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JOINT UNDERWRITING ASSOCIATION / JUA |
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Insurers which join together to provide coverage for a particular type of risk or size of exposure, when there are difficulties in obtaining coverage in the regular market, and which share in the profits and losses associated with the program. JUAs may be set up to provide auto and homeowners insurance and various commercial coverages, such as medical malpractice. (See Assigned risk plans; Residual market)
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JUNK BONDS |
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Corporate bonds with credit ratings of BB or less. They pay a higher yield than investment grade bonds because issuers have a higher perceived risk of default. Such bonds involve market risk that could force investors, including insurers, to sell the bonds when their value is low. Most states place limits on insurers' investments in these bonds. In general, because property/casualty insurers can be called upon to provide huge sums of money immediately after a disaster, their investments must be liquid. Less than 2 percent are in real estate and a similarly small percentage are in junk bonds.
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KEY PERSON INSURANCE |
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Insurance on the life or health of a key individual whose services are essential to the continuing success of a business and whose death or disability could cause the firm a substantial financial loss.
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KIDNAP/RANSOM INSURANCE |
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Coverage up to specific limits for the cost of ransom or extortion payments and related expenses. Often bought by international corporations to cover employees. Most policies have large deductibles and may exclude certain geographic areas. Some policies require that the policyholder not reveal the coverage's existence.
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LADDERING |
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A technique that consists of staggering the maturity dates and the mix of different types of bonds.
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LAW OF LARGE NUMBERS |
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The theory of probability on which the business of insurance is based. Simply put, this mathematical premise says that the larger the group of units insured, such as sport-utility vehicles, the more accurate the predictions of loss will be.
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LIABILITY INSURANCE |
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Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.
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LIFE INSURANCE |
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See Ordinary life insurance; Term insurance; Variable life insurance; Whole life insurance
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LIMITS |
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Maximum amount of insurance that can be paid for a covered loss.
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