GLOSSARY

CAPACITY The supply of insurance available to meet demand. Capacity depends on the industry’s financial ability to accept risk. For an individual insurer, the maximum amount of risk it can underwrite based on its financial condition. The adequacy of an insurer’s capital relative to its exposure to loss is an important measure of solvency. A property/casualty insurer must maintain a certain level of capital and policyholder surplus to underwrite risks. This capital is known as capacity. When the industry is hit by high losses, such as after the World Trade Center terrorist attack, capacity is diminished. It can be restored by increases in net income, favorable investment returns, reinsuring more risk and or raising additional capital. When there is excess capacity, usually because of high return on investments, premiums tend to decline as insurers compete for market share. As premiums decline, underwriting losses are likely to grow, reducing capacity and causing insurers to raise rates and tighten conditions and limits in an effort to increase profitability. Policyholder surplus is sometimes used as a measure of capacity.

CAPTIVE AGENT A person who represents only one insurance company and is restricted by agreement from submitting business to any other company, unless it is first rejected by the agent’s captive company. (See Exclusive agent)

CAPTIVES Insurers that are created and wholly owned by one or more non-insurers, to provide owners with coverage. A form of self-insurance.

CATASTROPHE Term used for statistical recording purposes to refer to a single incident or a series of closely related incidents causing severe insured property losses totaling more than a given amount, currently $25 million.

CATASTROPHE DEDUCTIBLE A percentage or dollar amount that a homeowner must pay before the insurance policy kicks in when a major natural disaster occurs. These large deductibles limit an insurer’s potential losses in such cases, allowing it to insure more property. A property insurer may not be able to buy reinsurance to protect its own bottom line unless it keeps its potential maximum losses under a certain level.

CATASTROPHE FACTOR Probability of catastrophic loss, based on the total number of catastrophes in a state over a 40-year period.

CATASTROPHE MODEL Using computers, a method to mesh long-term disaster information with current demographic, building and other data to determine the potential cost of natural disasters and other catastrophic losses for a given geographic area.

Catastrophic Ground Cover Collapse Catastrophic Ground Cover Collapse offers protection if the insured property experiences all of the following:
  • Geological activity that results in the abrupt collapse of the ground cover
  • A depression in the ground cover clearly visible to the naked eye
  • Structural damage to the building, including the foundation
  • The insured structure being condemned and ordered to be vacated by the governmental agency
  • Structural damage consisting merely of the settling or cracking of a foundation, structure or building does not constitute a loss resulting from a catastrophic ground cover collapse


Citizens Property Insurance Corporation Emergency Assessment Citizens is responsible for paying hurricane and other covered claims to its policyholders. If Citizens funds are depleted after a catastrophic event, resulting in a deficit, assessments are levied according to Florida law. This ability to levy assessments provides Citizens with resources to pay claims after an event. Below is a summary of the Emergency Assessment.

  • A broad base of property and casualty policyholders, including Citizens policyholders, is assessed directly by their insurer at renewal.
  • For each of the 3 Citizens accounts, this assessment may not be more than 10 percent of the policy premium or 10 percent of the remaining deficit, whichever is greater. That means that assessable policyholders could be assessed a maximum of 30 percent of assessable premium if there is a deficit in each of the 3 Citizens accounts. The Emergency Assessment can be spread over multiple years, which could reduce the burden on Florida policyholders.


Citizens Property Insurance Corporation Regular Assessment Citizens is responsible for paying hurricane and other covered claims to its policyholders. If Citizens funds are depleted after a catastrophic event, resulting in a deficit, assessments are levied according to Florida law. This ability to levy assessments provides Citizens with resources to pay claims after an event. Below is a summary of the Regular Assessment.

  • A broad base of licensed Florida property and casualty insurance companies, including property and automobile insurers are assessed if a deficit remains.
  • These companies are required to remit their share of the Regular Assessment to Citizens within 30 days of the levy and are permitted to recoup this amount by passing it on their policyholders at renewal.
  • Insureds who purchase coverage from surplus lines insurers are also subject to the regular assessment.
  • This assessment can be up to 6 percent per account of assessable premium. That means that assessable insurers, and thus their policyholders, could be assessed a maximum of 18 percent of assessable premium if there is a deficit in all 3 of Citizens' accounts.
  • This assessment is a one-time assessment.
  • Citizens policyholders are not charged this assessment.
  • If the Citizens Policyholder Surcharge and the Regular Assessment do not cure a deficit for any account, the Emergency Assessment is levied.


COLLATERAL Property that is offered to secure a loan or other credit and that becomes subject to seizure on default. Also called security.

COVERAGE Synonym for insurance.

Coverage A The dwelling on the "residence premises" shown in the Declarations, including structures attached to the dwelling; and Materials and supplies located on or next to the "residence premises" used to construct, alter or repair the dwelling or other structures on the "residence premises." This coverage does not apply to land, including land on which the dwelling is located.

Coverage B Other structures on the "residence premises" set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection. This coverage does not apply to land, including land on which the other structures are located.

Coverage C Personal property owned or used by an "insured" while it is anywhere in the world. We will cover personal property owned by: Others while the property is on the "residence premises" occupied by an "insured"; A guest or a "residence employee," while the property is in any residence occupied by an "insured."

Coverage D Coverage D or Loss of Use pays out in the event that you are unable to live in your primary home due to a covered loss.

Coverage F Medical Payments for a set amount of time payable towards injuries sustained by someone that is not the insured or regular resident of the property.

CRIME INSURANCE Term referring to property coverages for the perils of burglary, theft and robbery.