Glossary

A perfect hedge is an investment vehicle designed to mitigate the financial risk inherent in a portfolio of investments and/or in the normal course of business. Financial risk hedges are usually derivatives designed to counteract the price risk associated with normal business activities, such as the purchase of raw materials. Derivative hedges, however, are usually not perfectly correlated with the risk against which they are supposed to hedge; thus, a degree of risk remains. A perfect hedge, however, correlates perfectly with the risk. When insurance contracts are used to hedge these risks, a perfect hedge is possible due to the fact that insurance is a zero-sum transaction—that is, the contract either pays off or does not pay off based on the policy claims trigger.

Often referred to as "forever chemicals,” perfluoroalkyl substances (PFAS) are a large group of synthetic chemicals widely used in various consumer products since the 1950s. They can be found in everyday items such as food packaging, stain-resistant carpets, nonstick cookware, and water-resistant clothing. PFAS are highly resistant to environmental degradation. Studies have shown that some types of PFAS can accumulate in the bodies of humans and other animals. People are typically exposed to PFAS by consuming PFAS-contaminated water or food, breathing air containing PFAS, or using any of the wide array of consumer products made with PFAS. Repeated exposure can potentially lead to increased blood levels of PFAS over time. Research conducted in 2023 by the National Institute of Environmental Health Sciences (NIEHS) shows links between exposure to PFAS and adverse health outcomes such as metabolism, pregnancy, immune function, and (in children) cognitive and neurobehavioral development.

A performance bond guarantees that the contractor will perform the work in accordance with the construction contract and related documents, thus protecting the owner from financial loss up to the bond limit (called the penal sum) in the event the contractor fails to fulfill its contractual obligations.

A performance ratio is a test of an insurer's or reinsurer's financial strength—for example, Standard & Poor's solvency ratios, which track net premium to adjusted shareholder funds, and liquidity ratio, which looks at technical reserves to liquid assets.

A peril is a cause of loss—for example, fire, windstorm, collision.

Peril of the sea refers to marine hull or cargo insurance for damage due to extraordinary forces of nature that maritime ventures might encounter in the course of a voyage. Some examples of these perils include stranding, sinking, collision, heavy wave action, and high winds.

Permanent life insurance refers to life insurance that has no expiration date and that provides for the payment of the face value upon death of the insured, regardless of when it may occur. This contrasts with term insurance, which pays benefits only if death takes place during the limited term (e.g., 1, 3, 5, or 10 years) of the policy. Under permanent life insurance policies, the insured pays a level premium rate all of their life. This approach results in an overpayment of premiums in the early years of the policy and an underpayment in the latter years—which is intended to average out over the life of the insured. Most types of permanent life insurance (e.g., whole life, universal life, and variable life insurance) accumulate a cash value that the insured may borrow or otherwise use.

Permanent partial disability is a workers compensation disability level in which the injured employee is still able to work but not with the skill and efficiency demonstrated prior to the injury. As a result, the earning capability of the worker is affected. Most workers compensation statutes provide for scheduled benefits based on the percentage of disability.

Permanent total disability is a class of workers compensation disability in which the injured employee is incapable of ever working again at any employment. Under most statutes, the employee will receive weekly wages for life.

Personally identifiable information (PII) refers to any information that can be used to uniquely identify, contact, or locate an individual, either alone or in conjunction with other sources, such as their name, Social Security number, driver's license number, date of birth, place of birth, mother's maiden name, and genetic information.