Glossary

C

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C risks (contingency risks). In the United States, four officially recognized categories of risk that the actuarial profession has identified as being vital to insurers. See also C-1 risk (asset risk), C-2 risk (pricing risk), C-3 risk (interest-rate risk), and C-4 risk (general management risk).

C-1 risk (asset risk). For insurers, the risk of a loss of asset value on investments in such assets as stocks, bonds, mortgages, and real estate.

C-2 risk (pricing risk). For insurers, the risk that an insurer's experience with mortality or expenses will differ significantly from the actuarial assumptions used in product pricing, causing the insurer to lose money on its products.

C-3 risk (interest-rate risk). For insurers, the risk that market interest rates might shift, causing an insurer's assets to lose value or its liabilities to gain value.

C-4 risk (general management risk). For insurers, the risk of losses resulting from the insurer's ineffective general business practices, from the need to pay a special assessment to cover another insurer's unsound business practices, from unfavorable regulatory changes, or from unfavorable changes in tax laws.

cafeteria plan. See flexible benefits plan.

calendar-year deductible. For medical expense insurance policies, an amount of eligible medical expenses that the insured must incur during a given calendar year (from January 1 to December 31) before the insurer becomes liable to pay any benefits for further covered expenses.

call center. Within a business organization, any group of individuals whose main function is to provide customer service by answering incoming customer calls or electronic mail messages that are routed through a computerized distribution system.

Canada Customs and Revenue Agency. The federal governmental agency responsible for enforcing the provisions of Canadian laws and regulations concerning income taxes.

Canada Health Act. In Canada, federal legislation that requires that each Canadian province provide its residents with health care coverage for hospital and medical services.

Canada Labour Code. Canadian federal legislation that mandates minimum wage and overtime standards that are similar to the standards established by the Fair Labor Standards Act in the United States.

Canada Pension Plan (CPP). A Canadian federal program that primarily provides retirement benefits for retirees who reside in all provinces except Quebec and who have contributed money into the plan during their working years. The program also provides a benefit to disabled workers, as well as to the widows, widowers, and surviving dependent children of deceased and disabled workers.

Canadian and British Insurance Companies Act. A Canadian federal statute that describes the requirements that federally incorporated Canadian insurers and British insurers must meet in order to transact business in Canada.

Canadian Council of Insurance Regulators (CCIR). In Canada, a committee of provincial superintendents of insurance that recommends uniform insurance legislation to the provinces.

Canadian Institute of Chartered Accountants (CICA). A professional organization of Canadian Chartered Accountants (CAA) that establishes generally accepted accounting principles (GAAP) for Canadian insurers to follow in recording and presenting their financial information.

Canadian Life and Health Insurance Association (CLHIA). An insurance industry association of life and health insurance companies operating in Canada.

Canadian Life and Health Insurance Compensation Corporation (CompCorp). In Canada, a federally incorporated, nonprofit company established by the Canadian Life and Health Insurance Association to protect insurance consumers against loss of benefits in the event a life or health insurance company becomes insolvent. Operates similarly to state guaranty associations. See also guaranty association.

Canadian Reinsurance Conference (CRC). An annual meeting of Canadian insurance companies and reinsurance companies that provides a forum for current life and health insurance and reinsurance issues. The CRC establishes the Canadian Reinsurance Guidelines.

Canadian Reinsurance Guidelines. A set of common reinsurance principles, established by the Canadian Reinsurance Conference (CRC), that can be voluntarily used as a basis upon which new reinsurance treaties can be written and existing treaties can be interpreted.

cancellable policy. An individual health insurance policy that gives the insurer the right to terminate the policy at any time, for any reason, simply by notifying the policyowner that the policy is cancelled and by refunding any advance premium paid for the policy. See also conditionally renewable policy, noncancellable and guaranteed renewable policy, and optionally renewable policy.

cap. For an equity-indexed annuity contract, the upper limit on the amount of an index's gain in value that will be credited to the annuity contract.

capacity. In insurance, the highest dollar amount of coverage that an insurer or reinsurer is financially able to accept on a specified risk.

