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Cafeteria Plan. An employee benefit plan that permits employees to choose from among a group of life, medical and other benefit plans; also known as a flexible benefit plan.

Calendar Year. A twelve-month period, January through December, when losses are incurred by an insurer, regardless of the effective date of the original policies.

Cancellation. Termination of an insurance policy by the insurer or the insured prior to the policy's scheduled expiration date.

Capacity. The amount of insurance available from a single insurer or from an insurer within a particular market. In Lloyd's, capacity refers to the historical basic unit of measurement within Lloyd's of the level of premium a syndicate is able to underwrite; a function of the capital pledged to support that syndicate by the capital providers.

Capitation. A payment system whereby managed care plans pay health care providers a fixed, per-capita amount (usually on a monthly basis) to care for a patient over a given period. Providers are not reimbursed for services that exceed the allotted amount. The rate may be fixed for all members or it can be adjusted for the age and gender of the members, based on actuarial projections of medical utilization.

Captive Agent. An insurance agent who has agreed to provide exclusive representation to one insurer. A captive agent usually is an employee of the insurer.

Captive Insurer. An insurer controlled by an insured or a group of insureds, formed for the purpose of insuring risks associated with the activities of its stockholders or members.

Carrier. A synonym for insurer.

Carrying Value. The dollar amount allowed by the NAIC Securities Valuation Office for any invested asset included in an insurer's statutory financial statement. Allowable values for different classifications of assets may vary.

Case Management. The process by which all health-related matters of a case are managed by a physician or nurse or designated health professional. Physician case managers coordinate designated components of health care, such as appropriate referral to consultants, specialists, hospitals, ancillary providers and services. Case management is intended to ensure continuity of services and accessibility to overcome rigidity, fragmented services and the misutilization of facilities and resources. It also attempts to match the appropriate intensity of services with the patient's needs over time, and is a component of utilization management.

Case Reserves. Reserves established with respect to specific reported claims that are intended to reflect the ultimate liability and expense of settling a claim.

Cash Balance Plan. A type of defined benefit plan, sometimes referred to as a hybrid plan because it mimics some of the characteristics of defined contribution plans. Employees receive credits in their own account, based on a percentage of their salary and a credited interest rate, and are provided periodic statements that track their accumulating balance. Although the account is more hypothetical than real, the funds are subject to the same rules as defined benefit plan assets and form part of the company's asset pool.

Cash Flow Underwriting. The process of underwriting in which the insurer seeks to compensate for underwriting losses by investment income derived from the cash flow of its premiums.

Cash Surrender Value. The amount of cash available to a policyholder upon surrender of a life insurance policy or annuity contract.

Casualty Actuarial Society (CAS). An Arlington, Virginia-based professional organization that promotes actuarial science for lines of insurance other than life insurance.

Casualty Catastrophe Cover. See Clash Reinsurance or Cover.

Casualty Insurance. A synonym for liability insurance.

Cat Cover. See Catastrophe Reinsurance.

Catastrophe. A loss or series of losses expected to exceed $25,000,000 in insured property damage. The definition was revised from a $5,000,000 threshhold effective January 1, 1997.

Catastrophe Reinsurance. A form of reinsurance, usually in the form of excess-of-loss reinsurance, that indemnifies the ceding insurer from losses arising from a natural disaster. The actual reinsurance document is referred to as a "catastrophe cover."

CCN. See Community Care Network.

Cedant. A term for an insurer that has underwritten insurance and transfers all or part of its risk to a third party by purchasing reinsurance; also known as a reinsured.

Cede. The act of purchasing reinsurance.

Ceded Premiums. Primarily, refers to premiums paid for reinsurance policies and transferred to the reinsurer. May also refer to premiums transferred by an individual company under a pooling arrangement.

Ceding Commission. An amount payable by a reinsurer to a cedant to cover its acquisition costs plus an anticipated profit margin.

CERCLA. See Comprehensive Environmental Response, Compensation, and Liability Act of 1980.

Certificate of Authority. See License.

Certificate of Insurance. A document issued to individuals insured under a group policy setting forth the essential terms of coverage.

Cession. The amount of insurance ceded to a reinsurer.

CGL. See Commercial General Liability Insurance.

Chartered Life Underwriter (CLU). A person with a minimum of three years of experience in the life and health insurance business who has passed a series of ten professional examinations.

Chartered Property and Casualty Underwriter (CPCU). A person with a minimum of three years of experience in the property-casualty insurance business who has passed a series of ten professional examinations.

Chronic Care. Long-term care of individuals with longstanding, persistent diseases or conditions. It includes care specific to the problem as well as other measures to encourage self-care, to promote health and to prevent loss of function.

Claim. A demand for payment under an insurance policy for a loss covered by that policy.

Claim Adjuster. An individual or firm, whose functions typically include the on-site examination, evaluation and settlement of insurance claims. May be an independent contractor or employee of an insurance company.

