The following glossary with regard to risk management and aquaculture insurance terminology has been selected and adapted from the Report of the Second Expert Consultation on Crop Insurance, held in FAO, Rome, 18-20 April 1989.
Accident
An unplanned event, unexpected and undesigned, which occurs suddenly and at a definite place.
Act of God
An event arising out of natural causes with no human intervention which could not have been prevented by reasonable care or foresight, e.g. floods, earthquakes, wind storms.
Actuarial
Describes the calculations made by an actuary. Essentially this is a branch of statistics, dealing with the probabilities of an event occurring. Actuarial calculations, if they are to be at all accurate, require basic data over a sufficient period to permit likelihood of future events to be predicted with a certain degree of certainty.
Aquaculture Insurance
This is insurance applied to aquacultural enterprises, e.g. crop insurance. Livestock insurance, generally against death, sickness, or serious injury to the aquatic animals (and plants) concerned, is included in this class of business. The term is not normally used to describe insurance of farm buildings or equipment, though the same insurer may cover both aquaculture production and fire insurance for farm buildings.
Commission
That portion of the premium paid by the insurer to the agent as remuneration for services in procuring and servicing the policy-holder.
Crop Insurance
Provides protection against damage or loss to growing crops against specified or multiple perils, e.g. wind storms, floods, fire. Measurement of loss could be by "yield" basis, production costs basis, agreed value basis, or rehabilitation costs basis.
Indemnity
The amount payable by the insurer to the insured, either in the form of cash, repair, replacement, or reinstatement in the event of an insured loss which amount is measured by the extent of the insured's pecuniary loss, is termed the indemnity. It is set at a figure equal to but not more than the actual value of the subject matter insured just before the loss, subject to the adequacy of the sum insured.
Insurance
Is a financial mechanism which aims at reducing the uncertainty of loss by pooling a large number of uncertainties so that the burden of loss is distributed. Generally each policy-holder pays a contribution to a fund, in the form of a premium assessed by the insurer, commensurate with the risk he introduces, which is established and administered by the insurer and out of that fund are paid the losses suffered by any of the insured.
Insured peril
The cause of the loss which entitles the insured to recover under the policy; for example, hail, frost, wind, drought, excessive rain, and diseases.
Loss adjustment
Following a notification of a claim, the insurer must determine the extent to which loss has occurred and the amount which can be paid to the insured as indemnity. This process of gathering information and making a decision is called loss adjustment, or loss assessment.
Loss frequency
The rate of the occurrence of losses, often expressed in terms of the number of incidents over a period of time. It is one method used for measuring the effectiveness of loss prevention services.
Physical hazards
The risk or danger arising from the subject matter of insurance; for example, excessive flooding when the crop is about to be harvested.
Risk
Relates to an event which may or may not occur, the likelihood of which can be predicted with a certain degree of confidence.
Specific-risk insurance
A policy which describes and pre-establishes specifically the named perils to be covered, in contrast to a policy that covers "all-risks" subject to certain exclusions.
