Sales Expense:
Compensation of agents, advertising expense and other costs
related to selling insurance policies.
Salvage:
Property damaged to the extent that it is not economical
to perform repairs, taken over by an insurer after it has
paid
a claim, to reduce its loss by “salvaging” the
remaining value of the property.
Schedule:
A list describing the property or items insured under the
policy and the extent to which they are insured.
Secondary Market:
Market for previously issued and outstanding securities.
Securities and Exchange Commission (SEC):
The organization that oversees publicly-held insurance companies.
Those companies make periodic financial disclosures to the
SEC, including an annual financial statement (or 10K), and
a quarterly financial statement (or 10-Q). Companies must
also disclose any material events and other information about
their stock.
Securities Outstanding:
Stock held by shareholders.
Securitization of Insurance Risk:
Using the capital markets to expand and diversify the assumption
of insurance risk. The issuance of bonds or notes to third-party
investors directly or indirectly by an insurance or reinsurance
company or a pooling entity as a means of raising money to
cover risks.
(See Catastrophe
Bonds.)
Self-Insurance:
A form of risk financing through which a firm assumes all
or a part of its own losses. Self-insurers may purchase insurance
to cover excess losses.
Severity:
Size of a loss. One of the criteria used in calculating premiums
rates.
Sewer-Drain Back-Up Coverage:
An optional part of homeowners insurance that covers sewers.
Shared Market:
See Residual Market.
Soft Market:
A condition where insurance premiums are lowered and the availability
of insurance is high. Opposite of a hard insurance market.
Solicitor:
A person authorized by an agent to solicit and receive applications
for insurance.
Solvency:
Insurance companies’ ability to pay the claims of policyholders.
Regulations to promote solvency include minimum capital and
surplus requirements, statutory accounting conventions, limits
to insurance company investment and corporate activities,
financial ratio tests, and financial data disclosure.
Special Multi-Peril Policy (SMP):
A business policy which combines in one contract the coverages
normally purchased under several policies. Many options and
endorsements are available to tailor it to the policyholder’s
needs.
Specified Perils:
See Named Peril.
Speculative Risk:
A type of risk with three possible outcomes: gain, loss or
no change.
Spread of Risk:
The selling of insurance in multiple areas to multiple policyholders
to minimize the danger that all policyholders will have losses
at the same time. Companies are more likely to insure perils
that offer a good spread of risk. Flood insurance is an example
of a poor spread of risk because the people most likely to
buy it are the people close to rivers and other bodies of
water that flood. (See Adverse Selection.)
Stacking:
Practice that increases the money available to pay auto liability
claims. In states where this practice is permitted by law,
courts may allow policyholders who have several cars insured
under a single policy, or multiple vehicles insured under
different policies, to add up the limit of liability available
for each vehicle.
Standard Provisions:
Policy provisions required by law.
Standard Risk:
A person who according to a company’s underwriting
standards is entitled to insurance without extra rating or
special restrictions.
Statutory Accounting Principles (SAP):
Those principles required by statute that must be followed
by an insurance company when submitting its financial statements
to the various state insurance departments. Such principles
differ from Generally Accepted Accounting Principles (GAAP)
in some important respects. For example, SAP requires that
expenses must be recorded immediately and cannot be deferred
to track with premiums as they are earned and taken into revenue.
Statutory Underwriting Profit or Loss:
Earnings or losses as shown by an insurer on its Statutory
Income Statement (convention blank) as required by state insurance
departments. More specifically: (1) the profit or loss realized
from insurance operations as distinct from that realized from
investments; (2) the excess of premiums over losses and expenses
(profit), or the excess of losses and expenses over premiums
(loss).
Stock Company:
A company organized and owned by stockholders, as distinguished
from the mutual form of company, which is owned by its policyholders.
Stopgap Endorsement:
Provides employer liability coverage for work-related injury
arising out of incidental operations or exposure in the monopolistic
fund states.
Structured Settlement:
Legal agreement to pay a designated person, usually someone
who has been injured, a specified sum of money in periodic
payments, usually for his or her lifetime, instead of in a
single lump sum payment. (See Annuity.)
Subrogation:
A principle of law incorporated in insurance policies that
enables an insurance company, after paying a loss to its insured,
to recover the amount of the loss from another who is legally
liable for it.
Substandard or Extra Risk:
An individual who, because of health history or physical limitations,
does not measure up to the qualifications of a standard life
or health insurance risk.
Superfund:
A federal law enacted in 1980 to initiate cleanup of the
nation’s
abandoned hazardous waste dump sites and to respond to accidents
that release hazardous substances into the environment. The
law is officially called the Comprehensive Environmental
Response,
Compensation, and Liability Act.
Surety Bond:
An agreement providing for monetary compensation should there
be a failure to perform specified acts within a stated period.
The surety company, for example, becomes responsible for fulfillment
of a contract if the contractor defaults.
Suretyship:
Contractual relationship in which one party (surety) guarantees
another party (obligee) against the default or misperformance
of a third party (principal). (See Fidelity
Bond and Surety
Bond.)
Surplus:
A stock company’s surplus is the amount by which its
admitted assets exceed its liabilities and capital stock.
In both stock and mutual companies, the term surplus-to-policyholders
means the excess of admitted assets over liabilities.
Surplus Lines:
A term originating in property/casualty insurance, used to
describe any risk or part thereof for which insurance is
not
available through a company licensed in the applicant’s
state (an “admitted” insurer). The business, therefore,
is placed with “non-admitted” insurers (insurers
not licensed in the state) in accordance with surplus or
excess
lines provisions of state insurance laws. These provisions
generally allow operations on a relatively unregulated basis;
that is, the non-admitted insurer is not subject to the same
rate or coverage requirements that apply to an admitted insurer.
Surrender Charge:
A charge for withdrawals from an annuity contract before a
designated surrender charge period, usually from five to seven
years.
Swaps:
The simultaneous buying, selling or exchange of one security
for another among investors to change maturities in a bond
portfolio, for example, or because investment goals have changed.
Syndicate:
A group of insurers or underwriters that join to insure certain
property that may be of such value or high hazard or so expensive
to underwrite that it can be covered more safely or efficiently
on a cooperative basis.
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