Glossary

Pollution is the contamination of an environment by substances regarded as pollutants. Liability from pollution is normally excluded to some degree by the general, auto, and umbrella liability policies. In recent years, insurers have attempted to introduce strict exclusionary language into these policies, making it necessary for insureds to seek coverage under separate "environmental impairment liability" policies.

A pollution exclusion in first-party or third-party insurance policies that excludes coverage for losses caused by "pollution," defined to mean an irritant or contaminant, whether in solid, liquid, or gaseous form, including—when they can be regarded as an irritant or contaminant—smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste.

A Ponzi scheme is a type of fraudulent investment operation (named after the notorious 1920s swindler Charles Ponzi) that pays returns to its investors from monies provided by subsequent investors, rather than from profit earned by the person or the organization running the operation. Ponzi scheme operators entice and secure new investors by offering higher rates of return than are otherwise obtainable in the marketplace. Another important characteristic of Ponzi schemes is that they require an ever-increasing flow of money from new investors to sustain the scheme. One notable Ponzi scheme was perpetrated by Bernard Madoff (for which Madoff was sentenced to 150 years in prison) and is considered to be the largest financial fraud in US history. The trustee for victims of the fraud estimated that investors lost $18 billion as a result of Madoff's fraud. The sheer volume of the scheme was, in part, made possible because Madoff had access to banks, insurers, pension funds, mutual funds, charitable trusts, and other money management firms, which, in return for generous fees and commissions, channeled their customers'/clients' funds to Madoff. Investors brought numerous lawsuits against the directors and officers of these institutions, in which investors alleged that the money management firms were negligent in not discerning that Madoff's operation was fraudulent.

A pool in the insurance context is a group of insurers or reinsurers through which particular types of risks (often of a substandard nature) are underwritten, with premiums, losses, and expenses shared in agreed ratios. Pooling can also involve a group of organizations that form a shared risk pool. Pooling is an attractive alternative for insureds that are not large enough to legally or feasibly self-insure but that desire more control over their loss exposures as well as an opportunity to reduce their cost of risk, compared to a program written by a commercial insurer.

Portable benefits are employee benefits that can transfer from a former employer to a new employer or from a former employer to an individual who is leaving the workforce. Such benefits are accumulated in an employer-sponsored plan and may include health (e.g., health savings accounts), retirement (e.g., 401(k)), and other types of plans. A rollover of a retirement plan from a former employer to a new employer is a common example of the portability of certain employee benefits. However, as the "gig economy" becomes more prevalent and workers more commonly provide "on-demand" services, yet without being classified as employees per se, additional efforts are being made to offer more innovative forms of portable benefits to the workforce.

Portfolio is the book of business of an insurer or reinsurer, including all policies in force and open reserves.

Portfolio reinsurance is a financial transaction in which an entire line of insurance, class of business, territory, or book of business of an insurer is reinsured. Under portfolio reinsurance, the reinsurer assumes all of the primary insurer's liability. It is typically arranged when an insurer wishes to discontinue operations in a specific state or territory.

Portfolio return is the return of unearned reinsurance premium to the ceding company when a reinsurance treaty is terminated. It is the opposite of a portfolio runoff.

Portfolio runoff refers to a practice under which a reinsurance portfolio is allowed to continue until all ceded premium is earned or all losses are closed, or both.

Portfolio transfer refers to the cession of a book of business—for example, for an insurer withdrawing from writing a certain class of risk. Since the business has already been written, it is retroactive insurance, so it is a balance sheet only transaction (transfer of assets and liabilities).