- Fac-Oblig (G)
-
Short for facultative-obligatory.
- Facultative (F)
-
A term used in the context of reinsurance treaties.
A facultative treaty is one which covers the situation where one party is
under no obligation to act in a particular way. Either "side" of
the treaty may be facultative. Sometimes abbreviated to "fac".
The opposite of facultative is obligatory.
On the part of a ceding company, facultative means that it is free to
seek cover from any reinsuring company. On the part of a reinsuring company
it means that it is free to accept the reinsurance or not, and, if it does
accept, on what terms.
- Facultative (G)
-
Reinsurance-speak for an individual reinsurance arrangement covering a
single risk (as opposed to a reinsurance treaty which will cover all risks
as defined in the treaty).
- Facultative-Obligatory (G)
-
A reinsurance treaty where the direct writer may choose whether or not to
place a risk under the treaty. The reinsurer has no choice and is obliged to
accept risks ceded.
- Failure Rate (A)
-
Same as Hazard Rate.
- Family Income Benefit (A/D)
-
A benefit under which Annuity payments are
made during the remainder of the term of cover following the death of an
assured life.
- Family Income Benefits (N)
-
A form of decreasing term assurance
under which, on the death of the life insured, the life office pays the
benefit in instalments to the beneficiary until the end of a selected term.
- Fertility (A/D)
-
Technical word for "having children".
- Fidelity Risk Reinsurance (G)
-
This is a non-traditional form of reinsurance which involves little risk
and provides reinsured with a means of changing its balance sheet and
revenue account without significantly altering the economic reality.
- Final Salary Benefit (A/D)
-
A pension scheme benefit that is based on the member's salary in the few
years before leaving (eg 1/60th of average salary over the previous 3 years
for each year of service). See also: Career
Pay Benefit.
- Final Salary Scheme (H)
-
A pension scheme where the benefit is calculated by reference to the
member's pensionable earnings for a period ending at or before normal
pension date or leaving service, usually also based on pensionable service.
- Financial Futures (A)
-
A Futures contract where the specified
asset is based on either a particular fixed interest security, share,
currency rate or interest rate. See also: Derivatives.
- Financial Futures (E)
-
Futures contracts based on financial assets or indices, ie futures based
on bonds, interest rates, the stock market or currencies.
- Financial Strength (F)
-
There is no agreed definition of this term. It refers to the ability of a
life insurance company to withstand adverse changes in experience and to
meet the reasonable expectations of its policyholders.
The normal simple measurement of financial strength would look at two
figures, the value of assets and the value of liabilities. The ratio of
assets to liabilities would be the most common single figure index. This
figure should be interpreted in conjunction with the methods and bases used
to calculate the values of the assets and liabilities. For example, the
ratio of published assets to liabilities (including or excluding the
required solvency margin) is an often-quoted measure of financial strength.
It is a flawed measure, but is used since the figures are publicly
available.
- Finite Risk Insurance (G)
-
A form of financial reinsurance which provides a limited amount of risk
transfer and a significant investment income element, in order to satisfy US
accounting guidance. For examples, this may be done by providing a profit
share if the reinsured's claims experience is low, in return for a limit
being placed on the recoveries the reinsured can make.
- First Loss (G)
-
A type of policy where the insurer agrees to cover the sum insured, which
is less than the full value of the insured property, with the policyholder
bearing any loss in excess of the sum insured. It is appropriate in
circumstances where the policyholder considers that a loss in excess of the
sum insured is extremely unlikely and is therefore common for industrial
fore business.
- Fixed Interest Security (A)
-
A loan or bond that pays a fixed amount of interest each year (eg a
conventional gilt).
- Flat Rate of Interest (A)
-
A loan (eg under a hire purchase agreement) in which the interest payable
is expressed as a proportion of the initial loan, rather than as a
proportion of the outstanding balance. The APR for such an arrangement is
actually nearly twice the "apparent" interest rate.
- Fleet Rating (G)
-
The process of determining premium rates for fleets.
Different techniques will be used for different fleets, largely based on
the size of the fleet and the amount of claims history available. For
example, small fleets may be largely rated according to book rates per
vehicle with some adjustment for expense savings, whereas experience rating
will be used for larger fleets with the credibility increasing with the size
of the fleet.
- Fleet (G)
-
A group of cars, commercial vehicles, ships or airplanes that are insured
together under one policy.
- Floating Rate Note (E)
-
A Eurobond with a variable rate of interest.
- Footsie (E)
-
The familiar name for the FT-SE 100 Index, an index which moves with the
weighted average of the share prices of the 100 largest companies on the
London Stock Exchange.
- Force of Interest (A)
-
The annualised rate of interest expressing the interest earned during an
instantaneous time interval as a proportion of the existing fund.
