Insurance Terminology


Giving up the proprietary rights in insured property to the underwriter in exchange for payment of a constructive total loss


The Australian Competition Consumer Commission promotes competition and fair trade in the market place to benefit consumers, business and the community. It also regulates national infrastructure services. Its primary responsibility is to ensure that individuals and businesses comply with the Commonwealth competition, fair trading and consumer protection laws.


An unplanned and unexpected event which occurs suddenly and at a definite place.

Act of God

An event or occurrence due to natural causes which occurs independently of human intervention and either could not be foreseen, or if foreseen, could not be reasonably guarded against. (e.g. storm, flood, earthquake, cyclone)

Actual Total Loss

An actual total loss occurs when:

  1. the insured property is completely destroyed or
  2. the assured is irretrievably deprived of the insured property or
  3. cargo changes in character so that it is no linger the thing that was insured or
  4. a ship posting “missing” at Lloyd’s in which case both the ship and its cargo are deemed to be an actual total loss.


A specialist in risk analysis, especially as it relates to insurance calculations such as premiums, reserves, dividends, and insurance and annuity rates. They usually work for insurance companies, particularly Life companies, to evaluate applications based on risk.

Additional Excess

This excess may be imposed in special circumstances, for example in motor insurance on high performance cars or motorbikes. It is payable in addition to any other excesses.


Also known as an assessor, is a representative of the insurer who seeks to determine the extent of the company’s liability for loss when a claim is submitted.


The exposure of property to risk

Advice Cards

Cards (with printed information) issued to Lloyd’s Underwriters by Lloyd’s data processing department

Age Excess

This excess is additional to the standard excess if the insured car is being driven by a person in the age ranges specified on the insurance schedule and renewal notice.

Agreed Value

A car’s agreed value is set at the beginning of each period of cover. It is based on the fair value given then for the cars make and model in the motor trade’s most commonly accepted price handbook. The value doesn’t change for the period of cover.

All Risks

All fortuitous causes of loss. It does not embrace inevitable loss, such as wear and tear.

Amount covered

The current amount covered is shown on the most recent of the insurance schedule and the renewal notice. It is the most the insurer will pay, less any excess, for a claim that is covered by the policy. The amount covered includes GST.


A contract sold by an insurance company designed to provide payments to the holder at specified intervals, usually after retirement.

Approved or h/c

An “approved vessel is on one which the Underwriter deem adequate to carry the insured cargo, at the agreed rate of premium. Where the vessel is not approved the risk is still covered but subject to a reasonable additional premium.


Australian Prudential Regulation Authority is the prudential regulator of banks, insurance companies and superannuation funds, credit unions, building societies and friendly societies.


Any unlawful setting fire to property.


The Australian Securities and Investments Commission enforces and regulates company and financial services laws to protect consumers, investors and creditors.


See adjuster


The passing of beneficial rights from one party another.

Attestation Clause

That part of a policy in which the Underwriter binds himself to the policy condition.


A partial loss. This can be particular average or general average (which see).

Average Clause

A clause in a policy, whereby partial losses are subject to special conditions (eg a franchise or deductible is to be applied to claims).


The right of an Underwriter, in the event of a breach of good faith or delay in commencement of an insured voyage, to step aside from the insurance contract and to treat it as though the never accepted the risk.

Benefit of Insurance Clause

A clause by which the bailee of goods claims the benefit of any insurance policy effected by the cargo owner on the goods in care of the bailee. Such a clause in a contract of carriage, issued in accordance with the Carriage of Goods by Sea Act, is void at law.

Bill of Lading

Contract of carriage and receipt for goods, issued by carrier.

Body Corporate

A group consisting of the owners of each strata property, established to maintain the common areas of flats or units and to take out insurance for the common areas.


An intermediary, who acts on behalf of a person who is applying for insurance. They earn a commission from the insurer, however, they have a responsibility to obtain the best cover for the best price possible. In certain circumstances a broker can also act as an agent for the insurer in terms of issuing a policy or collecting a premium.

Building Insurance

See Home Building Insurance.


Precious metals, such as gold, in the form of ingots or bars.

Burning Cost

A loss ratio determined from the statistics of a number of preceding years in order to assess the premium to be charged to the reinsured in connection with excess loss reinsurance.

C. and F.

A sale term relating to goods. Cost and freight. The consignee makes his own insurance arrangements for the goods throughout the period of transit.


The termination of a policy before the expiry date.

Cancelling Return

A return of premium paid because a hull policy has been cancelled before the natural expiry date.


The ability of an insurer, syndicate or market to absorb the risk.


Sometimes used to describe the insurer. Not generally used because of confusion with carriers of freight.

Cash Loss

A payment made outside the normal accounting procedure for treaty reinsurance.


See disaster

Certificate of Insurance

A certificate that acts as proof that a policy has been issued. Usually requested by a financial institution.

Certificate of Rating or No Claim Bonus

A certificate that acts as proof that a person has earned an insurance rating or no claim bonus entitlement.


Contract between shipowner and person who hires his ship or space therein, for a specific voyage or a period of time.

Claims Ratio

The ratio of the cost of claims to earned premiums.


Corporate Law Economic Reform Program


Where two or more persons share single risk. A co-insurer is not obliged to follow the decision of another co-insurer, except where he has given authority for the other person to act on his behalf. Each co-insurance is a separate with the assured.

Collection or Set

A group of items of sufficiently common type, appearance or nature that they reasonably belong together and that is devalued if one or more of the group is lost or damaged.


