum of all acquisition costs incurred by a non-life insurer, divided by the net earned premium for the period under review.

Ratio, burning cost ratio

The burning cost ratio is an experience-based insurance rating method commonly used in determining rates for excess of loss reinsurance, or the insurance that insurance companies buy to protect themselves against total claims that exceed their total premiums collected.

Ratio, combined ratio

The sum of an insurer’s claim, acquisition and expense ratios for the period under review; the combined ratio is an important measure of insurer profitability and can be used to calculate the underwriting margin. A combined ratio of 100% means that the insurer is breaking even on their insurance operations, below 100% means that they are generating a profit from their underwriting activities and above 100% represents an underwriting loss.

Ratio, expense ratio

The sum of an insurer’s expenses, excluding incurred claims, divided by the net earned premium for the period under review; some analysts will include acquisition costs in this ratio, in which case it is recorded as the total expense ratio.

Ratio, loss ratio / claims ratio

An expression of the total claims paid by an insurer in the form of incurred claims for a given period; claims paid are divided by gross written premiums for the gross loss ratio, which represents the position before reinsurance is factored in. Claims paid are divided by net earned premiums for a net loss ratio, which represents the position net of premiums ceded to reinsurers.

Ratio, overturn ratio

The Ombudsman for Short Term Insurance publishes an annual overturn ratio, described as a measure of complaints brought to the office that result in some benefit to the non-life insurance consumer, the complainant; the number of complaints resolved in favour of complainants is divided by the total number of complaints entertained by the office.

Ratio, solvency ratio

A measurement of the financial strength of a non-life insurer, this ratio represents the shareholders’ funds expressed as a percentage of net written premium income; this method of measurement is generally accepted internationally.

Reinsurance, agreement

An agreement entered by a ceding company and reinsurer which details the conditions upon which the reinsurer would pay a share of the claims incurred by the ceding company.

Reinsurance, ceding company

A ceding company is the insurer that purchases reinsurance, or enters into a reinsurance agreement, with a reinsurer; the word ‘ceding’ indicates that the ceding company cedes some of the risks in its portfolio to another.

Reinsurance, premium

The premium paid by the ceding company to the reinsurer in consideration for the liability assumed by the reinsurer.

Reinsurance, retrocession

A transaction in which a reinsurer transfers risks it has reinsured to another reinsurer.


A form of insurance that is purchased by an insurance company, referred to as the ceding company, from one or more insurance or reinsurance companies, either directly or through a broker, as a means of risk management.


A company or underwriter that places the ceding company’s risks on cover in return for a reinsurance premium.

Replacement value

The amount that an insurer would have to pay to replace an asset according to its current worth; this is one of several methods used by insurers in determining the value of an insured item.


Any person who renders a financial service to a client for or on behalf of a financial services provider in terms of conditions of employment or any other mandatory agreement; all South African financial services representative must be licensed at the Financial Sector Conduct Authority (FSCA) and complete the introductory regulatory examination, known in the industry as RE 1.


The decision by a non-life insurer, or a binder holder or underwriting management agent (UMA) acting on the insurer’s behalf, to reject or refuse a claim made against it by a policyholder in line with the terms and conditions of the policy wording or insurance agreement.

Retail Distribution Review (RDR)

A discussion document, published by the Financial Sector Conduct Authority (FSCA) that proposes far-reaching reforms to the regulatory framework for distributing financial products to financial customers; first published in South Africa in 2014 the document set out 55 specific regulatory proposals that have been implemented through a mixture of primary and subordinate legislation in three phases since. Phase I took place between 2016 and 2018 and Phase II and III will complete once the Conduct of Financial Institutions Bill is enacted, likely before the end of 2022.

Risk factors

Any attribute or variable that has an influence on the insurer’s risk exposure, or the insured’s risk profile; risk factors, also referred to as ratings factors, have the potential to alter the likelihood or frequency of a loss event or the severity of a loss, and typically attach to the insured or the insured’s assets. It is the insurer’s job to identify and assess risk factors.

