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Actuarial Glossary :: "The Mother of All Actuarial Glossaries"



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 assurance policy.


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 debentures.


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 head downwards.


Deferred Acquisition Costs (DAC) (G)

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 Annuity (A/D)

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 share.


Defined accrued benefit funding method (H)

see GN26

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 Contribution Scheme.


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 Benefit Scheme.


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, Morbidity, Mortality.


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 Future.


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 ratios.


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 channels.


Direct Insurer/Writer (A/D)

An insurer who issues a policy directly to a policyholder, as opposed to a Reinsurer.


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 trusts.


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 NCD system.


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 dividend payments.


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 volatility.


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 types.


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 statutory reserves.

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, cancer, stroke).


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 of assumptions.


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 new companies).



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 accounting information.



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 Earnings (H)

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.

Actuarial Glossary

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