Physical impact between two or more ships or vessels used for navigation. In collision liability insurance the term does not include contact of the insured vessel with anything other than a ship or vessel.

Combined Ratio

A combination of the claims ratio and the expense ratio.


A fee charged by a broker or agent for services in the sale of an insurance contract.

Common Law

The principles of law arising from court decisions.

Common property

See site.

Comprehensive Motor Insurance

Provides specified cover for damage to the insured car as well as damage the insured car may cause to the property of others.

Compromised Total Loss

An arranged settlement on a hull policy where there is no claim for actual or constructive total loss but it is impracticable to repair the vessel.

Consequential Loss

A subsequent loss that results from the direct damage e.g. public transport costs incurred when a car is off the road due to and accident.

Constructive Total Loss

Where the assured abandons the subject matter insured to the underwriter and claims a total loss. He can do this when an actual total loss appears to be inevitable or when he is deprived of the insured property and is unlikely to recover it or in the following circumstances. Ship- the cost of recovery and repair would exceed the insured value. Cargo- the cost of recovery, reconditioning and forwarding would exceed the value of the goods at destination.

Contents Insurance

See Home Contents Insurance.


This term is used in hull insurance to refer to damage received when the ship hits something other than another ship or vessel. When the ship hits another ship or vessel, damage received thereby is referred to as collision and contract are perils covered by a hull policy. However whilst a hull policy usually covers collision liability does not cover collision liability, by reason of contract.


The term relates to circumstances where more than one party covers the risk. Each party is deemed to be liable for his proportion of the loss. If the assured recovered in full from one insurer, that insurer is entitled to recover from the other insurer for that part of the loss which should have been paid by the latter. The term is used in marine insurance, also, in relation to contributions paid by the assured in connection with salvage and/or general average.

Contributory Value

The value on which a contribution to a general average loss or salvage award is calculated.

Cooling off period

Federal law provides that you can cancel your policy within 14 days of its purchase date.

Country Damage

Damage to baled or bagged goods (e.g. cotton) caused by excessive moisture from damp ground or exposure to weather, or by grit, dust or sand forced into the insured property by windstorm or inclement weather.

Cover and covers

Means the protection provided by the policy.

Cover note

A Cover Note informs the insured that coverage is active often interim cover


The scope of the protection provided under a contract of insurance.

CTP Insurance

Compulsory Third Party insurance (CTP Green slip in NSW) is the insurance that is needed when registering a vehicle. CTP insurance is intended for the situation where another person is injured or killed in an accident, which is caused by the driver of the insured vehicle.


A decrease in the value of any type of property over a period of time resulting from use, wear and tear, or obsolescence.

Direct insurer

Is an insurer which deals direct with the consumer rather than through an intermediary or agent.

Direct or Held Covered

A condition requiring that the insured voyage be direct from one place to another. If the voyage is delayed en route or there is deviation from the direct route the insurance cover continues subject to payment of an additional premium, but only if the assured gives prompt notice of such delay or deviation immediately on receipt of advice, unless the policy provided otherwise.


A disaster is said to have occurred when the normal community and organisational arrangements cannot cope with a hazard impact.


The duty of the assured and his broker to tell the underwriter every material circumstances before acceptance of the risk.

Due date

The date a policy is in force to and by when a renewal premium must be paid.

Duty Of Assured Clause

The clause appears in the institute cargo clauses and the institute hull clauses. It brings to the attention of the assured his legal obligation to take such measures as may be necessary to prevent or minimise losses which might be recoverable under the policy. Underwriters will reimburse the assured for reasonable expenses (termed sue and labour charges) incurred pursuant to compliance with this duty. The hull clause also incorporates the “waiver” clause; the latter being shown separately in cargo clauses.

Earned Premium

Applies when an insurance is terminated before expiry of the insured period. The earned premium is the premium attaching to the period during which the underwriters have been on risk.

Earned Premium

The amount of the premium that has been “used” during the term of a policy. For example, if a twelve month policy has been active for six months, half of the total premium has been earned.

Effective date

The date on which the cover of an insurance policy commences.


Means a special condition that applies to a policy. For example, an endorsement may state that drivers under a nominated age are not covered under the policy.

Escalator Clause

A clause allowing for adjustment of the insured value in certain non-marine material damage insurances. The term is applied, also, to a similar clause in insurance conditions covering a ship under construction.


An excess on a policy is the first amount that must be contributed by the insured towards each claim. When one or more excesses apply to a policy, they will be shown on the insurance schedule and updated on the renewal notice.

Excess Liabilities

Insurance to cover the excess amount of liability for general average contributions, salvage charges, sue and labour charges and three-fourths collision liability where the full amount is not covered by a hull policy.

Excess of Line Re-Insurance

A re-insurance to cover that part of the original underwriter’s acceptance which is in excess of his retained line.

Excess of Loss Re-Insurance

A re-insurance to cover that part of a loss paid by the reinsured which is in excess of an agreed maximum loss.

Expense ratio

A measure of an insurers expenses in operating its business.

Expired policy

See lapsed policy.

Expiry date

The date coverage ceases.

Extra Charges

Expenses included in a claim for loss or damage.


Facultative/obligatory. A reinsurance term for a contract where the reassured can select which risks he cedes to the re-insurer, but the re-insurer is obliged to accept all cessions made.


The right of option. The right of an underwriter to decide whether or not to accept a risk. Declarations under a cargo open cover are obligatory rather than facultative.

Fine Print

A reference to imaginary small type in a policy document purportedly containing exclusions, reductions, exemptions, and limitations of coverage. It is now a requirement for policy documents to comply with minimum type size.


Means burning with flames.