Risk mitigation

A systematic reduction in the extent of exposure to a risk and or the likelihood of its occurrence; in insurance, any steps taken to reduce the probability or severity of an insured loss event.

Risk pricing

The activities undertaken by the pricing division of a non-life insurer to determine the correct premium for the risk taken on; such activities are complex and include estimates of future claims costs and expenses, profit and contingencies, marketing goals and competition and legal restrictions among others.


A probability or threat of damage, injury, liability, loss or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through pre-emptive action; in insurance, risk is simply referred to as the potential to lose something of value.


The amount received by an insurer from the sale of damaged or recovered property on which it has paid a total loss to the insured.


A method of managing risk wherein an individual, firm or juristic entity sets aside a pool of money to be used if an unexpected loss occurs; those who self-insure believe that they can cover certain categories of risk more efficiently than an insurer and typically insure against predictable and smaller losses.

Short-term insurance

South Africa’s new Insurance Act replaces short-term with non-life throughout. See non-life insurance.

Smart device

An electronic device, generally connected to other devices or networks via different wireless protocols that can operate to some extent interactively and autonomously; telematics devices installed in motor vehicles for fleet tracking or non-life insurance purposes are a good example of such.

Solvency Assessment and Management (SAM)

A forward-looking, risk-based approach to solvency that seeks to align the capital requirements of insurance firms with the underlying risks that they face; SAM refers to the project launched by South Africa’s then Financial Service Board (FSB) to develop a new solvency regime for the country’s life and non-life insurance industries, to align these industries with international standards, most notably the Solvency II initiative in Europe.


A scenario under which an economy is experiencing an increase in inflation at the same time as a stagnation or slowdown in economic output; the coincidence of high unemployment, rising prices and slow economic growth.

Standard wording

The standard terms and conditions provided by an insurer to a policyholder for a certain policy type; these wordings can be varied by way of policy schedules or policy endorsements.


The right of an insurer to take over any legal rights that a policyholder may have had in respect of a claim; this is to prevent the insured from claiming from third parties after receiving a pay-out from the insurer.

Sum insured

The amount for which an asset is insured and thus the maximum sum that the insurance company will pay to the policyholder following loss or damage to that item.


The branch of information technology which deals with the long distance transmission of computerised information; in non-life insurance it most frequently refers to the use of telematics devices installed in the insured’s vehicle that provide the insurer with real time information such as vehicle location, acceleration, braking, cornering etc. Telematics is closely linked to big data and is seen as a valuable tool in real-time risk rating engines.

Third party

An individual, firm or juristic entity that is involved in a claim but is neither the policyholder nor the insurer.

Tied agent

A tied agent is an insurance adviser that is contracted with an insurer on terms requiring that the adviser market the products of that insurer only; this adviser is also referred to as a representative of the insurer or an insurer agent.


The time specified in a non-life policy wording during which an insured must institute action against the insurer; this period is usually far shorter than that stipulated in South Africa’s Prescription Act, being around 90 days versus three years. See prescription.

Treating customers fairly (TCF)

A principles-based approach to financial services regulation that requires that financial services firms deliver on six TCF outcomes to their customers, throughout their product life cycle; this begins with product design and promotion, through advice and servicing, to complaints and claims handling.

Twin peaks

A form of financial market regulation wherein two separate regulatory authorities are established, one to preside over prudential aspects of regulation and the other to oversee the conduct of businesses in the sector.


When the sum insured as shown in the non-life insurance policy schedule is insufficient to cover the maximum possible loss or damage.


A person or entity that has the power to accept or reject an insurance risk and, in the event the risk is accepted, determine the premium to be charged.

Excess, voluntary

An additional excess negotiated between the insured and the insurer and reflected in the policy schedule or policy wording; the insured agrees to a higher first amount payable in exchange for a more favourable premium.

Fairness and equity

Principles applied by South Africa’s life and non-life insurance ombudsman schemes in addition to the law; the idea is to treat complainants in insurance matters with fairness and to ensure outcomes that are equitable to both complainant and respondent.