Claim Department. A unit within an insurance organization responsible for the evaluation and settlement of claims.

Claimant. One who submits a claim or suffers a loss.

Claims-Made Policy. An insurance policy covering only those claims that occur and are reported during the policy period. In certain instances, a claims-made policy may cover claims arising prior to the policy's inception date. See also Prior Acts Coverage.

Clash Reinsurance or Cover. A form of reinsurance that indemnifies the ceding insurer for losses affecting multiple policies. Such coverage is designed to protect the cedant from multiple catastrophic losses.

Closed Network HMO. An HMO in which all the primary care providers are its employees, i.e., the HMO does not contract with outside providers for primary care.

Closed Panel. Medical services that are delivered in an HMO-owned health center or satellite clinic by physicians who belong to a specially formed, but legally separate, medical group that serves only the HMO. This term usually refers to group or staff HMO models.

CLU. See Chartered Life Underwriter.

CMP. See Commercial Multi-Peril Insurance or see Competitive Medical Plans.

Coinsurance. This term refers to (1) a relationship between two insurers that agree to share a risk proportionally and (2) those instances in which an insured assumes a portion of the risk.

COLI. See Corporate-Owned Life Insurance.

Collateral Assignment. The use of a life insurance policy as collateral for a loan.

Collision Insurance. A form of insurance that covers damage to an insured's automobile resulting from an accident.

Combined Ratio. The sum of an insurer's loss ratio, expense ratio and policyholder dividend ratio, which may be determined in accordance with statutory accounting practices or generally accepted accounting principles. A combined ratio under 100% generally indicates an underwriting profit, and a combined ratio over 100% generally indicates an underwriting loss.

Commercial General Liability (CGL) Insurance. A form of insurance policy that includes a variety of coverages for liability exposures applicable to businesses. New standard-form policies exclude pollution coverage, although such coverage may be available through endorsement or separate policies. Also known as Comprehensive General Liability Insurance.

Commercial Lines Insurance. Insurance that covers commercial and governmental activities.

Commercial Multi-Peril (CMP) Insurance. A form of insurance that provides comprehensive protection to businesses, including coverage for property damage from fire, windstorm and certain other perils, for losses from crime, and for liability for personal injury to others.

Commercial Package Policy (CPP). A package policy designed to meet the needs of larger, more complex businesses.

Commission. Compensation paid to a producer for originating business; primary insurers also are paid a commission for ceding business to a reinsurer.

Common Law. Legal principles established by the courts that are used as precedent for deciding future cases. This contrasts with statutory law that is enacted by legislative bodies.

Community Care Network (CCN). A health care vehicle that provides coordinated, organized and comprehensive care to a community's population. Hospitals, primary care physicians and specialists link preventive and treatment services through contractual and financial arrangements, producing a network that provides coordinated care with continuous monitoring of quality and accountability to the public. While this term often is used interchangeably with Integrated Delivery System (IDS), the CCN tends to be community-based and nonprofit.

Community Rating. The practice of some prepayment plans whereby rates are calculated using a broad range of populations in a community or region. Thus, premiums for subscribers are reasonably uniform and not dependent on individual or group claim experience. This is the rating methodology required of federally qualified HMOs and of HMOs under the laws of many states, and occasionally indemnity plans under certain circumstances. Plans are permitted to factor in differences for age, sex, mix (average contract size) and industry factors; not all factors are necessarily allowed under state laws.

Commute. The process of estimating, paying and discharging an insurer's present and future obligations. Frequently, an insurer and a reinsurer will commute their obligations to each other rather than maintain an ongoing relationship over a number of years.

Company Adjuster. An adjuster who is an employee of an insurer. See Claim Adjuster.

Comparative Negligence. A legal doctrine that enables a claimant to recover damages notwithstanding a finding that the claimant may have a degree of culpability. Damages are apportioned in accordance with degrees of culpability.

Compensatory Damages. Damages awarded to a claimant that compensate the claimant for losses sustained and are designed to make the injured party "whole." This contrasts with punitive damages, which are intended not merely to compensate the claimant but to punish the wrongdoer as well.

Competitive Fund. A state-run workers' compensation insurance facility that competes with private insurers for primary business.

Competitive Medical Plans (CMPs). A type of Medicare private managed care plan, provided for under TEFRA. See Risk HMO.

Completed Operations. The imposition of liability for faulty construction arising after the work has been completed.

Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA or Superfund). Legislation enacted by the federal government to provide funds to clean up hazardous waste sites. The legislation, which was amended and extended in 1986, also holds certain responsible parties liable for the expenses of cleaning up hazardous waste sites. Through the legislation's "joint and several liability" provisions, insurers have been required to pay for the cost of clean-up in certain instances.

Comprehensive General Liability Insurance. See Commercial General Liability Insurance.