First Three

A term on a slip requiring that subsequent amendments be subject to the three leader agreement.

Flat Line Re-insurance

A re-insurance which covers losses on the original policy up to a fixed amount, any excess being borne by the reinsured.

Floating Policy

A cargo policy with a fixed sum insured which is sufficient to cover more than one shipment; each shipment up to an agreed limit being declared as it takes place. The policy lapses when the sum insured has been exhausted by declared shipments. Such policies are seldom seen today.


Means the inundation or covering of normally dry land by water which: escapes or overflows from, or cannot enter, because it is full or has overflowed, or is prevented from entering, because other water has already escaped or been released from it, the normal confines of any watercourse or lake, including any that may have been modified by human intervention, or reservoir, canal, dam or storm water channel. Flood does not mean storm water run off from areas surrounding the site or water escaping from any water main, pipe, street gutter, guttering or surface. Many Home Insurance policies do not cover flood.

Follow the Fortunes

An agreement in a re-insurance contract whereby the re-insurer agrees to follow the decisions of the original insurer. Particularly important where ex gratia payments are made by the original insurer, which would not be recoverable from re-insurers in the absence of this agreement.


Free of particular average.


The term “fraud or dishonesty” encompasses all those risks of loss that might arise through dishonest acts or omissions.


Accepting liability for a direct insurance with the intention of re-insuring the whole risk at the original net rate, usually less an overriding commission.


Financial Services Reform Act

G.A. in Full

An agreement in a cargo insurance whereby underwriters do not reduce a claim for general average contribution in event of underinsurance.

General Average

A deliberate sacrifice or expenditure incurred for the common safety of a maritime adventure. Those interests that benefit from the sacrifice or expenditure contribute rateably towards the loss.

General Average Contribution

The proportion paid or payable by a saved interest involved in a general average act.

General Average Deposit

Paid by a consignee to obtain release of the cargo from the carrier following a general average act. This may be replaced by an underwriter’s guarantee.

General Average Guarantee

An undertaking by underwriters to pay the contribution due from a cargo assured on completion of the general average adjustment.

General Exclusions Clause

A clause in the institute Cargo Clauses 1982, which specifies risks that are excluded, irrespective of the risks covered elsewhere in the wording.

General Insurance Code of Practice

The General Insurance Code of Practice is a commitment by the general insurance industry to aim for the best standards of service possible, and to promote better relations between customers and insurers. The Code describes standards in the areas of employee training, plain language policy documentation, claims handling and dispute resolution. It was introduced in 1995 with the backing of consumer groups, the federal government, insurers and the Insurance Council of Australia. More information on the Code can be obtained from Guardian or the Insurance Ombudsman Service. You can contact the Insurance Ombudsman Service on 1300 780 808.

Good Faith

A basic principle of insurance. The assured and his broker must disclose and truly represent every material circumstances to the underwriter before acceptance of the risk. A breach of good faith entitles the underwriter to avoid the contract.

Green Slip

See CTP insurance.

Gross Premium

The net premium plus operating expenses, commissions and other expenses.


Goods and Services Tax.


A situation that increases the probability of the happening of loss arising from a peril, or that may influence the extent of the loss. For example, accident, fire, flood, liability, burglary, and explosion are perils. Slippery floors, flammable liquids, unsanitary conditions, unlocked and unguarded premises and poor roads are hazards.

Held Covered

A provision acceptance of risk, subject to confirmation at a later date that the agreed cover is needed. Where applicable to an existing insurance cover is conditional, in practise, on prompt advice to the underwriter as soon as the assured is aware of the circumstances to be held covered coming into effect, and a reasonable additional premium is payable if the risk held covered comes into effect.

Home buildings insurance

Is insurance for the buildings at the site used for domestic and residential purposes.

Home contents insurance

Is insurance for certain items used primarily for domestic purposes. (see Policy Disclosure Statement for full description)

Honeycomb Slip Endorsement

A standard agreement form for attachment to the broker’s slip. Pre-printed boxes provide space the initials of underwriters subscribing the agreement and help the broker to ensure that all the necessary agreements have been obtained. It is used in all cases where an agreement requires the initials of six or more underwriters.

Honour Policy

One which is not acceptable as evidence in a court of law (e.g. P.P.I policy) and is binding in honour only.


Institute Cargo Clauses. There are three basic sets of these clauses (A, B and C). The A clauses cover “all risks” subject to specified exclusions. The B and C clauses cover specified “risks”, subject to specific exclusions.


Incurred but not reported, is the liability that an insurer has for losses that have happened but not yet reported as claims.


The Insurance Council of Australia represents the interests of the Australian general insurance industry.

Imperial warranty

A warranty that is not expressed in a policy, but which is implied to be therein , by law (e.g warranty of seaworthiness in a voyage policy, warranty of legality in all policies.)


A set of ICC (International Chamber of Commerce) terms offered for optional use in trading contracts and intended to reduce misunderstandings in the meaning of international trade terms.

Incurred claims ratio

The percentage of claims costs incurred to premiums earned (see earned premiums).

Indemnity insurance

Type of insurance that restores the individual as close as possible to the financial position that they enjoyed before the loss.

Inherent Vice

A property in cargo which causes, or is liable to cause, loss or damage to the cargo, without any accident occurring (e.g. spontaneous combustion). It is always excluded by the insurers of the cargo because of its inevitable nature.

Inland Marine

Inland waterway (river, canal etc) risks, but in practise, the term is loosely applied to certain non-marine risks placed in the marine market.

Institute Clause

A standard clause published by the institute of London Underwriters.