Financial Sector Charter (FSC)

A transformation policy based on the terms of South Africa’s Broad-based Black Economic Empowerment Act to promote social and economic integration and access to the financial services sector.

Financial services provider (FSP)

Any person who, as a regular feature of the business of such person, furnishes advice and / or renders any intermediary service in relation to financial products, such as a non-life insurance policy, who is licensed in terms of the Financial Advisory and Intermediary Services Act.


Loosely defined as computer programs and other technology that are used to support or enable banking and financial services.

First loss basis

An agreement between the policyholder and the insurer that assets on a policy be insured for a sum that is lower than the actual value of those assets; it may be agreed, for example that a maximum ZAR100 000,00 out of an office with total contents worth ZAR1 million would be lost following any single burglary event, in which case the insurer will cover burglary events up to the first loss of ZAR100 000,00.

Fourth Industrial Revolution (4IR)

The accelerated intersection of consumerism and technology underpinned by the emergence of new technologies in fields such as artificial intelligence, big data, blockchain, nanotechnology and quantum computing among others.

Generalised Linear Model (GLM)

In ratemaking, a flexible generalisation of ordinary linear regression that allows for response variables that have error distribution models other than a normal distribution; it is the simplest way to differentiate between categories of risk by, for example, preventing the double counting of certain risk factors and acknowledging the effect of one risk on another or different combinations of risk.

Goods in transit insurance

Insurance cover for goods in transit that can be taken out against multiple perils; the cover is usually provided for goods carried by road freight between the despatch warehouse and the receiving warehouse. Cross-border road freight can also be insured, though it is usually underwritten in the marine insurance segment.

Gradient Boosting Model (GBM)

In ratemaking, gradient boosting is a machine learning technique for regression and classification problems, which produces a prediction model in the form of an ensemble of weak prediction models, typically decision trees.


In ratemaking, the ability to consider risk factors at an individual level rather than across a pool of insurers or potential insureds.

Gross written premium (GWP)

Also referred to as premium written and received before the deduction of reinsurance ceded; this is the premium that an insurer is contractually entitled to receive from all its policyholders in relation to contracts of insurance or from other insurers in relation to inwards reinsurance contracts.

Homeowners insurance, buildings insurance

An insurance policy providing cover against multiple perils that may cause loss or damage to the structures and permanent fixtures of a house and its surrounding buildings.

Household inventory

An inventory of the household contents that make up the sum insured on a householders or household contents insurance policy.

Householders insurance, contents insurance

An insurance policy providing cover against multiple perils that may cause loss or damage to the contents of a house and its surrounding buildings.

Indemnity period

Is the length of time, usually specified in months, that an insurance company is obligated to make payments to indemnify the losses insured under a policy or section of a policy. In business interruption, the period for which the business’ results are affected due to a loss or damage.

Indemnity, limit of indemnity

The highest amount that the insurer would be liable to pay for a claim under a section of a non-life insurance policy; in the case of motor and property insurance the limit of indemnity is usually calculated based on the cost to replace the insured item.


Inflation is the decline of purchasing power of a given currency over time; the rise in the general level of prices, often expressed as a percentage, means that a unit of currency, say the South African rand, effectively buys less than it did in prior periods. See deflation.

Insurable interest

The legally recognised relationship between the insured and the financial loss suffered following an insured loss event; there must be a loss for an insurance contract to come into force and be considered valid.

Insurance broker

A third party agent or intermediary who is licensed to provide insurance services including sourcing insurance quotations, recommending insurance solutions and placing clients’ risks on cover with an insurer.

Insurance brokerage, broking firm

A business that provides independent advice about what non-life insurance cover is available from different companies and assists its clients in sourcing insurance quotations, recommending insurance solutions and placing clients’ risks on cover with an insurer.


Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for money. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. An insurer underwrites the insurance policy; the insured, or policyholder, is the person or entity buying the policy; the amount of money to be charged for a certain amount of insurance cover is called the premium.


