- DAC (G)
See Deferred Acquisition Costs.
- Days of Grace (N)
See period of grace .
- Death after Retirement (A/D)
Death after retirement.
- Death in Deferment (A/D)
Death between withdrawal from a pension scheme and retirement age.
- Death in Service (A/D)
Death while still an active member of a pension scheme. On death in
service an additional lump sum benefit is usually provided, which may be
higher for married members.
- Death Strain at Risk (A/D)
The excess of the benefit payable on death over the reserve for a life
- Debenture (A)
A loan to a company that is secured against the assets of the company.
- Debenture (E)
A loan made to a company which is secured against the assets of the
company. Debentures usually have a floating charge over the assets of the
company so that debenture holders rank above other creditors should the
company be wound up. Debentures with fixed charges are called mortgage
- Debt (Lien) (F)
A method of reflecting an era mortality risk. A debt or lien is a
deduction from the benefit payable under a life assurance contract usually
only on death where a standard premium is payable. The debt might apply for
the whole of the policy, or for only a part of the policy. The debt might be
level or decreasing (or, theoretically, increasing).
A debt is also sometimes referred to as a lien.
- Deductible (G)
Amount of each claim (or possibly of total claims) which is not covered
by the insurer. The term is more often used in relation to large risks. A
deductible eats into the cover, whereas an excess is the first layer which
is not covered by insurance. This difference matters only where there is an
upper limit on the amount of cover.
- Deep Pocket Syndrome (G)
A situation where claims are made based on the ability of the defendant
to pay rather than on the share of blame. An injured party will try blame
the party with the greatest wealth (ie deepest pocket) where there is more
the one potential defendant.
- Defensive Company (E)
A company which is relatively immune to the economic cycle. Investors
often move to defensive shares when the economy looks like it is starting to
- Deferred Acquisition Costs (DAC)
The amount of acquisition costs paid in a particular accounting period
which relate to unexpired risks.
- Deferred Annuity (F)
This is an annuity under which the payments commence at some point in the
future. It may be by annual premiums payable during the deferred period or
by single premium.
Note that many so@ed deferred annuities are not really deferred annuities
at all. A deferred annuity may have a cash option a guaranteed method of
converting the annuity to cash. If this cash option is very onerous to the
life office, the deferred annuity may effectively be a deferred cash sum.
Group deferred annuity contracts are often not contingent on any
particular human life in deferment. They are not therefore really deferred
in the full actuarial sense of the word (they are delayed but not contingent
on a human life).
- Deferred Annuity (N)
An annuity providing for income payments to begin at some future date,
such as in a specified number of years or at a specified age.
- Deferred Benefit/Deferred
A benefit that does not take effect immediately eg a deferred pension
payable from age 65 to a worker who leaves a pension scheme at age 40.
- Deferred Pensioner (H)
A member of an occupational scheme, who is no longer an active member but
has a pension entitlement that has not yet started to be paid.
- Deferred Period (A/D)
The time interval before benefit payments or cover begins. For example, a
40 year old may take out a deferred annuity policy with payments beginning
at age 60. In sickness benefits, a period (typically 3 or 6 months) must
elapse following the onset of illness before benefit payments commence. See
also: Off Period. Waiting Period.
- Deferred Period (Sickness Benefit) (F)
In a PHI contract, this is the period after the policyholder has become
disabled in accordance with the conditions of the contract before he or she
starts to receive benefit. The deferred period is typically 1 3, 26 or 52
weeks. 4 week periods are also found.
With some PHI policies the deferred period is waived for connected
sickness claims if the second follows closely on from the first. (This
encourages people to return to work as soon as they can, rather than waiting
until they are sure they are fit.)
See also Off Period and Waiting Period.
- Deferred Shares (E)
A special class of share capital. They may be deferred by time, so that
no dividends are paid until a specific time period has elapsed.
Alternatively they may be deferred in that no dividends are paid unless
ordinary shareholders have received a specified level of dividend. Neither
type is common. The London Stock Exchange discourages unusual types of
- Defined accrued
benefit funding method (H)
The text of GN26 is copied below for case of reference.