Institute of London Underwriters

An organisation representing the interests of member insurance companies. The institute maintains a close liaison with Lloyd’s marine market, and provides facilities for a number of joint committees to operate.

Institute Warranties

A clause published by the institute of London Underwriters for use in policies covering the hull and machinery of a ship. It comprises five locality warranties and one trade warranty.

Insurable Interest

It is illegal for anyone to insure without an insurable interest or, in the case of marine insurance, a reasonable expectation of acquiring such interest. In general one has such interest when his relationship to property at risk may expose him to loss or liability or where he stands to gain by the safety of such property.


A device for transferring specified risks of individual persons to an insurer. The insurer agrees, for consideration (usually payment of a premium), to assume, to a specified extent, certain losses that may be suffered by the insured.

Insurance Ombudsman Service

Any policyholder who is dissatisfied with the outcome of his or her dealings with an Australian insurer can contact the Insurance Ombudsman Service on 1300 780 808. See General Insurance Code of Practice.

Insurance schedule

Sets out the information given to an insurer upon which the decision to offer cover is made. It also displays the individual details of a policy.


The party to an insurance arrangement to whom the insurer agrees to provide cover against specified losses, or to render services, subject to the terms of the insurance contract.

Insured event

Occurrences which cause loss and damage which are listed in the relevant policy.


The party to an insurance arrangement who undertakes to provide cover or to render services, on the happening of specified events.

Investment Income

The return received by insurers from their investment portfolios.


Means an individual piece of home contents, such as an item of jewellery.

Joint Cargo Committee

A committee composed of representatives from Lloyd’s and London company market, to examine matters of interest to cargo insurers and to make recommendations or action to be taken by the market.

Joint Hull Committee

Similar to the Joint Cargo Committee, but in respect of hull interests.

Joint Hull Understandings

Agreement between London hull underwriters to provide uniformity in their consideration regarding hull insurance conditions and rating structures.

Known Loss

A loss known to one or both parties when a broker and underwriter are negotiating placing.

Lapsed Policy

A policy which has been allowed to expire because of non payment of premiums.

Lay Up Return

A return of premium allowed on expiry of a hull policy (without a total loss having occurred) for periods during which the vessel has been laid up in protected waters.

Lead a Slip

To lead a slip is to be the first syndicate or company on the slip.


An underwriter whose judgement is so respected by other underwriters that they will follow his lead in accepting a risk. His syndicate or company will be the first on the slip.

Leader Underwriter Agreement

A provision on a brokers slip whereby subsequent agreements (other than those which materially alter the risk) are acceptance to all underwriters on the slip when initialled solely by the leading underwriter.


An agreement which gives a person the right to exclusive possession of a property.

Liability Insurance

Insurance to cover the legal liability of the assured to the extent of such liability but subject to any limitations expressed in the policy.

Limit Any One Bottom

The maximum amount at a cargo underwriters risk, under an open cover, in one location.

Limited Terms

Insurance conditions that provide limited cover (e.g. total loss only)


The amount or percentage in a brokers slip or policy which establishes the extent of the underwriters liability. The written line is written the underwriter’s liability. The written line is written by the underwriter on the slip when he accepts the risk. The signed line is the underwriter’s proportion of the risk as shown in the policy.

Line Slip

A signing slip issued of a long term cover.

Line Stamp

A rubber stamp issued by a Lloyd’s underwriter. It incorporates the syndicates pseudonym and number and is impressed on the broker’s slip by the underwriter who inserts his line and reference.

Living with you

means any person normally living or staying in your home or at the site.

Location Clause

Used in cargo open covers this limits underwriters’ liability in any one location.

London Insurance Market Network (LIMNET)

An electronic data transfer system embracing a network of computers. This system is designed to reduce the flow of paperwork and improve the flow of information within the London insurance market.

Long Tail

A term used to describe a risk that may have claims arising long after the risk has ceased to attach. So that he can close the underwriting account for the year it is often necessary for an underwriter to arrange reinsurance protection to cover claims which may arise after the account has been closed.

Long Term

A policy exceeding 12 months.


Generally refers to the amount of reduction in the value of an insured’s property caused by an insured peril. In an insurance sense it usually does not mean “misplacing” an item.

Loss of Specie

A charge in the nature or character of insured goods so that they are no longer the thing insured. (see also “Actual Total Loss”)


Lloyd’s Policy Signing Office.

Machinery Damage Additional Deductible

An institute clause, used in hull and machinery policies, which applies a specially agreed deductible additionally to the policy deductible expressed in the standard hull clauses. The additional deductible applies to damage to ship’s machinery arising from certain perils (mainly negligence of the crew and others) specified in the Institute hull clauses attaching to the policy.

Malicious Acts Clause

A clause which excludes claims on a hull policy arising from detonation of an explosive or any weapon of war and used by persons acting maliciously or from a political motive.

Malicious Damage Clause

A clause published by the Institute of London Underwriters for use in a cargo policy that is subject to the Institute Cargo Clauses (1982) B or C. It adds the risks of malicious acts, vandalism and sabotage to the cargo policy.

MAR Policy

A market term for the form of marine policy used by Lloyd’s and the London company market. It is a basic contract from to which the conditions agreed by the insurers subscribing a marine insurance contract are attached.

Market Value

The fair price for which something can be sold in its current condition.

Material Circumstance

Any circumstances which would influence the judgement of a prudent underwriter in determining whether to accept a risk and the amount of premium to charge.

Material Representation

A statement made to the underwriter before acceptance of risk which is material to his decision in accepting and rating the risk.

