Insurance Glossary

SALVAGE

Damaged property an insurer takes ownership of after paying a claim in order to reduce its loss. Salvage charges are the costs associated with recovering such property.

SCHEDULE

A detailed list of individual items or groups of items covered under an insurance policy, or a listing of specific benefits, charges, credits, or assets.

SECONDARY MARKET

The financial market in which previously issued securities are bought and sold among investors.

SECURITIES AND EXCHANGE COMMISSION (SEC)

The federal agency that oversees publicly traded companies, including insurance companies, requiring regular financial disclosures such as annual (10-K) and quarterly (10-Q) reports.

SECURITIES OUTSTANDING

Shares of stock that have been issued and are currently held by investors.

SECURITIZATION OF INSURANCE RISK

The transfer of insurance risk to capital markets through instruments such as catastrophe bonds, allowing insurers and reinsurers to raise capital and spread risk.

SELF-INSURANCE

The practice of assuming financial risk instead of transferring it to an insurance company. This may involve deductibles, self-funded employee benefits, or retaining predictable losses.

SEVERITY

The size or magnitude of a loss. Along with frequency, severity is a key factor in determining insurance premiums.

SEWER BACK-UP COVERAGE

An optional homeowners insurance endorsement that covers damage caused by sewer or drain backups.

SINGLE PREMIUM ANNUITY

An annuity contract that is fully funded with a single lump-sum payment at the time of purchase.

SOFT MARKET

An insurance market condition characterized by abundant coverage availability, relaxed underwriting standards, and lower premiums.

SOLVENCY

An insurer’s ability to meet its financial obligations and pay policyholder claims, supported by regulatory capital and surplus requirements.

SPREAD OF RISK

The distribution of insurance exposures across many policyholders and geographic areas to reduce the likelihood of simultaneous losses.

STACKING

A practice that allows policyholders to combine coverage limits from multiple vehicles or policies to increase available claim payments, where permitted by law.

STATUTORY ACCOUNTING PRINCIPLES (SAP)

Conservative accounting rules mandated by state regulators that emphasize insurer solvency by recognizing liabilities earlier and limiting asset valuations.

STOCK INSURANCE COMPANY

An insurance company owned by shareholders who benefit through dividends and increases in stock value.

STRUCTURED SETTLEMENT

A legal arrangement in which a claimant receives compensation through periodic payments over time rather than a single lump sum.

SUBROGATION

The legal right of an insurer to seek recovery from a third party responsible for a loss after paying the policyholder’s claim.

SUPERFUND

A federal program established under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to clean up hazardous waste sites.

SURETY BOND

A three-party agreement in which a surety guarantees the performance or obligation of a principal to an obligee, commonly required for public construction projects.

SURPLUS

The amount by which an insurer’s assets exceed its liabilities, serving as a financial cushion for unexpected or catastrophic losses.

SURPLUS LINES

Insurance coverage placed with non-admitted insurers for risks that admitted insurers cannot or will not insure, subject to state-specific regulations.

SURRENDER CHARGE

A fee assessed for withdrawing funds from an insurance-based contract, such as an annuity, before the end of a specified surrender period.

SWITCHING

The exchange of one security for another, often to adjust investment maturity, risk profile, or investment objectives.