The Actuarial Liability for active members either as at the valuation
date or as at the end of the Control Period is calculated on the assumption
that the scheme will be discontinued on those dates. As with the other
methods, the Actuarial Liability is normally assessed on the basis of
actuarial assumptions consistent with those used for long term funding. It
is assumed that members will be entitled to the discontinuance benefits
which are defined in the rules of the scheme before reduction of benefits
under the application of any priority rules in a fund with a shortfall in
assets. Additionally (but not alternatively) calculations may be made which
assume that members will receive higher discontinuance benefits, by exercise
of discretion, and both the Actuarial Liability and the Standard
Contribution Rate would then be calculated by reference to those higher
benefits. The Funding Ratio, however, will always be certified by reference
to the discontinuance benefits defined in the rules.
- Defined Benefit Scheme (A/D)
A pension scheme where the pension on retirement is calculated according
to a specified basis (eg 2/3rds of final salary) and the contribution to the
scheme to provide the defined benefits is the variable. Opposite of Defined
- Defined Benefit Scheme (H)
A pension scheme in which the rules specify the benefits to be paid, and
the scheme is financed accordingly.
- Defined Contribution Scheme (A/D)
A pension scheme where the contributions to the scheme are specified (eg
10% of pay) and the benefit provided is the variable. Opposite of Defined
- Defined Contribution Scheme (H)
A scheme where the benefits are determined on a money purchase basis.
- Degrees of Freedom (A/D)
The parameters for some standard distributions derived from the normal
distribution (eg the t, F and chi square distributions) are expressed as a
number of degrees of freedom. The number of degrees of freedom can takes
values 1, 2, 3, ... and represents the amount of "play" in the
equations defining the system.
- Delay Table (G)
A decrement table (ie like a life table) which can be used to estimate
the number of outstanding IBNR claims. Delay tables may be used for
estimating ultimate numbers for any process where delays are common (eg
lapses). The expression may also be used more generally to refer to any
tabular process for assessing outstanding claims (eg a run-off triangle).
- Delay Triangle (A/D)
Same as: Run-off Triangle.
- Demographic (A/D)
Relating to populations and their behaviour. See also: Fertility,
- Deposit Account (A)
A bank account.
- Deposit Back (Reinsurance) (F)
A term used in connection with reinsurance.
Reinsurance involves the payment of premiums to the reinsurer. If the
direct writer is short of capital, the reinsurer may deposit these premiums
back with the insurer.
- Deposit Premium (G)
A premium paid at the start of a period of cover, which may be followed
by an adjustment premium when all the relevant rating data is known.
- Derivative (A)
A contract to trade an underlying asset in the future, eg an Option or a
- Deterministic (A/D)
A deterministic model assumes that the values of all variables are known
in advance, as opposed to a Stochastic model.
- Deterministic (F)
Contrasts with stochastic. A deterministic approach to a problem is one
which does not include parameters which are random variables (as opposed to
a stochastic approach, which does).
- Development Factors (G)
The factors emerging from a chain ladder calculation which are the ratios
of claims in successive development years. Sometimes also known as link
- Direct Insurance (G)
The most usual expression relates to insurance provided by a company for
the insured, as opposed to reinsurance. More recently the term has been used
also for business sold direct to the insured, ie through direct sales
- Direct Insurer/Writer (A/D)
An insurer who issues a policy directly to a policyholder, as opposed to
- Direct Investment (E)
A direct holding of an underlying asset (eg a share, a gilt, a property).
As opposed to indirect investments such as unit trusts and investment
- Direct Writer (F)
A term used in relation to reinsurance. The direct writer is the life
office which has the contract with the policyholder. Any reinsurance
arrangements are between the life office and the reinsurer and do not
involve the policyholder.
The term cedent is also used to refer to a life office which is
reinsuring some business. This term does not necessarily have the same
meaning as "direct writer" since a reinsurer may reinsure. In this
case, the term retrocession is used instead of reinsurance.
- Dirty Price (E)
The amount paid for a bond. It is the clean price (the quoted price) plus
the accrued interest.
- Disability Benefits (N)
There are two main types. The one provides for the payment of a lump sum
on permanent disability. The other (also known as permanent health
insurance) provides for the payment of a regular income on disablement.
