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acquisition costs Those costs that are primarily related to the acquisition of new or renewal
of insurance contracts, e.g. commissions and management expenses.
Acquisition costs are often expressed as a percentage of earned premium
and referred to as the acquisition cost ratio.
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BBBEE broad-based black economic empowerment

binder An authority issued by an insurer to another party to: enter into, vary or
renew a short-term policy on behalf of that insurer; determine the wording
of a short-term policy; determine premiums under a short-term policy;
determine the value of policy benefits under a short-term policy; or settle
claims under a short-term policy.

catastrophe (short-term) Fire, earthquake, windstorm, explosion and other similar events that result
in substantial losses.

cell captive insurer An insurer that is structured with separate independent cells. The
assets and liabilities of the cells are ringfenced. Profits and losses from
business introduced by the cell owner to the insurer are attributable to
the cell owner.

churn rate The proportion of policyholders who leave a supplier during a given
time period.

claim (short-term) A demand in the insurer for indemnification for a loss incurred from an
insured peril.

claims incurred Claims cost for an accounting period made up of:

– claims paid for the period, including claims handling expenses,
– less outstanding claims at the end of the preceding accounting period,
including IBNR, plus outstanding claims at the end of the current
accounting period, including IBNR.

claims incurred but not reported (IBNR) Claims resulting from events which have taken place, but of which the
insurer has not received notices or reports of loss. An estimate is made of
the amount of these claims based on previous experience.

claims ratios Ratios expressing the relationship between claims and premiums. The
net claims ratio expresses claims net of recoveries from reinsurers as a
percentage of premiums net of premiums ceded to reinsurance. The gross
claims ratio reflects the position before reinsurance is taken into account.
Also referred to as loss ratios.
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CSI corporate social investment

deferred acquisition costs (DAC) Acquisition costs relating to unearned premiums, disclosed as a separate
asset on an insurer’s statement of financial position.

earned premium The proportions of premium attributable to the periods of risk that relate
to the current accounting period. It represents written premium adjusted
by the unearned premium provision at the beginning and end of the
accounting period.

ERM enterprise risk management

ESG environmental, social and governance

FAIS Financial Advisory and Intermediary Services

FSB The Financial Services Board, the regulator of insurance companies in

South Africa.

GDP gross domestic product

GRI Global Reporting Initiative

gross written premiums Premiums which an insurer is contractually entitled to receive from

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the insured in relation to contracts of insurance or from other insurers
in relation to inwards reinsurance contracts. These are premiums on
contracts entered into during the accounting period or adjustment to
premiums from prior years. Also defined as premiums written and received
but before deduction of reinsurance ceded.

IFRS International Financial Reporting Standards

intermediary A person who negotiates contracts of insurance or reinsurance with the

insurer or reinsurer on behalf of the insured or reinsured.

King III King Report on Governance for South Africa 2009 and the King Code of
Governance Principles

loss ratio Refer to “claims ratios".

net written premiums Gross premiums written or received on all business less return premiums
and premiums ceded to reinsurers.

reinsurance premium The premium paid by the ceding company to the reinsurer in consideration
for the liability assumed by the reinsurer.

salvage The amount received by an insurer from the sale of (usually damaged)
property on which he has paid a total loss to the insured.

short-term insurance
Defined in the Short-term Insurance Act as providing benefits under short-
term policies, which means engineering policies, guarantee policies, liability
policies, miscellaneous policies, motor policies, accident and health policies,
property policies or transportation policies or a contract comprising a
combination of any of those policies.

Solvency assessment management (SAM) The project launched by the FSB to develop a new solvency regime for the
South African long-term and short-term insurance industries to be in line
with international standards and specifically the Solvency II initiative under
way in Europe.
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SBI Sustainable Business Initiative
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SEM Sanlam Emerging Markets

solvency margin Is a measurement of the financial strength of a short-term insurer. It

represents the shareholders’ funds, expressed as a percentage of net
written premium income. This method of measurement is generally
accepted internationally.

TCF Treating Customers Fairly

UMA Underwriting management agencies

underwriting The process of examining, accepting, or rejecting insurance risks,

and classifying or segmenting those selected, to change the proper
premium for each.

underwriting cycle The regular pattern of rising profits and increasing premiums and reduced
profits/losses, and decreased premiums experienced in short-term
insurance. The cycle starts when insurers’ underwriting standards become
more stringent and premiums increase. This happens once underwriting
losses reach unacceptable levels.
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underwriting result The underwriting profit or loss calculated by deducting claims incurred,
net of commission and management expenses from premiums earned.

unearned premium provision The portion of premiums attributable to the periods of risk that relate to
subsequent accounting periods and which are carried forward to such
subsequent accounting periods.

UNEP FI United Nations Environment Programme Finance Initiative

WMO World Meteorological Organization