Glossary

A cap is an agreement obligating the seller to make payments to the buyer, with each payment based on the amount by which a reference price (or level) or the performance (or value) of one or more underlying interests exceeds a predetermined number, sometimes called strike rate or strike price.

Capacity refers to the largest amount of insurance or reinsurance available from a company or the market in general.

In captive insurance, capital has one of three different meanings: the amount initially needed to set up a captive or the initial amount paid in; the total of this paid-in capital plus other forms of capital, like letters of credit; or the sum of these two plus accumulated surplus.

Capital adequacy refers to the funding required of a risk financing vehicle, such as a captive insurance company, to meet the liabilities insured.

Capital allocation is the actual deployment of capital to different business segments.

A capital asset pricing model (CAPM) is an asset valuation model that describes the relationship between expected risk and expected return for marketable assets.

Capital attribution is the assignment of enterprise-level capital to the various business segments (e.g., lines of business, regions, projects) that make up the enterprise in recognition of the relative risk of each segment for purposes of measuring segment performance on a risk-adjusted basis.

Capital at risk is capital that is available to support the retention of risk by a self-insurer or underwriter of risk.

Capital markets are the institutions in which financial instruments such as stocks and bonds that mature in more than 1 year are created and traded.

Capital stock refers to the ownership of a corporation as expressed in individually or jointly held shares of stock.