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


Uberrima Fides (G)

Latin for "utmost good faith". This honesty principle is assumed to be observed by the parties to an insurance, or reinsurance, contract.


Ultimate (A/D)

Experience (eg mortality) for which the Duration exceeds the Select Period.


Undergraduation (A/D)

A Graduation in which the graduation has been applied too crudely (eg by not including enough parameters in the graduation formula). Smooth graduated rates are obtained, but they do not adhere closely enough to the original data. See also: Graduation , Overgraduation.


Underinsurance (G)

Where the declared value of the goods insured is less than the true value. Depending on the policy conditions, where underinsurance is proved to exist, insurers may be able to claim that the policy is null and void. Alternatively, average may be applied to claim amounts.


Underwrite (E)

Providing some form of guarantee. In investment, underwriting is where an institution gives a guarantee to a company issuing new shares or bonds that it will buy any remaining shares or bonds that were not bought by other investors the expression 'it was left with the underwriters' (or words to that effect) means that the new issue was a flop, few investors wanted to buy the shares and so the underwriters had to buy the unwanted shares.


Underwriter (G)

An individual who assesses risks and decides the premiums, terms and conditions on which they can be accepted by the insurer.


Underwriting Agent (G)

An organisation at Lloyd's providing management services for syndicates and/or advice for Names.


Underwriting Factor (G)

Rating factor. To some practitioners, an underwriting factor refers to the more subjective areas of risk assessment where the underwriter makes a qualitative decision. Compare with a rating factor, say, with a quantitative answer (eg age of driver).


Underwriting Profit (G)

Earned premium less incurred claims less expenses accruing (ie incurred) in the period.


Underwriting Result (D)

The profit or loss on a portfolio of general insurance policies before investment income is taken into account. The underwriting result is estimated as earned premiums less incurred claims less expenses.


Underwriting (A/D)

The process of assessing the risk for a potential policyholder to decide whether to accept a risk for insurance and, if so, on what terms to offer cover. (Originally, underwriters indicated their agreement to the terms of an insurance contract by signing their names at the bottom ie literally underwriting.)


Underwriting (F)

This is the process by which a life insurance company decides which people to accept for insurance and on what terms.

The most important reasons for underwriting are:


  • to reject the uninsurable risks
  • to determine which risks are acceptable on normal terms
  • to assess the expected experience of risks acceptable on special terms


Underwriting (G)

The process of reviewing an individual risk to establish the terms on which a risk should be accepted, eg premium rate, exclusions, conditions to be met before cover is provided.


Unearned Premium Reserve (G)

The portion of premium written in one accounting period which is held at the end of the accounting period in respect of the unexpired risks. It is usually taken to be net of acquisition costs and so is equal to the unearned premium less deferred acquisition costs.


Unearned Premium (G)

The proportion of premium (gross of commission) which relates to the next accounting period, eg for an annual policy written on I September with risk even over the year and premium of 1,200, the unearned premium at the year end is 400.


Unearned Premiums (D)

The portion of a premium that is not earned during a given accounting period. See Earned Premium.


Unexpired Risk Reserve (G)

The reserve required to cover the claims and expenses which will emerge from unexpired risks. If it is greater than the unearned premium reserve (ie recent premiums are thought to be inadequate) an additional reserve for unexpired risk should be held. Some people use the term unexpired risk reserve to refer to the additional unexpired risk reserve. So be careful!


Uniform Distribution (A)

A standard statistical distribution where the probability for each value (or for equal sized intervals) is constant.


Unit Account (F)

A term used for unit-linked business.

The value of the units the policyholder is told he/she owns. This is closely related to the unit reserve.


Unit Linked (A/D)

A life assurance policy or annuity where the proceeds are linked to "units" in an investment fund.


Unit of Account (G)

The value of the European Currency Unit as used when calculating the statutory minimum solvency margin. The unit of account is the ECU with a minimum of 41.66 pence.


Unit Pricing (F)

This is the process whereby the price of units is set. The price of units is basically a reflection of the value of the underlying assets. The method used depends upon whether the unit fund is a net buyer of assets (it is expanding) or a net seller (contracting). Capital gains tax liability further complicates the issue.


Unit Reserve (F)

This is part of the reserve that a life insurance company needs to set up in respect of its unit-linked contracts. The unit reserve represents its liability in terms of units under the contracts.

It may be calculated by taking a special unrounded unit price with no allowance for transaction costs, and by multiplying this number by the number of units promised to policyholders. There may also be a further adjustment for actuarial funding. The unit reserve is then fed into the cashflow model to calculate the sterling reserve, which ensures that in aggregate the unit and sterling reserves are enough to eliminate future negative cashflows on the policy.


Unit Trust (A)

A trust (usually operated by a bank or insurance company) which manages a portfolio of investments on behalf of a number of small investors. 7le investors benefit from diversification and reduced dealing costs.


Unitised Business (F)

After deducting an amount to cover part of ha costs, each premium under a unitised contract is used to buy units at their offer price. These units are added to the contract's unit account When the insured event happens the amount of the benefit is the then bid price value of all the units in the contract's unit account. This may be subject to a minimum amount specified in money terms.

The price of the units may either relate directly to the value of the assets underlying the contract (a unit-linked contract). or may be related to an index (an index-linked contract) or may be based on smoothed asset values with a guarantee that the price of the units will not fall (a unitised with profit contract).


Unitised Fund (A/D)

See: Unit Linked.


Unrelieved Expenses (F)

These arise in the context of the taxation of the Basic Life Assurance and General Annuity Business of a UK life insurance company. They arise when the amount of expenses in the "I-E" assessment are restricted, either so as to avoid "I-E" becoming negative or, in the case of a proprietary company, so as to give an answer equal to the Notional Case I assessment. The unrelieved amount is carried forward for relief in future years.

Carrying forward unrelieved expenses is sometimes referred to as being "XSE". The position of not carrying forward unrelieved expenses is known as being "XSI".


Upper Band Earnings (H)

Earnings between the Lower Earnings Limit and the Upper Earnings Limit on which the SERPS pension is calculated. Also used in the calculation of a GMP.

That part of NI contributions that relates to SERPS is also calculated on this band of earnings. The NI rebate in respect of a contracted out employee is therefore also based on this band.


Upper Earnings Limit (UEL) (H)

The maximum amount of earnings on which National Insurance contributions are payable by employees.



Unearned premium reserve.



Unexpired risk reserve.



The Unlisted Securities Market was for companies who did not want, or could not meet the requirements for, a full listing on the London Stock Exchange. Replaced by AIM.


Actuarial Glossary

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