Comprehensive Major Medical Insurance. A group health policy that combines basic health care coverage with major medical insurance in a single policy. See Major Medical Insurance.

Compulsory Insurance. Insurance coverage that is required by law, such as automobile liability insurance for drivers or workers' compensation insurance for employers.

Concurrent Causation. A legal doctrine that holds that when a property loss may be attributable to multiple causes, the loss shall be covered by insurance as long as one cause is covered by insurance.

Concurrent Review. Monitoring, under the direction of a medical professional (usually a nurse), of the medical treatment and progress toward recovery once a patient is admitted to a hospital. Its purpose is to assure timely delivery of services and to confirm the necessity of continued inpatient care. This is a component of utilization management.

Condition. A substantive provision of an insurance contract.

Consequential Loss. A loss resulting from, but not caused directly by, an act. This contrasts with the proximate cause of a loss, which refers to an event that is the direct and immediate cause of a loss.

Contingent Beneficiary. A person entitled to receive the proceeds of a life insurance policy if the primary beneficiary dies before the insured.

Contingent Commission. A supplemental commission payable by an insurer based upon the loss ratio or experience of the business being placed.

Contingent Liability. A liability that may occur in the future but has not yet occurred.

Contract Performance Bond. A surety bond that guarantees the performance of specific contractual obligations between the principal and the obligee, as well as payments to suppliers of labor and material.

Contractor's License Bond. A surety bond that guarantees the principal will meet the requirements of such licensing laws as may be applicable to contractors.

Contributory Negligence. A legal doctrine that precludes recovery for damage if the plaintiff has contributed to the loss.

Contributory Plan. A group life or health policy in which the beneficiary pays a portion of the premium.

Convention Blank or Statement. See Annual Statement.

Conversion Annuity. A group annuity contract that at one time shared in the payment of dividends as a participating policy but which subsequently was converted to a non-dividend paying, non-participating policy.

Convertible Term Insurance. Term life insurance that, by its provisions, is convertible to permanent life insurance without evidence of insurability. See Term Life Insurance.

Corporate Name. A new participant in Lloyd's of London, started in 1994, where liability is limited and capital is provided on a corporate basis.

Corporate-Owned Life Insurance (COLI). A life insurance policy covering an employee, with the corporation owning the policy.

Corporation of Lloyd's. Provides administrative support functions for all Lloyd's syndicates, and is paid for by all syndicates.

Cost Containment. Refers to the practice of controlling health care costs through the elimination or reduction of inefficiencies in the health care delivery system.

Cost HMOs. A type of Medicare private managed care plan, provided for under TEFRA, which is essentially a Point-of-Service plan, except that Medicare bears all risk and pays for out-of-network care.

Cost Shifting. Charging one group of patients more in order to make up for underpayment by others. Most commonly, charging some privately insured patients more in order to make up for underpayment by Medicaid or Medicare.

Co-Surety. One of two or more sureties participating in a surety bond and sharing liability.

Council of Lloyd's. The 28-member governing body of Lloyd's.

Country Risk. See Political Risk Insurance.

Court Bond. A surety bond that guarantees that the principal will discharge obligations set by a court.

Cover Note. Same as binder; used primarily outside the United States.

Coverage. The protection provided by an insurance policy.

Covered Participant. A person who meets the eligibility requirements of a pension plan or a group life or health insurance policy and either is receiving or is eligible to receive benefits.

CPCU. See Chartered Property and Casualty Underwriter.

CPP. See Commercial Package Policy.

Credentialling. The process used by managed care companies of reviewing a practitioner's credentials (training, experience or demonstrated ability) for the purpose of determining if criteria for clinical privileging are met, i.e., before admitting the practitioner to the health network.

Credit Enhancement. Use of a financial guaranty to upgrade the credit quality of a security. Credit enhancement may be provided through insurance or a letter of credit.

Credit Life Insurance. A form of decreasing term insurance that covers the life of a debtor and pays the proceeds to the creditor. See Decreasing Term Insurance.

Crediting Rate. The interest rate applied to life insurance policies and annuity contracts, whether contractually agreed upon or declared for a specific period.

Crop-Hail Insurance. A form of insurance that provides protection from damage to crops by hail and certain other named perils, such as fire, lightning and wind. Also referred to as Multiple Peril Crop.

Cut-Through Endorsement. An amendment to an insurance policy for the benefit of a policyholder providing that, in the event of an insurer's insolvency, reinsurance payments shall be made by the reinsurer directly to the policyholder. Such payment bypasses or "cuts through" the usual payment route.

Cycle. See Underwriting Cycle.

Cycle Turn. A change in the property-casualty underwriting cycle suggesting the arrival of either a hard insurance market or a soft insurance market. See also Underwriting Cycle, Hard Insurance Market and Soft Insurance Market.