The use of technology innovations designed to squeeze out savings and efficiency from the current insurance industry model; the word is a mixture of insurance and technology that was inspired by the term fintech, its equivalent in the broader financial services world.

Intermediaries’ agreement

Any agreement entered between an insurance intermediary or broker and either an insurer or an underwriting management agency (UMA).

Intermediary Guarantee Facility (IGF)

A facility set up by the South African non-life insurance industry through which insurance brokers that collect, handle or process policyholders’ premiums on behalf of an insurer can provide the legally required guarantees; this was a requirement in terms of section 45 of the Short-term Insurance Act, read together with regulation 4 thereto. Amendments to the insurance legislation rendered this facility void from 31 March 2019.


A person who negotiates contracts of insurance or reinsurance with the insurer or reinsurer on behalf of the insured or reinsured.

Internet of Things (IoT)

Refers to a network of digitally-connected devices that interface with the real world and communicate with each other and with server systems via the Internet or other communication networks.


An agreement, no longer in force, that was signed by members of the South African Insurance Association (SAIA) in terms of which each insurer would pay out for the damages incurred by its own insured in the event of a multi-vehicle accident; conditions included that all insureds involved in the accident be policyholders of a signatory of the knock-for-knock agreement and that all had comprehensive motor insurance.

Life insurance or long-term insurance

The collective term for products that pay out upon the death or disability of an insured person, the policyholder, in which case the products are referred to as ‘life risk’ products; or products that pay out a fixed sum at a future date, such as endowments, in which case they are referred to as ‘life savings’ products.


A UK-based specialist insurance marketplace comprising Lloyd’s specialist underwriters, syndicates and members; Lloyd’s brokers or cover holders can approach Lloyd’s underwriters with a complex risk that they would like to place on cover, and the Lloyd’s underwriters will price and place these risks in syndicates, underwritten by members.

Loss adjuster

An independent claims specialist who investigates complex or contentious claims on behalf of insurance companies with the view to establish the cause of the loss and assess whether it is covered by the insurance policy; the loss adjuster will compile a report to the insurance company assessing the validity of the claim and recommending appropriate resolution, including a view on the insurer’s liability. Their fees are paid by the insurance company in addition to the claim settlement.

Loss assessor

Appointed by policyholders when they need to submit large or complex claims; the loss assessor will handle all aspects of the claims process including meeting with insurance company representatives or their appointed loss adjusters, preparing the claim, negotiating the best possible settlement of the claim etc. Their fees are paid by the policyholder.

Mechanical breakdown

A section of a non-life insurance policy that provides cover for the mechanical breakdown of equipment, machinery or plant at the insureds’ premises or on a contract site; this section will specify the perils that are covered, the extent of cover and any excesses and exclusions that apply.


An insurer that conducts the business of microinsurance.


A sub-category of the broader insurance market that is distinguished by its focus on the low value covers and premiums; it is provided by a variety of different financial institutions and managed in accordance with generally accepted insurance practice. Under the South African financial services regulatory framework, microinsurance business is defined based on the value of the insurance under an insurance policy, which may not exceed legislated maximum amounts.


A false statement of fact made by one party which affects the other party’s decision in agreeing to a contract; in insurance it would typically involve the potential insured making a false statement during the policy quotation stage, for example lying about his or her previous claims experience. See disclosure and non-disclosure.

Moral hazard

The additional risk posed to an insurance company due to changes in behaviour by the insured after going on cover; the risk is written or accepted based on the expected behaviour of a reasonable insured and cannot accommodate major deviations from observed behaviour. Insurers have contractual clauses that mitigate their obligation to provide coverage if the insured engages in behaviour that grossly magnifies his or her risk.

Motor vehicle insurance

A non-life insurance policy that provides cover for motor cars and other specified vehicles against loss or damage following accident, theft or hijacking and a range of other perils.


An old standard policy wording introduced for multi-peril business insurance policies; it was introduced by the South African Insurance Association (SAIA) in 1987, was developed over the following years as Multimark II and Multimark III, and was eventually withdrawn in 2007 over fears that it contravened local competition legislation.

