Glossary

An 831(b) captive is a captive that takes the 831(b) election and is then taxed under Internal Revenue Code § 831(b). This tax election allows a captive qualifying to be taxed as a US insurance company to pay tax on investment income only in any year that its written premium is at or below the threshold for the applicable tax year, which in 2017 was set at $2.2 million or less with the premium cap subject to inflation adjustments. Such captives are also known as "micro-captives."

Earned premium (EP) is that part of a policy's premium that applies to the expired portion of the policy. Although insurance premiums are often paid in advance, insurers typically "earn" the premium at an even rate throughout the policy term. The unearned portion of the premium that has been paid is kept in the "unearned premium reserve."

The earned reinsurance premium is the amount of premium allocated to the portion of the policy period that has elapsed at any given point in time. Reinsurance premiums are usually paid at the inception of the underlying policy to which they apply. Reinsurers recognize the premium as being earned as time elapses during the underlying policy period.

Earned surplus refers to funds earned by an insurance company (including captives and risk retention groups) after all losses and expenses have been paid. Once earned surplus is recognized, it can be allocated to capital and/or dividends.

Earnings before interest, dividends, depreciation, and amortization is a form of cash flow measure, useful for evaluating the operating performance of companies with high levels of debt (when the debt service costs may overwhelm other measures such as net income). It is used in enterprise risk management.

Earnings guidance is the common practice of publicly held corporations issuing quarterly disclosures to both securities analysts and the public about the level of earnings that the company expects to report in the near future. Some say that doing away with quarterly earnings guidance will help companies focus on long-term results, a practice that should ultimately increase shareholder value. Another argument against issuing earnings guidance is that it often encourages undesirable executive behavior (e.g., artificially boosting earnings), in an effort to meet guidance targets, which sometimes leads to claims against corporate directors and officers.

Earnings insurance is a type of business interruption insurance that uses a monthly limit on loss recovery in place of a coinsurance clause. The declarations show both a total limit of insurance and the portion of that total limit (expressed as a fraction: one-third, one-quarter, etc.) applicable to loss in each month following the direct damage loss. The monthly limit of indemnity coverage option in the Insurance Services Office, Inc. (ISO), business income coverage forms approximates the coverage provided under an earnings insurance form.

Earthquake coverage is typically excluded (along with other earth movement) from most property insurance policies, except ensuing fire. In most cases, earthquake coverage must be purchased by endorsement to a difference-in-conditions (DIC) policy or to an all risks policy. Normally, the coverage provided is subject to a per-occurrence sublimit, an annual aggregate limit, and a separate deductible.

The earth movement (or earthquake) exclusion is found in most property insurance policies (even all risks policies) eliminating coverage for loss resulting from earthquake and usually all other forms of earth movement, except ensuing fire.

An easement is an interest that one party has in the land of another or a right of use over another party's property. An easement need not be written but may be implied or created by necessity or by prescription. Generally, the party enjoying the benefit of being on the property of another assumes the liability of the property owner. Easements are "insured contracts" unless they are in connection with construction or demolition operations on or within 50 feet of a railroad.