- Gamma Distribution (A/D)
-
A continuous statistical distribution which models the waiting time for
an event which occurs as the result of a number of sequential events. See
also: Exponential Distribution.
- Gaussian Distribution (A)
-
Same as: Normal Distribution.
Named after the mathematician, Karl Friedrich Gauss.
- Gearing (E)
-
Any system whereby the change in one item leads to a magnified change in
another item, eg a change of 1% in x leads to a change of 5% in y. lie
expression "gearing" or "financial gearing" is often
used to refer to the impact on the profits for a company caused by fixed
interest borrowing. For a financially highly geared company a small change
in the total profits might have a very large proportionate impact on the
profits for shareholders. A company with lots of fixed interest borrowing is
"highly geared". Companies with high fixed costs and low marginal
costs are said to have high "operational" gearing. A small change
in sales gives a big change in profits for such companies.
- GEMMS (E)
-
See Gilt-Edged Market Makers.
- General Business Amount (G)
-
An amount used in the assessment of admissible assets. It is the
technical reserves plus other liabilities plus 20% of net written premium
(or 400,000 ECU if less).
- General Insurance (A/D)
-
Insurance which protects property, financial arrangements or liability to
third parties. See also: Life Assurance ,
Short-term Business.
- Generating Function (A)
-
A function involving a dummy variable that enables all the mathematical
properties of a random variable to be encapsulated in a single function. See
also: Probability Generating
Function and Moment
Generating Function.
- Genetic Testing (F)
-
This refers to the laboratory testing of a person's genetic
characteristics as stored in the molecule DNA (deoxyribonucleic acid). The
aim of the testing is to detect diseases which may cause a significant
reduction in life expectancy before any symptoms are apparent.
There is currently debate as to how much life offices should be allowed
to use the results of genetic tests in underwriting. Offices are
particularly concerned about the risk of anti-selection from people who know
that they have a high risk of a life-threatening illness.
- Gilt (A)
-
A gilt-edged security is a stock issued by the British Government. Since
payments are guaranteed by the Government, the Risk
of default of payment can be ignored.
- Gilt-Edged Market Makers (GEMMS) (E)
-
An institution (eg a merchant bank) which is authorised by the Bank of
England to "make a market" in gilts. GEMMS are very much like
market traders except they deal in gilts rather than vegetables. Also, GEMMS
are required to offer buying and selling prices if approached by a potential
client.
- GN12 (G)
-
Guidance Note 12, relating to actuarial reports for general insurance
business. It concerns formal reports on the reserves and the financial
soundness of general insurance companies and Lloyd's syndicates.
- Going-concern Basis (G)
-
The accounting basis required for Companies Act accounts, which is based
on the assumptions that the insurer will continue to trade as normal for the
long term future.
- Golden Wednesday (E)
-
16 September 1992. The day when currency traders and speculators decided
that the Bank of England would not be able to keep the pound within the ERM.
After a brief struggle with a threat of interest rates being raised from 10%
to 15% to defend the pound, the Treasury capitulated and the pound was
withdrawn from the ERM. Without the need to keep the pound within the
specified range, interest rates were allowed to fall to 6% within the next
four months. Hence the concept of "Golden": it was really good
news for the economy. Those who wanted the UK kept within the Bundesbank's
financial strait-jacket use the term Black Wednesday.
- Gompertz' Law (A/D)
-
A mortality law proposed by Gompertz in which the force of mortality at
age x = B * c^x . See also: Makeham's Law.
- Good Advice (F)
-
See Best Advice. Good advice is a more
recent and slightly weaker version.
- Graduation (A/D)
-
The process of smoothing a table so that the rates progress smoothly eg a
mortality table tabulated by age. See also: Undergraduation,
Overgraduation.
- Gross Premium Valuation (F)
-
This is a method for placing a value on a life insurance company's
liabilities that explicitly values the future office premiums payable. In
addition, it usually values explicitly future discretionary benefits and
future expenses.
If it makes explicit allowance for future bonuses it may be referred to
as a bonus reserve valuation. The valuation may be carried out using formula
or cashflow techniques.
- Gross-Gross Basis (F)
-
A term used to reflect taxation pricing and valuation assumptions. If a
gross-gross basis is used, both interest and expenses are treated as gross
in bases.
- Grossing-up Factor (G)
-
A factor used to adjust a base figure to an ultimate one. For example:
- The ratio between the ultimate cost and the accumulated payments at a
prior development period, as used in statistical claims projection
methods.
- The scaling-up of claims experience allow for the expectation of the
occasional very large claims, as used in experience rating on individual
claims experience that has been stripped of any very large claims.
- Group Benefits (A/D)
-
Benefits that are provided for a group, usually of employees (eg group
death in service benefits). Each individual in the group is given the
relevant "benefit".
- Group Contract (F)
-
Life assurance contracts are split into two sorts, group and individual.
A group contract is a contract that covers a group of gives. Group contracts
are generally arrangements between a life office and a party like a company,
a group of companies, a partnership or the trustees of a pension scheme. The
contract then covers a defined group of people eg some or all of the
employees, or partners, or members concerned.
- Group Life Insurance (N)
-
Life insurance issued, usually without medical examination, on a group of
persons under a single master policy. It is usually issued to an employer
for the benefit of employees. The individual members of the group hold
certificates stating their coverage.
- Guarantee Fund (EU) (G)
-
The greater of one-third of the SMSM and 400,000 ecu. The very minimum
level of funding required by EC (and UK) legislation, below which severe
action will be taken by supervisory authorities.
- Guarantee Fund (G)
-
A solvency indicator for the DTI, such that failure to meet it indicates
severe financial weakness. The guarantee fund is one-third of the SMSM.
- Guarantee Fund (US) (G)
-
This is a US term which is applied in two different ways.
- In the context of mutual insurers it refers to the amount
policyholders may be called on to pay in addition to their premiums if
the insurer is unable to meet its claim liabilities.
- A premium levy on all insurers within each US state to form a
centrally run fund to pay claims and other outstanding liabilities of
insolvent companies.
- Guarantee (F)
-
In the context of life insurance a guarantee usually refers to a promise
that the company will pay a specified sum of money or sums of money at
specified times if a specified condition is fulfilled. The condition can be
an event such as the death of the policyholder, or the surrender or maturity
of a contract.
Guaranteed items may not be varied at the discretion of the life office.
Guarantees are basically what separates non-profit, with-profit and
unit-linked business. Guarantees may also concern premiums or (in the case
of unit-linked business) charges.
In a lay sense, guaranteed = fixed.
Sometimes the term guarantee is used as a synonym for option.
- Guaranteed Annuity (A/D)
-
An Annuity under which payments are guaranteed to continue for at least a
given period. Commonly used in retirement benefits to give the appearance of
providing value for money.
- Guaranteed Insurability Option
(N)
-
A right included in a newly-issued life insurance policy at extra cost,
guaranteeing that the policyholder may buy specified additional insurance at
specified later times, regardless of his or her state of health.
- Guaranteed Minimum Pension (H)
-
The minimum pension which an occupational pension scheme must provide as
one of the conditions of contracting out (unless it is contracted out
through the provision of protected rights).
For an employee contracted out under any occupational or personal pension
scheme an amount equal to the GMP is deducted from his/her benefits under
the state scheme.