Net written premium (NWP)

This is an insurers’ gross premium written and received on all its insurance business reduced by return premiums received from other insurers and further reduced by premiums ceded to reinsurers.

New for old

This is a phrase used in non-life insurance policy wordings to describe the replacement of a used motor or property asset with a new replacement in the event one of the insured perils resulted in damage that meant the asset was uneconomic to repair.

Niche insurer

Used interchangeably with specialist insurer, a niche insurer is either licensed for, or considered to operate, in one type of insurance business only.

No-claim bonus

A cash payment made to an individual insured by the insurer in recognition that no claims were made against the insured’s policy over an agreed time; in practice the insurer will retain a part of the policyholder’s premium each month and refund the accumulated balance to the policyholder after a period of three or five years, provided no claims have been received against the policy over that time.


The omission of a fact by one party which affects the other party’s decision in agreeing to a contract; in insurance it might involve the potential insured purposefully failing to disclose a material fact relating to the item that he or she is seeking cover for. See disclosure and misrepresentation.

Non-life insurance

Providing benefits under non-life insurance policies as stipulated from time to time in the insurance legislation; classes of non-life insurance written in South Africa include property, motor, engineering, guarantee, liability, accident and health and many others.


Also referred to as an insured peril, is the source or cause of the damage or loss that is covered on a non-life insurance policy; the insured perils vary from one policy type to the next, for example, a fire and allied perils policy will extend to cover property from loss or damage due to fire and a range of other perils.

Personal accident cover

A type of non-life insurance policy that provides compensation in the event of injuries, disability or death caused solely by violent, accidental, external and visible events.

Personal liability cover

A type of insurance cover usually included as part of the homeowners or householders policy that provides cover for bodily injury and property damage sustained by third parties but caused by entities, persons or structures for whom the policyholder is legally liable.

Personal lines insurance

Non-life insurance can be broken down into personal lines, which is insurance sold to individuals, and commercial lines, which is insurance sold to businesses and commercial entities.

Plain language

A consequence of the financial sector regulators’ desires to protect consumers; plain language requires that the insurer or insurance broker provide written communications, including policy schedules and wordings, to their policyholders or clients in plain and understandable English.


A global non-profit association working to improve data quality and information exchange for the insurance industry.

Acquisition cost

Costs that are incurred by insurance companies and are primarily related to the acquisition of new insurance contracts or the renewal of existing insurance contracts such as commissions and management expenses.

Act of God

A term used by non-life insurers to describe loss events that stem from natural disasters such as earthquake, flooding and severe storms and similar.

Actio injuriarum

From Latin, meaning an action for delict which not only seeks to protect an individual’s dignity and reputation but also his or her physical integrity.

Adverse selection, anti-selection

A situation that arises due to the policyholder having information that the insurer does not about an aspect that is material to the pricing of the risk or the placing of the risk on cover. The policyholder is placed on cover at a premium rate that is too low, thus adversely affecting the entire insured pool.


A representative of an insurance company by way of an agent-principal agreement; the agent’s primary allegiance is with the insurer as opposed to the insurance broker, who represents the insured.


A platform, usually a website, that collects related items of content and displays them or provides links to them; in non-life insurance a website that provides multiple insurance quotes from multiple insurers based on the same data provided by the potential insured.

All risks cover

A section of an insurance policy that covers loss or damage to specified and non-specified items from any peril, as opposed to standard cover sections where perils are specifically named. The trend internationally is to refer to open perils or special perils due to fears that ‘all risks’ is too broad.

Alternative risk transfer (ART)

The use of techniques other than traditional insurance and reinsurance to provide risk bearing entities with coverage or protection; ART structures include financial instruments such as catastrophe bonds and collateralised reinsurance.

Apportionment of loss or damages

The allocation of a loss between all the insurance companies that insure a piece of property, usually as a pre-agreed percentage of liability to each insurer.

Artificial intelligence (AI)

The theory and development of computer systems able to perform tasks normally requiring human intelligence such as visual perception, speech recognition, decision-making and translation between languages.