- Force of Mortality (A/D)
-
The annualised rate of mortality expressing the expected number of deaths
during an instantaneous time interval as a proportion of the existing
population.
- "Force" of Sickness (A/D)
-
The probability of an individual being sick at a given time. It is not a
"force" in the same sense as the force of mortality since it is
not a measure of Change in the population. lie force of sickness can be
subdivided by duration since inception of sickness.
- Foreign Bond (E)
-
A bond issued in one country's domestic bond market by an overseas
borrower (eg bulldogs yankees etc.)
- Form 9 Free Asset Ratio (F)
-
The ratio of published assets to statutory liabilities (including or
excluding the required solvency margin) appearing on Form 9 of the DTI
returns. An often-quoted measure of financial strength. It is a flawed
measure, but is used since the figures are publicly available.
- Forward Contract (E)
-
A contract to buy (or sell) an asset on an agreed basis in the future.
- Free Assets (F)
-
There is no agreed definition of this term.
It is loosely used to refer to that part of a life insurance company's
assets that are not needed to cover its liabilities. Opinion differs as to
what should be included in the liabilities.
Often in the UK, the term is used to describe the excess of the value of
the assets over the value of the liabilities as reported in one of the forms
of the returns made to the UK insurance supervisory authority.
The term free assets is also used to refer to an excess of a realistic
value of assets over a realistic value of liabilities. Free assets are also
known as "free reserves" or the "estate".
- Free Cover Limits (F)
-
Free cover limits arise under group life or group PHI contracts. It is
the level of benefit, on a particular member, up to which a life insurance
company will provide cover without medical evidence. Free cover limits vary
according to the size of the group insured, their average sum assured and
the variation in their sum assured.
- Free Reserves (G)
-
The excess of assets over liabilities. Also called free assets or
solvency margin or capital employed or surplus or shareholders' funds. The
amount will be dependent on the bases used for valuing assets and
liabilities.
- Free
Standing Additional Voluntary Contributions (FSAVCs) (H)
-
A pension contract separate from an occupational pension scheme taken out
by an active member of that scheme. Contributions from the member alone are
used to provide benefits. The employer may not contribute to an FSAVC
scheme.
See also AVCS.
- Friendly Society (A/D)
-
An organisation similar to a life assurance company that provides
benefits to members on death, survival or sickness.
- From the Ground up (G)
-
A method by London Market excess of loss reinsurer to assess their own
exposure by examining the expected claims distributions in all lower layers
of cover, ie from the cedant's retention up to their own layer.
- Front-End Load (F)
-
A term in unit-linked business.
A front-end load is a method of recouping expenses early on in a
contract. An example of a front-end load is a nil allocation period.
Arguably, capital units plus actuarial funding are also a front end load
(although capital units without actuarial funding definitely aren't).
The term is imprecise and ideally should not be used.
- FSAVC (F)
-
Free standing additional voluntary contributions. A type of AVC separate
from an occupational pension scheme. FSAVCs are mainly invested with life
offices. FSAVCs are effectively a form of personal pension, but are only
available to people in an occupational pension scheme.
- FT (E)
-
The Financial Times. A pink daily newspaper packed with useful financial
data.
- FTSE Index (A)
-
The Financial Times-Stock Exchange Index, which measures the price of a
basket of major UK shares. Pronounced: 'Footsie'.
- Full Preliminary Term Method (D)
-
A method of calculating reserves in life insurance that involves
increasing the policyholders age by 1 year to make allowance for the
expenses incurred in the first year of the policy.
- Functional Costing (G)
-
A process used within an expense analysis to split the expenses of each
on-line department between the different classes of business covered by that
department. The process relies upon fixing relative costs for each of the
processes carried out by the department and counting the number of times
that each of the processes is carried out over the period in question.
- Fund Accounting (G)
-
An alternative term for three-year accounting.
- Fundamental Analysis (E)
-
The analysis of a company's share value and potential for future profit
and dividends, based on accounting and economic information (compare with
Technical Analysis).
- Funding Level (H)
-
See Level of Funding.
- Funding Method (H)
-
Funding methods are different ways of calculating contribution rates to
pension schemes. Most are defined in terms of a Standard Contribution Rate
and an Actuarial Liability.
Different funding methods do not lead to different costs. They merely
dictate the pace at which a scheme is funded.
- Funding Objective (H)
-
The arrangement of the incidence over time of payments with the aim of
meeting the future cost of a given set of benefits.
- Funding Ratio (H)
-
see GN26
The text of GN26 is copied below for case of reference.
The ratio of the Actuarial Value of Assets to the Actuarial Liability.
- Future Valuation Strain (F)
-
Valuation strain expected (on a particular valuation basis) to occur in
the future.
Reserves are calculated to avoid future valuation strain.
- Future (A)
-
An agreement to trade a specified asset on a specified date in the future
at a specified price.
