Glossary

Diversification is a risk control technique that spreads loss exposures over a myriad of projects, products, areas, or markets. This technique is important since financial returns from various enterprises are not always directly correlated, so that when one activity has low returns, other activities likely would have higher returns. For example, many crop farms in the Midwest produce both soybeans and corn. By producing both crops rather than just one, the farm is less at risk of experiencing extreme fluctuations in revenues since the market prices of the two crops do not always move in the same manner. In one year, for example, low soybean yields and revenues may be counterbalanced by relatively high corn yields. An example of financial diversification is investing in a combination of stocks, bonds, and treasury bills to reduce overall financial risk.

Diversification credit is an enterprise risk management term referring to the recognition of the "portfolio effect"—that is, the fact that the economic capital required at the enterprise level will be less than the sum of the capital requirements of the business segments calculated on a stand-alone basis. The diversification credit is typically apportioned to the business segments in a manner that attempts to preserve the relative equity of the capital attribution process.

A divided risk endorsement can be attached to any type of insurance policy for the purpose of delineating exposures covered by particular insurance policies (e.g., project or site-specific policies) to remove any possibility of double coverage. For example, these endorsements are commonly used on contractors' workers compensation policies to exclude payrolls associated with the contractor's work on a project that is insured under a wrap-up insurance program.

Dividends are a partial return of premium to the insured based on the insurer's financial performance or on the insured's own loss experience. Insurers cannot legally guarantee the payment of dividends. In the captive arena, there are two types: policyholder dividends are paid back through the insurance premium process to the insureds. They are before-tax expenses for the captive. Shareholder dividends are paid to the captive's shareholders after tax (and are then taxed again to the shareholder).

Dividend accumulation refers to dividends paid by life insurers that may be added to the cash value. These accumulated dividends will also earn income for the insured.

Dividend addition is an option regarding payment of dividends to insureds that is offered by some life insurers, particularly mutual companies. There are a number of alternative ways dividends may be paid, such as in cash, as an increase to the policy's cash value, or as a paid-up addition. Under this alternative, the dividend is used to purchase a paid-up single premium increase in the policy's face value, thereby increasing the death benefits.

Dividend options are varying ways in which insureds may elect to receive dividends under a life insurance policy. Dividends may be received in the form of cash payments, as increases to the policy's cash value, or as paid-up additional insurance.

A divisible contract clause provides that violation of the conditions of the policy at one location will not void the coverage at other locations.

A docket control system is used by attorneys to alert them to upcoming filing deadlines and statutes of limitations on specific legal actions, motions, and cases. Use of docket control systems is a critical tool in preventing professional liability claims from being made against attorneys. This is because studies have shown that a significant percentage of claims involve losses caused by the failure to meet filing and statutory deadlines for various types of legal actions.

The Dodd-Frank Act, enacted in 2010, made dramatic, sweeping changes to the nation's financial regulatory system. This law was enacted to make the US financial system more transparent and accountable and to prevent the type of financial crisis that occurred during 2008. Three specific provisions within Dodd-Frank are likely to increase the nature and scope of legal liability faced by corporate directors and officers. These include the "clawback" provision, the whistle-blower provision, and the "say-on-pay" provision.