Average clause

A clause in the insurance policy wording that stipulates that an insurance pay-out for damages to the insured’s property will be reduced pro-rata with the percentage of underinsurance in the event the sum insured is less than the actual value of the insured goods.

Average limit

An average or aggregate limit is a contract provision used in insurance to limit the amount that can be paid in a certain policy period, in other words the maximum rand amount the insurer will pay in that period to settle all an insured’s claims under that cover.


The sale of life and non-life insurance products and services by a banking institution, whether under the bank’s own insurance license or by arrangement between a bank and a licensed insurer.

Big data

Extremely large data sets generated by customers’ interactions with the digital world that are available to firms to analyse in search of patterns, trends and associations.

Binder agreement

A binder agreement is an agreement between an insurer and a third party, the binder holder, whereby the insurer mandates the binder holder to enter, vary or renew a non-life policy on behalf of that insurer; determine the wording of a non-life policy, determine premiums under a non-life policy, determine the value of policy benefits under a non-life policy; or settle claims under a non-life policy on its behalf.

Binder holder

The third party that enters into a binder agreement with an insurer in connection with the administration of insurance policies; in terms of South African law, the binder holder must be an underwriting manager, administrative financial services provider or non-mandated intermediary.


A digitised, decentralised, public ledger based on distributed ledger technology that can keep track of digital transactions without central recordkeeping; the technology is primarily used to verify transactions within digital currencies, though it is possible to digitise, code and insert practically any document into the blockchain. Also described as a continuously growing list of records, called blocks, which are linked and secured using cryptography.


A report providing premium or loss data with respect to identified specific risks and periodically furnished to a reinsurer by the ceding insurers or reinsurers.

Broadform liability

A comprehensive liability policy that provides protection to a business for legal liability arising out of injury or damage caused to third party persons or their property during the performance of the business.

Business interruption insurance

A type of insurance that covers the loss of income that a business suffers due to physical loss or damage to buildings, plant or equipment; business interruption can be included for any insured peril that results in loss of profit or additional cost of works, whether the peril leads to physical damage such as a fire, or non-physical damage such as a cyberattack.

Captive insurer

Also called a first party cell captive, this is a licensed insurer that only insures the risks of a parent firm or group of firms; it is owned by a parent firm and is predominantly, if not exclusively, utilised to provide cover for the risks of the owner.


Any of a wide range of perils that result in substantial losses including fire, earthquake, windstorm, explosion and other similar events; distinction is made between man-made catastrophe such as a nuclear disaster and natural catastrophe such as earthquake and ensuing tidal wave, with the latter contributing the bulk of insured and uninsured losses worldwide.

Ceding company or insurer

An insurance company that passes a part or all of its risks from its insurance policy portfolio to a reinsurance firm.

Cell captive insurer, cell provider

A licensed insurer that offers insurance structures called cells to first party or third party cell owners; each cell owner, whether a first party or third party cell, obtains a cell in the cell captive insurer and then satisfies its own insurance needs, or offers insurance products through that cell.


A demand from an insured for indemnification from a loss incurred from an insured peril, based on the terms and conditions of the insurance policy; the insurance company reviews the claim for its validity and then pays out to the insured or requesting party once approved.

Claims incurred but not reported

An accounting term for claims resulting from events which have taken place, but of which the insurer has not received notices or reports of loss; for accounting purposes, an estimate is made of the amount of these claims based on previous experience.

Claims incurred

An accounting term for the claims costs for an accounting period, made up of claims paid for the period including claims handling expenses, less outstanding claims at the end of the preceding accounting period, plus outstanding claims at the end of the current accounting period.

Claims paying ability rating

A ratings agency opinion on the overall capacity of an insurance company to meet its financial obligations to its policyholders.


An arrangement that involves separate insurance companies sharing the exposure on one risk; this is a common feature of large asset cover and complex insurance programmes for large commercial non-life insurance policies.

Commercial insurance

Non-life insurance transactions can be reported under two sub-categories, commercial, which is insurance sold to businesses and commercial entities, and personal lines, which is insurance sold to individuals.

