Glossary

Risk-based capital (RBC) requirements refers to a method developed by the National Association of Insurance Commissioners to determine the minimum amount of capital required of an insurer to support its operations and write coverage. The insurer's risk profile (i.e., the amount and classes of business it writes) is used to determine its risk-based capital requirement. Four categories of risk are analyzed in arriving at an insurer's minimum capital requirement: asset, credit, underwriting, and off-balance-sheet.

Risk refers to the uncertainty arising from the possible occurrence of given events. It also refers to the insured or the property to which an insurance policy relates.

The Risk and Insurance Management Society, Inc. (RIMS), is an industry association of risk managers that publishes several periodicals, lobbies, sponsors seminars, and conducts an annual conference.

Risk appetite is the degree to which an organization's management is willing to accept the uncertainty of loss for a given risk when it has the option to pay a fixed sum to transfer that risk to an insurer.

Risk capital is the capital required to finance the consequences of business risks.

A risk charge is an amount identified in some reinsurance agreements as specifically to be retained by the reinsurer or assuming the risk under the policies reinsured; a share of the profits in excess of the risk charge is returned to the cedent as an experience refund.

Risk concentration is the underwriting of a number of like risks, where the same or similar loss events could involve multiple subjects of insurance insured by the same insurer.

Risk control is the risk management technique of minimizing the frequency or severity of losses with training, safety, and security measures. It is a more modern term for what was once more frequently called "loss control."

A risk dashboard is a graphical presentation of the organization's key risk measures (often against their respective tolerance levels); typically used in reports to senior management.

Risk distribution, used in tax deductibility discussions, mandates that enough independent risks of unrelated parties be pooled to invoke the actuarial law of large numbers. In tax disputes, the Internal Revenue Service (IRS) and numerous courts have required the presence of both risk shifting and risk distribution to find a financial arrangement to be "insurance."