Glossary

The hurdle rate is the internal rate of return established in an organization as necessary to justify investment in an operation, based usually on the short-term cost of borrowing. It is often used as the discount rate in a net present value cost analysis.

Hybrid refers to a type of risk financing plan that makes use of both internal and external funds to pay losses. It thus falls between a pure transfer approach and a pure retention approach to risk. The costs of hybrid techniques tend to be less experience-responsive as compared to pure retention but more experience-responsive as compared to pure transfer techniques. Examples of hybrid techniques include pooling arrangements, high-deductible plans, multiple-parent captives, and retrospectively rated insurance policies.

A hybrid captive is the combination of a standard group captive and structured reinsurance. It is designed to create significant limits of insurance for risks that, for one reason or another, cannot be covered in the commercial insurance markets. The major difference between the hybrid captive and a standard group captive is how limits of liability are structured.

Hybrid plans are risk financing techniques that are a combination of retention and transfer. Hybrid plans are designed to transfer only part of the risk of loss to an insurer while the organization retains the balance of the exposure. These plans are also called blended plans or alternative market plans.

Hydraulic fracturing is the process in which fractures in hard-to-reach shale rock formations below the earth's surface are opened and widened by injecting water, chemicals, and sand under high pressure to extract natural gas and oil trapped in the shale rocks. It enables wells that would flow only at very low rates to produce oil and gas in commercially viable volumes.

Hydrocarbons are a class of organic compounds composed only of carbon and hydrogen. Common hydrocarbons include natural gas, crude oil, and coal. Hydrocarbons are the primary source of the world's electric energy and heat sources due to the power created when they are burned.