Comprehensive cover

A term used to refer to the extent of coverage provided on a certain insurance policy or section of that policy; a comprehensive motor policy, for example, would provide the policyholder with protection from all of the perils typically covered on that policy type.

Consequential loss

An indirect loss that occurs consequent to a direct loss event that is covered on a non-life insurance policy; structural damage following a fire event is considered a direct loss while the policyholder’s loss of profit due to being unable to utilise the building following the fire event is an indirect or consequential loss.

Cooling-off period

The period after taking out an insurance policy within which the policyholder may cancel the policy without losing any premium, usually 30 days; this condition applies more to the non-life personal lines insurance segment.

Corporate insurance

Insurance for large businesses often with multinational operations; the line between commercial and corporate insurance is blurred, but generally the latter refers to mega-insurance for large corporations and multi-billion rand construction and engineering projects that can span several years. The Insurance Act only recognises a commercial sub-category, which holds for both commercial and corporate insurance.

Cover note

A document giving temporary evidence of cover while the insurance policy and certificate are being prepared.

Credit rating agency

An entity that provides credit rating services.

Credit rating

An independent assessment regarding the creditworthiness of an entity, a security or financial instrument or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.

Cyber insurance policy

A non-life insurance policy that offers protection from a range of Internet-based risks including the policyholder’s liability for a data breach in which its customers’ personal details are exposed or stolen by a hacker or other criminal who has gained access to the policyholder’s electronic network; a range of damages or losses that occur following a cybercrime event can be added to such policies.


A crime in which a computer is the object of a crime such as hacking, phishing or spamming attacks; or in which a computer is used as a tool to commit an offense.


A general decline in prices for goods and services typically associated with a contraction in the supply of money and credit in the economy; periods of deflation coincide with an increase in the purchasing power of the affected country’s currency. See inflation.

Directors and officers cover (D&O)

A form of liability insurance payable to the directors and officers of a company, or to the organisation, either as indemnification for losses or advancement of defence costs in the event a policyholder suffers such a loss due to a legal action brought for alleged wrongful acts in their capacity as directors and officers.


The act of revealing all facts relevant to the insurance proposal including telling the truth about the risk that is to be covered; if either party fails to fully disclose important details, the contract may be declared invalid. See misrepresentation and non-disclosure.

Distribution channel

The chain of entities or intermediaries through which an insurance policy reaches the policyholder. Non-life insurance distribution channels include direct channels, through an insurer call centre or website; intermediated distribution channels, through an agent or insurance broker; bancassurance; mobile insurance; and general retail outlets.

Earned premium

An accounting term for the proportion of an insurer’s premium that is attributable to the periods of risk that relate to the current accounting period; it represents written premium adjusted by the unearned premium provision at the beginning and end of the accounting period.


Special provisions added to an insurance policy wording to enhance or restrict its coverage; in other types of contracts, endorsements are the addenda which, though not a part of the original, become an integral and legal part of the contract when attached.

Ex gratia payment

A payment made to the policyholder despite there being no liability or obligation to pay on the part of the insurer; the term is derived from the Latin ‘ex gratia’ which means ‘out of goodwill’.

Exceptions or exclusions

Specific conditions, circumstances or situations that are listed in the policy wording as being not covered; all contracts contain exclusions, expressly or by implication.

Excess, compulsory

An excess that is stipulated by the insurer in the policy wording and is accepted by the insured as part of the contract.

Excess, deductible or first amount payable

The first amount of a claim against an insurer that is noted as an excess in the policy wording and is therefore not covered by the policy; It is payable by the insured, usually by way of a deduction from the claim pay-out.

Insurance phrases, terms and words

The following is a list of phrases, terms and words that you may encounter while reading about non-life or general insurance in South Africa. Definitions have been taken from the Internet, from annual reports and from South African regulation, among other sources. Acknowledgement to the Financial Sector Conduct Authority, Santam Insurance and Sasria (SOC) Limited for the glossaries in their annual reports, and to,;; and

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