Measure of Indemnity

The extent of liability of the insurer for loss.


A mis-statement of fact made by the assured or his broker to the underwriter, before acceptance of the risk, which misleads the underwriter in assessing the risk. If the representation is material and amounts to misrepresentation it is a breach of good faith.

Moral Hazard

A condition of morals or habits that increases the probability of loss from a peril. An example would be an individual who had previously arranged for the theft of his own car to collect the insurance.


The lender in a mortgage contract.


The borrower in a mortgage contract.


Failure to use a degree of care which an ordinary reasonable person would use under the given or similar circumstances. A person may be negligent by acts of omission or commission or both.

Net Abs

Premium is payable net of all discount, including any over-rider applicable. Return premiums are usually paid on this basis.

Net Line

The amount, of the original line, which is retained by the reinsured (Net retained line).


The London market electronic data communication system. This system is currently being developed. For information contact the London Insurance Market Network Group.

New for Old

Sometimes called “thirds”, this is the deduction from the cost of hull repairs, provided in law, to allow fro depreciation due to age of material or parts being replaced. In practice, hull underwriters waive thirds.

New for Old (Home Insurance)

Replacing your existing old damaged items or equipment with new ones.

No Claim Bonuses

see rating

No Cure – No Pay

Salvage provision whereby no award is paid to a salvor if he is unsuccessful.

No Market

Broker’s term indicating that the risk offered is not placable in the market/s available to him. This might arise where the market capacity is saturated with the risk already (e.g. reinsurance on a large vessel) or in the case of a particularly hazardous risk.

Non-Contribution Clause

A clause providing that the policy does not pay any part of a loss that is covered by another policy in force on the same risk.


Failure of the assured or his broker to disclose a material circumstance to the underwriter before acceptance of the risk. A breach of good faith.

Not to Inure Clause

A clause, in a policy, which prohibits the passing of benefit of the insurance to a bailee, or other party who has care of the insured goods (see “Benefit of Insurance Clause”).

Notice of Abandonment

A condition precedent to a constructive total loss. If the assured fails to give notice to the underwriter the loss can be treated only as a partial loss unless an actual total loss is proved. An underwriter who accepts notice admits liability for the loss. Notice is not necessary where it would not benefit the underwriter, where the underwriter waives the obligation or in the case of a re-insurance. Provided the policy incorporates the “waiver” clause, action taken by an underwriter to prevent or reduce the loss is not deemed to be an acceptance of abandonment.

Oblige Line

A line written by an underwriter to help a broker in placing a risk in circumstances in which the underwriter would not, otherwise, have accepted the risk.


Original equipment manufacturer. Means the original manufacturer of the car or part.

Open Cover

An agreement whereby the assured undertakes to declare every item (e.g. shipment, vessel, etc. as appropriate) which comes within the scope of the cover in the order in which the risk attaches. The insurer agrees, at the time of concluding the contract, to accept all valid declarations up to the agreed limit for each declaration. An open cover may be for a fixed period or always open; subject to a cancellation clause.

Open Policy

A cargo policy designed to cover many shipments which are advised by declaration and evidenced by the issue of certificates.

Open Slip

A broker’s slip covering a sum sufficient to cover a number of shipments which are advised as they take place.

Original Bill

Original Bill of Lading.

Original Slip

The placing slip used by a broker when negotiating the insurance with the underwriter.


All additional premium charged on a cargo open cover declaration because the carrying vessel is outside the scope of the classification clause.


A term used to describe the condition that exists when an insured has purchased coverage for more than the actual value or replacement cost of a subject of insurance. It is also used to describe a situation where so much insurance has been obtained it constitutes a moral hazard.


Placing more than 100% of the amount at risk.

Overriding Commission

An additional discount allowed to a re-insured who effects reinsurance at original net rates, to help cover his underwriting costs.

Owners’ Clauses

Clauses specially agreed for a particular fleet, probably giving wider cover than is normally allowed.

P & I Club

A protection and indemnity society. A community of shipowners and operators who mutually insure themselves for risks not normally covered by the ordinary hull insurance market. The club is primarily concerned with liabilities incurred by its members; both contractual (e.g. to cargo owners) and third party (e.g. collision liability).

P.P.I. Policy

The law requires that the assured must have an insurable interest in the subject matter of the insurance at the time of the accident resulting in the loss. The underwriter is entitled to ask for proof of such interest at time of loss before a claim can be settled. A P.P.I. (policy proof of interest) policy waives the underwriter’s right to demand proof of interest, and such policy is honoured in practice, although it is invalid in a court of law. P.P.I. policies are used extensively in practice in respect of “hull interest” policies (e.g. “disbursements” policies).

Parity Clause

A clause which automatically adjusts the premium rates on one open cover in parity with a change in a similar (related) cover placed in another market.

Partial Loss

Any loss that is not a total loss.

Particular Average

Particular Average – accidental partial loss of the subject matter insured proximately caused by an insured peril.

Particular Charges

Used in relation to expenses incurred in connection with a Particular Average claim. The term is replaced, in practice, with “Extra” charges.

Payment Order

Broker’s authority to act for the assured in collecting a claim.

Percentage of Depreciation

The percentage, of the sound value of cargo, by which the cargo has suffered damage covered by the policy. The percentage is applied to the insured value expressed in the policy to determine the measure of indemnity.


A term used in the Marine Insurance Act (1906) to denote a hazard. The principle of proximate cause is applied to an insured peril to determine whether or not a loss is recoverable. In modern practice the term “risk” often replaces “peril”.


The cause of a possible loss. Not to be confused with hazard.