- Disallowed Claims Frequency (G)
The claim frequency calculated using only the number of disallowed
claims. Disallowed claims are those which result in loss of bonus under an
- Disclosure Regulations (H)
Regulations requiring disclosure of information about pension schemes and
benefits to interested parties.
- Discontinuance Valuation (H)
An actuarial valuation carried out to assess the position if the scheme
were to be discontinued and the trustees were to wind it up in accordance
with the requirements of the trust instrument. The valuation may take into
account the possible exercise of any discretion to augment benefits.
- Discount (E)
The extent to which a security is priced below its nominal or par value
(see also Premium and Par Value). For example a security at a 2% discount
has a price or value of 98 per 1100 nominal.
- Discounted Dividend Model (E)
A share price valuation model. According to the model, the price (or
value) of a share equals the discounted value of the projected future
- Discounted Mean Term (E)
Average remaining term of the payments on a bond or other security,
weighted by the present value of the individual payments. It is a function
of term, coupon and yield for fixed interest stocks. Also called the
"duration" or "effective me-an term". Closely related to
- Discounted Payback Period (A)
The number of years before the accumulated profit from a business project
becomes positive. Discounted payback periods are used in assessing business
projects where borrowing is required.
- Discovery Period (G)
A time limit placed on the period within which claims must be reported.
It generally applies to classes of business where large IBNR exists, eg
employer's liability. However, courts may decide to ignore this and apply
higher minimum periods. For example, in the case of UK liability claims
courts have ruled that adults have up to three years to claim after they
have discovered the possible liability. Some courts in the US have rule that
it is unreasonable the place any limit on discovery.
- Distribution Function (A)
The probability that a random variable X takes a value less than or equal
to a given value ie P(X <= x).
- Diversification (A)
Reducing investment Risk by holding a variety of investments of different
- Dividend Yield (E)
The running yield (dividends/share price) on an equity.
- Dividend (A)
A payment to a Shareholder. Shareholders normally receive two dividends
each year: an interim (provisional) dividend and a final dividend. See also:
Cum Dividend , Ex Dividend.
- Dividend (Contribution Method) (F)
This is the name given to the cash bonus under the contribution method of
distributing surplus. The amount of the dividend is determined either by
using a formula or by comparing the asset shares of the contracts with their
Used in conjunction with the contribution method.
- Double Endowment (A/D)
An endowment assurance policy under which the survival benefit is twice
the amount of the death benefit.
- Dread Disease Cover (F)
See Critical Illness Cover.
- Dread Diseases (A/D)
Some life assurance policies provide a lump sum benefit if the assured
falls victim to one of the "dread diseases" (heart disease,
- DTI Published Reserves (F)
The reserves shown in the DTI Returns. These may be (and often are) in
excess of the minimum reserves required.
- DTI Returns (F)
The accounts which are required from an insurance company to satisfy the
requirements of Insurance Companies Act 1982 and the Accounts and Statements
Regulations 1983. Insurance companies are required to show reserves which
are at least as great as those calculated using a specified method and set
- DTI Returns (G)
The accounts and statements that an insurance company is legally obliged
to file with the DTI, annually or more frequently in some circumstances (eg
- DTI (A/D)
The Department of Trade and Industry, which has statutory responsibility
in the UK for monitoring insurance business, in particular for ensuring that
insurance companies are solvent. Insurance companies have to submit annual
DTI returns, which consist of a book of standard forms giving detailed
- DTI (G)
The Department of Trade and Industry.
- Durability (of a Funding Method) (H)
A funding method is durable if the contribution rate remains stable if a
major event happens to the membership of the scheme. For example closure of
the scheme to new entrants or a large influx of new entrants.
- Duration (A/D)
The time since Selection eg since a life assurance policy was effected.
Used in addition to age in the calculation of mortality rates.
- Duration (E)
See Discounted Mean Term.
- Dynamised (or Revalued) Average
Dynamisation is a term sometimes used to describe escalation or
indexation. It can be used to describe index linking of earnings, either for
calculating scheme benefits, or for determining final remuneration for the
purpose of PSO limitations.