Glossary

Underwriting profit is the net profit that an insurer derives from providing insurance or reinsurance coverage, exclusive of the income it derives from investments. It is calculated by taking the net collected premiums (net of reinsurance premiums) less losses, loss adjustment expenses, and underwriting expenses paid.

Underwriting risk is the loss borne by insurers and reinsurers. It can take the form of underestimated liabilities from unpaid business written in past years (i.e., applying to expired policies) or underpriced current business (i.e., unexpired policies).

Underwriting year experience refers to underwriting based on written premiums and ultimate losses from loss events falling within the same accounting period, where the accounting period is the period covered by the insurance policy or reinsurance agreement, regardless of when the premiums and losses were actually reported, booked, or paid.

Undue familiarity refers to the legal doctrine stating that physicians have a duty not to become physically intimate with their patients. Given the unique relationship that exists in a therapeutic setting between a doctor and a patient, a psychiatrist, for example, who becomes intimate with a patient could cause the patient significant emotional harm. Accordingly, doctors who violate their duty not to become unduly familiar with their patients are usually held strictly liable for any damages resulting from such conduct. As a result, virtually all physicians' professional liability policy forms exclude coverage for damages resulting from sexual acts, although most policies do cover the costs of defending allegations that a physician violated the duty of undue familiarity.

Undue hardship is a term contained in the Americans with Disabilities Act of 1990 relating to the degree of accommodation an employer must make for a qualified, disabled employee. An employer must make reasonable accommodations for the employee unless making the accommodations would impose an undue hardship on the employer's operations. Factors taken into consideration in determining whether the accommodations would unfairly burden the employer include the overall cost of the accommodation (taking into account tax credits or other financial incentives provided by the government), the overall financial resources of the entity, the effect of the accommodations on the resources and operations, and the type of operation.

Unearned premium (UEP or UP) is the portion of the policy premium that has not yet been "earned" by the company because the policy still has some time to run before expiration. A property or casualty insurer must carry all unearned premiums as a liability in its financial statement since, if the policy should be canceled, the insurer would have to pay back a certain part of the original premium.

Unearned premium reserve (UEPR or UPR) represents the amount of unexpired premiums on policies or contracts as of a certain date (the total annual premium less the amount earned).

Unearned reinsurance premium represents the portion of a reinsurer's premium that applies to the unexpired portion of the policies it has reinsured.

An unfunded retention is a type of retention plan under which losses are paid out of cash flow or from funds obtained by borrowing.

Unfunded self-insurance refers to a system in which a company creates a "paper" reserve figure. It does not specifically segregate funds to match the reserve it has set but uses the money for other purposes.