Period of cover

means the current period for which we have agreed to provide you with insurance cover. The current period is shown on the most recent of your insurance schedule and renewal notice and any receipt we may send to you. When we make a writeoff payment, the period of cover comes to an end.

Personal lines

This term is used to refer to insurance for individuals and families, such as private car insurance and home insurance. Contrast with Business Insurance and Commercial Lines.

Personal Valuables

For most people, their Home contents include personal valuables which they often wear or take with them when they are away from their home. Cover for these items is often limited. Extra cover is available by payment of an additional premium.


Damaged material picked off bales of cotton or similar to make the remainder saleable.


means the Product Disclosure Statement and the policy schedule.

Policy schedule

a notice showing the particular details of a policy.


Generally use to describe the policy owner and/or insured. See Insured.

Pollution Hazard Clause

A clause in a hull policy, whereby underwriters cover loss of, or damage to, the insured ship, where it is caused deliberately by Governmental authority in attempts to mitigate the effects of pollution by oil or other contaminating substance leaking from a stricken ship.

Pool Schemes

Various arrangements for processing very small premium or claim entries which are entered in a pool rather than being applied to individual syndicates.

Portfolio Transfer

A procedure for transferring a long term insurance contract from one re-insurer to another, including outstanding losses.


The price of insurance cover for a specified risk for a specified period of time

Premium Advice Note (PAN)

A Lloyd’s broker uses a PAN (sometimes termed London premium advice note – LPAN) to submit premium accounting details to LPSO and/or the ILU PSO for entry in the centralised accounting procedures.

Premium Reserve

A provision in a re-insurance contract allowing the reassured to retain an agreed proportion of the premium against payment of claims.

Premium Transfer

Syndicate accounting is on an annual basis but some long term insurance contracts run for more than 12 months. Where the premium paid in the first year relates in part to subsequent years a transfer is arranged at the end of the year to carry forward the relevant premium to the subsequent underwriting year’s account. The operation becomes a book entry only.

Private use

see Use

Proximate Cause

The most direct cause of loss, that is, the most effective and dominant cause in a chain of events which ends in the loss.

Proximate cause

The direct, real, or operative cause of loss or damage, as determined by applying common sense standards.

Qualifying Category Codes

An alphabetical coding system to indicate to the data processing services the category of an entry (e.g. premium, claim, etc.).


The cost of a given unit of insurance.

Rating One Protection

Protection of maximum discount level for one at fault claim during the period of cover, and pay an extra amount on your premium when you renew your policy.

Rating, no claim bonuses and no claim discounts all describe essentially the same thing

a discount off your car insurance premium. The discount increases each year providing no claim that reduces your rating/discount is made on your policy. It keeps on increasing until it reaches the maximum discount level, called ‘rating one’ or ‘maximum no claim bonus’.


Amount recovered from a third party responsible for a loss on which a claim has been paid.


A position whereby one insurer transfers all or part of its risk of loss to another insurer. The other insurer is called the “reinsurer” or reinsurance company.

Renewal Certificate

A certificate which is used to renew a policy. It refers to the original policy, keeping all of its provisions, without restraining all of the insuring agreements, exclusions, and conditions.

Renewal Premium

The premium paid for a renewed policy.

Replacement Clause

A clause limiting underwriters’ liability for damage to machinery cargo.


A statement of fact made by the assured or his broker when negotiating an insurance with the underwriter.

Re-signing Addendum

An endorsement attaching to a Lloyd’s policy changing a syndicate’s participation.

Retaining Wall

Means a wall that supports or confines a mass of earth or water.


An amount retained by a reinsured when effecting a re-insurance.


Re-insurance of a line accepted as a re-insurance on a long term contract. The original insurer cedes the line and the re-insurer, having arranged re-insurance cover to protect his own interests, retrocedes the line.


A fortuity. It does not embrace inevitable loss. The term is used to define causes of loss covered by a policy.


General meaning is a thing or person insured.

Risk management

Management of the risks to which a company might be exposed. It involves analysing all exposures to the possibility of loss and determining how to handle these exposures through such practices as avoidance, reducing the risk, retaining the risk, or transferring the risk e.g. see reinsurance.

Rotation Clause

A provision is a large open cover allowing small declarations to be allocated to a small group of the subscribing underwriters instead of over the whole subscription. The subscribing underwriters are split into small groups, each group taking the declarations in rotation.

Rules of Practice

A set of rules drawn up by the Association of Average Adjusters to give their members guidance in assessing the relationship of circumstances to general average and particular average losses.

Running Down Clause

The collision liability clause which appears in a policy covering the hull and machinery of a ship. A three-fourths RDC appears in the Institute clauses, whereas a four-fourths RDC appears in American and some other sets of hull clauses.


The deliberate casting away or destruction of property to prevent greater loss. General average sacrifice is for the common good and saved interests make good the sacrifice in proportion to the saving enjoyed.

Sale Charges

Costs incurred in selling goods. Underwriters are interested only when the sale is the result of insured damage or when they authorise the sale for their own account.

Sale of Vessel Clause

A hull clause providing that the policy is cancelled automatically on the sale of the insured vessel or transfer of management.


Property taken over by an insurer to lower its loss.

Salvage Charges

The award due to a salvor for services rendered in saving the insured property.

Salvage Loss

Occurs when the underwriter agrees to settle a cargo claim by paying the difference between the insured value and the proceeds realised by selling the damaged goods.


A list attached to a slip, open cover, policy or other document, usually detailing the rates of premium for various voyages, interests and risks.


