- Obligatory (F)
A term used in the context of reinsurance treaties.
An obligatory treaty is one which covers the situation where at least one
party is under an obligation to act in a particular way. Either
"side" of the treaty may be obligatory. Sometimes abbreviated to
"oblig" or "ob".
If the direct writer is under an obligation to offer a certain type of
risk to the reinsurer, then the direct writer's side is described as
If the reinsurer is under an obligation to accept a certain type of risk
from the direct writer, then the reinsurer's side is described as
See also Facultative.
- Occupational Pension Scheme (A/D)
A pension scheme sponsored by employers.
- Occupational Person Scheme (H)
An arrangement subject to the SSA73, organised by an employer or on
behalf of a group of employers to provide pensions and/or other benefits for
or in respect of one or more employees on leaving service or on death or
- Off Period (A/D)
The time interval which must separate spells of sickness benefit payments
before they are treated as separate claims. The off period is important
where benefits decrease over time to prevent claimants from temporarily
"recovering" so as to revert to the higher initial benefit level.
See also: Deferred
Period , Waiting
- Off Period (Sickness Benefit) (F)
In respect of a PHI contract, this Is the period after recovery from
disability within which a further claim is treated as a continuation of the
previous claim, is the deferred period is ignored.
The purpose of this is to encourage people to return to work even if they
think they may relapse (otherwise, they would be worried about having to
suffer another deferred period).
The feature is also sometimes referred to as "linked claims".
See also Deferred
Claims and Waiting
- Offer Basis (F)
A method of calculating unit prices appropriate for an expanding fund.
- Offer Price (F)
This is the price a life insurance company uses to allocate units to a
unit-linked policyholder. It is often 5% higher than the bid price at which
the policyholder can redeem units.
There are different ways of calculating offer and bid prices which may
cause them both to suddenly alter. They will normally remain 5% apart.
- Office Premium (A/D)
The actual premium charged for a policy. The office premium allows for Expenses
Margins. See also: Mathematical
Premium , Net
Premium , Pure
Premium , Risk
- Office Premium (F)
The office premium is the premium that the policyholder pays under a life
This can be contrasted with the net premium used for a net premium
valuation. In gross premium valuations (formula or cashflow) the office
premium is used rather than the net premium.
- Office Premium (G)
The actual premium charged.
- Omon Value (E)
Time value, ie the excess value of an option (or a security with an
option feature) over its intrinsic value.
- One Year Accounts (G)
The basis of accounting whereby profit is calculated from the exposure in
a given period. It is the standard basis for most insurance companies and
classes of business, especially for personal lines of business. Compare with
three year accounting.
- Open Ended Investment (E)
An investment such as a unit trust or open ended investment company where
additional units can be created as and when needed (see also Closed
- Open Year (G)
A year before profit is determined under three year accounting. See also Closed
- Operating Ratio (G)
- Opting Out (H)
A decision by an employee to leave (or not join) a pension scheme whilst
remaining in the employment of the sponsoring company.
- Option Loading (F)
An extra premium (or charge) payable to pay the life office for the
cost/risk of providing an option.
- Option (A)
The right to buy or sell an investment at a predetermined price during a
specified period in the future. A call option gives the investor the right
to buy. A put option gives the right to sell.
- Option (F)
An option is where the life insurance company gives a policyholder the
right to make guaranteed surrender value is an example of a financial
option. The right to increase the level of death - or sickness - cover at
any time without further evidence of health is an example of a health
- Option (ie Traded Option) (E)
A contract between two parties. One party sells the other party an
option. The option may be either to buy or to sell a given asset on
specified terms. Options are traded through LIFFE.
- Ordinary Branch Business (F)
Life assurance business is classified as either industrial branch (IB) or
ordinary branch (OB) business. Business which is not industrial branch (IB)
is ordinary branch (OB). OB is by far the larger class. There is no longer a
distinction between the two for life office taxation purposes.
- Ordinary Life Insurance (N)
Life insurance usually issued in amounts of $1 000 or more with premiums
payable on an annual, semi-annual, quarterly, or monthly basis. The term is
also used to mean "straight life insurance".
- Ordinary Shares (A)
The basic form of shares issued by a company, which entitle the holder to
receive regular dividends from the company's profits. Some companies also
issue other forms of shares (eg preference shares) which give preferential
rights to the holders.
- Origin Year (G)
The base year for defining the origin of claim events. The most usual
definition will be the accident year, although other types of origin year
are possible (eg reporting year, underwriting year).
- Original Gross Premium Ratio (OGPI)
The gross premium income received by an insurer in relation to business
that is covered by a non-proportional reinsurance premium being calculated
as a percentage of this OGPI.
- Original Terms (F)
Reinsurance whereby the reinsurer broadly accepts the "original
terms" offered by the direct writer to the insured. If, for example,
the direct writer cedes 400,000 of a 700,000 risk in year 1:
- the ceding company will pay 4/7 of the office premium to the reinsurer
- the reinsurer will meet 4 of any claim (this amount would be paid to
the ceding i company, not direct to the policyholder)
- Orphan's Benefit (A/D)
A benefit (usually an annuity payable until age 18 or 21) payable to a
child following the death of a parent covered by life assurance or a pension
scheme. A child with no surviving parents is sometimes called a double
- OTC (E)
Over-the-counter. Describes share dealings outside a recognised stock
- Outstanding Claims Reserves (G)
Money set aside to cover claims which have already been incurred, but are
not yet settled. Without further clarification, outstanding claims may or
may not include IBNR. Care required. Get in the habit of checking whether
IBNR reserves are included, and where they are not, use the expression
"outstanding reported claims reserves".
- Overgraduation (A/D)
in which the graduated values adhere too closely to the original data (eg by
including too many parameters in the graduation formula). This results in a
graduated table which is not as smooth as it should be. See also: Graduation
- Overheads (F)
The term overheads is used to refer to that part of a life insurance
company's total expenses which are independent of the volumes of business it
is currently writing or generally taken to include items has already
written. There is no agreed definition of what constitutes an overhead
Overheads are generally taken to include items like property costs,
training and personnel costs.
- Overriding Commission (G)
Additional commission paid by a reinsurer to a direct writer as a
contribution towards the direct writer's expenses and overheads.
- Overriding Legislation (H)
Acts (or regulations) of Parliament that overrule the contents of a
scheme's Trust Deed and Rules.
From time to time, schemes update (or consolidate) the TD&R to take
account of such legislation, so that there can be no confusion when reading
- Overseas Investment (A)
Investment in another country eg in a Japanese company or a US bond.
- Overseas Investments (E)
Investments issued other than in the UK.