capital. (1) An amount of money invested in a company by its owners, usually through the purchase of the company's stock. Also known as owners' equity. (2) Long-term funds.

capital and surplus. For insurers, the amount remaining after liabilities are subtracted from assets; owners' equity in an insurance company.

capital and surplus ratios. Financial ratios insurance companies use to express the relationship between the insurer's capital and/or surplus and its liabilities and thus to measure an insurer's financial strength. Also known as capital ratios and capitalization ratios.

capital appreciation. An increase in the market value of invested assets.

capital budget. A budget that shows a company's plans for the financial management of its long-term, high-cost investment proposals, such as new investments, major repairs to or remodeling of existing investments, acquisitions of other companies or lines of business, mandated safety and environmental improvements, expense reduction projects, and revenue expansion projects.

capital gain. The amount by which the selling price of an asset exceeds its purchase price. Contrast with capital loss.

capitalization ratios. See capital and surplus ratios.

capitalize. To record an expense, such as deferred acquisition costs, as an asset.

capital loss. The amount by which the purchase price of an asset exceeds its selling price. Contrast with capital gain.

capital ratios. See capital and surplus ratios.

capitation. A fee payment method used by some health maintenance organizations (HMOs) under which the HMO prepays a medical care provider a flat amount for each subscriber's medical careæusually on a monthly basis.

captive agent. An insurance agent who is under contract to only one insurer and who is not permitted to sell the products of other insurers. Also known as exclusive agent. Contrast with broker.

captive reinsurer. A reinsurance company that is formed and controlled by an insurance company or another type of insurance marketer for the purpose of providing reinsurance to that insurer or marketer.

career agency system. See agency building distribution system.

career agent. A licensed insurance salesperson who is under contract with at least one insurance company. A career agent is considered to be an independent contractor and not an employee of the insurance company.

caregiver training benefit. A benefit provided in a long-term care (LTC) policy to cover the cost of training someone to help care for a covered person who is to receive LTC at home or at an alternate living facility.

case assignment system. A system for organizing underwriting work in which cases are distributed to an appropriate person or group for underwriting based on certain characteristics of the case; for example, the face amount requested, the type of application of policy change, or the geographic origin of the application or location of the agent. Contrast with work division system.

case management. A process insurers use in managed health care plans to evaluate the necessity and quality of an insured's medical care and the appropriateness of alternative treatments or solutions for the insured's medical care.

cash-basis accounting. An accounting system in which a company recognizes revenues or expenses only when it receives or disburses cash.

cash budget. A type of budget that projects a company's beginning cash balance, cash inflows, cash outflows, and ending cash balance for a specified accounting period, typically by quarter.

cash disbursement. The payment of cash by a company.

cash disbursements budget. A schedule of expected cash disbursements, including their timing and amount, during the accounting period.

cash dividend option. For participating insurance policies, a dividend option under which the insurer sends the policyowner a check in the amount of the policy dividend. See also dividend and policy dividend options.

cash equivalents. Short-term assets that are not cash, but can typically be converted to cash within 90 days with little or no risk of losing value.

cash flow. Any movement of cash into or out of a company. A cash inflow is a source of funds and a cash outflow is a use of funds.

cash flow statement. A financial statement that provides information about an insurer's cash receipts (inflows) and its cash disbursements (outflows) during a specified period.

cash-flow testing (CFT). The use of simulation modeling to project into a future period the cash flows associated with an insurance company's existing business, as of a given valuation date, and to compare the timing and amounts of asset and liability cash flows after the valuation date. Contrast with dynamic financial analysis (DFA).

cash inflow. See cash flow.

cash management. The management of short-term funds. Also known as working capital management.

cash-out provision. See bailout provision.

cash outflow. See cash flow.

cash payment option. One of several nonforfeiture options included in life insurance policies and some annuity contracts that allows a policyowner to receive the cash surrender value of a life insurance policy or an annuity contract in a single payment. Also known as cash surrender option. See also nonforfeiture options and cash surrender value.

cash receipt. A check, money order, electronic funds transfer (EFT), or other cash transaction that is remitted to a company as a form of pa