The act of initialling a signing slip or a slip agreement to signify the underwriter’s approval. The term may be used also in connection with a clause excluding “scratching, bruising and denting”.


Settlement due date.


There is an implied warranty in every voyage policy that the ship must be seaworthy at the commencement of the insured voyage, or, if the voyage is carried out in stages, at the commencement of each stage of the voyage. To be seaworthy, the ship must be reasonably fit in all respects to encounter the ordinary perils of the contemplated voyage, properly crewed, fuelled and provisioned and with all her equipment in proper working order. Cargo policies waive breach of the warranty except where the assured or their servants are privy to the unseaworthiness. Breach of the warranty is not excused in a hull voyage policy, literal compliance therewith being required. Although there is no warranty of seaworthiness in a hull time policy, claims arising from unseaworthiness may be prejudiced if the ship sails in an unseaworthy condition with the knowledge of the assured.


The underwriters subscribing a risk.

Settling Agent

An underwriter’s representative who is authorised to settle claims.

Shipped Bill

A Bill of Lading that acknowledges the goods have been loaded on the ship.

Short Closing

Closing a risk for less than the amount insured.

Short Interest

The outstanding balance of the sum insured by a floating policy after all declarations have been made.

Short Tall

A term used to describe a risk in respect of which all claims are likely to be advised within the period of cover or shortly after the cover ceases to attach.

Signed Line

The percentage expressed on a signing slip or in a policy which, when applied to the sum insured, indicates the extent of the underwriter’s liability.

Signing and Accounting

A procedure in the London market whereby accounting procedures are conducted concurrently with the policy signing procedure.

Signing Down

The practice of reducing written lines on a placing slip, so that, when they are applied to the sum insured, the total amount covered does not exceed 100% of the sum insured.

Signing Slip

The broker’s slip that is used for submitting details to LPSO or the ILU PSO for signing and accounting. This can be the original slip, a certified photocopy of the original slip or an initialled off slip.

Simultaneous Payments Clause

A re-insurance clause which provides that the re-insurance shall pay a claim at the same time as the original claim is paid by the re-insured.

Single Administrative Document

A document introduced to the EEC in 1988 as part of the “aligned series” of SITPRO documents designed for the improvement of trade procedures.


Those parts of the land at the insured address which are used solely for domestic purposes but not ‘common property’ which is land or areas that others are entitled to use, for example common property in a strata development, retirement village or any other type of residential property development.


Simplication of International Trade Procedures.

Slip Agreement

An agreement expressed by an underwriter on the broker’s slip.

Slip Policy

A broker’s slip which is used as the policy document. Subject to certain requirements slip policies can be used, where practical and where no formal policy is required, for cargo insurance, for some types of hull insurance and for re-insurance.

Slip Registration

A practice introduced at Lloyd’s for all placing’s attaching as from 1 January 1987 whereby the risk placed is recorded at LPSO, that it can be monitored in relation to the policy signing and central accounting procedures.

Special Settlement

Normally, settlement of premium and claims is arranged on balance on a specified date each month. Where early settlement is required it can be arranged so that settlement takes place outside the usual monthly settlement.

Specified Items

Are home contents with limited cover under the policy which you have described to us, told us their current replacement value and the insurer has agreed to cover in writing.

Standard Excess

See excess

Standard Slip

A standard form of broker’s slip designed for use in the London market for business placed with Lloyd’s syndicates and/or member companies of the Institute of London Underwriters. It incorporates a number of printed boxes, in which entries are made in a standard format; thereby maintaining a routine method of information for date processing purposes.

Statute of Limitations

A law that specifies a time limit for which a person can bring a legal action for a claim.

Statutory Exclusions

Policy exclusions specified in the Marine Insurance Act (1906), Section 55.

Stop Loss Re-insurance

A re-insurance to protect the re-insured from losses in excess of his net premium income.


Means violent wind (including a cyclone or tornado), thunderstorm or a heavy fall of rain, snow or hail.

Strata Title

A system of title that allows the owner of a unit, in a block of units, to have a separate title for that unit.

Strikes Cover

Limited to damage caused to insured property by strikers, locked out workmen and persons involved in a labour dispute. Does not include loss or expense incurred as a result of strikes, etc.

Subject Approval No Risk

The abbreviation S.A.N.R. appears on a slip where the assured is required to approve the conditions, etc. for the risk to attach.


The right of the underwriter to step into the shoes of the assured following payment of a claim to recover the payment form another party who was responsible for the loss. Limited to the amount paid on the policy.

Substituted Expenses

Expenses which would not be normally covered by the policy; but which are allowed (up to the saving to underwriters) because the expenses reduced a claim under the policy. A similar allowance is made in a GA adjustment where expenditure reduces a GA loss.

Sue and Labour Charges (Marine)

Expenses incurred by the assured or their representatives with the intention of preventing or minimising a loss for which the underwriter would have been liable. They do not include expenses incurred in general average or salvage acts; these being recoverable under the policy only as part of the underwriters’ liability for contribution to general average or salvage, if any. Sue and labour charges are recoverable under a policy that incorporates a sue and labour clause (SG policy), or in accordance with the wording of the policy (e.g. under the “duty of the assured” clause attached to a MAR policy).

Sympathetic Damage

Damage to property which arises because other property in close proximity has been damaged. An example would be where fumes given off by water damaged cargo cause taint to another cargo.

Target Risk

A very large risk shared by most of the market.


Under insurance law it means the period of time for which a policy is issued.

Term Policy

Policy written for a period in excess of 12 months.

Terms of Trade

The agreed period of credit allowed to a Lloyd’s broker for payment of premium etc.; or allowed to an underwriter for settlement of claims etc.

Third Party Liability

Liability incurred by the assured to another party but excluding contractual liability.

Third Party Property Damage Insurance

Provides specified cover in respect of damage a vehicle causes to another person’s property.

Three Leader Agreement

A condition in a broker’s slip whereby the subscribing underwriters agree that they will accept subsequent amendments to the conditions, which do not materially alter the risk, when the first three underwriters on the slip have signified their approval. There is a market understanding that, where both Lloyd’s and ILU lines appear on the same slip, the broker must obtain the initials of the first two Lloyd’s underwriters and the first two ILU underwriters.

Time on Risk

Where a non-marine risk has expired before the policy is signed and no claims attach it may be agreed to dispense with the issue of a policy, noting the slip with “T.O.R.” (time on risk). The term T.O.R. is not normally applicable to marine insurance policies.

To Pay as Cargo

Used in ancillary insurances relating to the cargo (e.g. increase valued) when the assured is not required to show evidence of loss or interest and can claim on the policy if he can show that a corresponding loss has been settled on the main cargo policy.


Metric measurement of weight. 1000 kilograms.

Total Loss

Total Loss – this can be actual total loss or constructive total loss. In hull insurance it may include arranged or compromised total loss.

Total loss

A loss of sufficient size so that the property cannot be economically repaired or it can be said there is nothing left of value. The complete destruction of the property. The term is also used to mean a loss requiring the maximum amount a policy will pay. (For car see write off).

Transit Clause

A clause in the Institute Cargo Clauses, specifying the attachment and termination of cover.


A long term re-insurance contract usually effected to cover the whole or a certain section of the re-insured’s business. Accounting is usually effected on a monthly or quarterly basis.


Natural loss in weight or quantity (e.g. evaporation).


An insurance effected for less than the value at risk.


A condition in which not enough insurance is held to cover the value of the insured property. This is particularly common with home contents insurance.


The basic insurance on which a supplementary insurance has been effected.


A technical person trained to evaluate risks and determine premium rates.

Unearned Premium

That part of the premium (if any) which relates to a period during which the underwriter is not on risk.

Unearned Premium

General meaning is the premium that is owed to the insured if the policy is cancelled


means not lived in by you or any other person with your consent.


means the private or business use of your car.

Private use: Use of your car for social, domestic and pleasure purposes and incidental business use where you are not using your car during your fulltime, part-time or casual working period as an integral means of earning your income.
Business use: Use of your car during your fulltime, part-time or casual working period as an integral means of earning your income that you have told us about and we have agreed to cover. Business use also includes social, domestic and pleasure use.

Private use and business use both cover the private use of your car in conjunction with repairing, servicing, testing, free driving lessons, private carpooling and demonstration for sale provided you are the driver or a passenger during the demonstration

Utmost Good Faith

Mutual trust in negotiating an insurance contract. A breach of good faith by one party entitles the other to avoid the contract.


Estimation of the value of an item, usually by appraisal eg. Jewellery appraisal.

Valuation Clause

A clause in a hull policy, whereby a constructive total loss based on cost of repairs cannot be claimed unless such costs would exceed the insured value.

Valued Policy

A policy that specifies the insured value of the subject matter of the insurance. This value is conclusive of the insurable value of the property, in the absence of fraud, and is the basis for the settlement of all claims on a marine policy. Except where the policy provides otherwise, the insured value is not to be used for determining a constructive total loss.


Vehicle identification number

Void Policy

One which is inadmissible as evidence in a court of law (e.g. P.P.I. policy).

Voidable Policy

Where the underwriter has the right to avoid a policy (e.g. in event of a breach of good faith) the policy is termed “voidable”.

Waiver Clause

A clause which entitles both underwriter and assured to take measures to prevent or reduce loss, without prejudice to the rights of either party.


An undertaking by the assured whereby he promises to comply with the terms of the warranty. Non-compliance constitutes breach of warranty and the underwriter is discharged from liability as from the date of the breach. Breach of warranty may be excused in certain circumstances, or where the breach is held covered under the policy conditions.

Waterborne Agreement

A market understanding whereby underwriters cover goods against war risks only whilst they are on the overseas vessel. This rule is relaxed only in the case of goods in a transhipping port for a short period awaiting onward carriage.

Without Benefit of Salvage

A term in a marine insurance policy, whereby the underwriters forego their subrogation rights. A policy incorporating such a term is deemed to be a gambling policy in law, and is therefore invalid in a court of law.

Without Prejudice

The claim is paid on this occasion, although the underwriter feels it does not attach to the policy, but this action must not be treated as a precedent for future similar claims.


To underwrite, or to accept an application for insurance.

Write off

Your car is declared a write off when in our opinion, it is so badly damaged that it would not be either safe or economical to repair or when it has not been found within 14 days of you reporting its theft to us.

Written Line

The percentage written by an underwriter on a placing slip to indicate the proportion of the sum insured thereby that he is prepared to accept. When the written lines total more than 100%, each line is reduced proportionately, so that only 100% is covered in total. A reduced line is termed the “signed” line.

Written premiums

The total premiums on all policies written by an insurer during a specified period of time, regardless of what proportion has been earned. See earned premiums.

York/Antwerp Rules

A set of internationally agreed rules for the application of general average circumstances.


Generally refers to the named insured.

A.I.S. Insurance Brokers Pty Ltd
137 Moray Street
South Melbourne 3205
Victoria Australia
Telephone +61 3 8699 8888
Facsimile +61 3 8699 8899