GLOSSARY

FACULTATIVE REINSURANCE A reinsurance policy that provides an insurer with coverage for specific individual risks that are unusual or so large that they aren’t covered in the insurance company’s reinsurance treaties. This can include policies for jumbo jets or oil rigs. Reinsurers have no obligation to take on facultative reinsurance, but can assess each risk individually. By contrast, under treaty reinsurance, the reinsurer agrees to assume a certain percentage of entire classes of business, such as various kinds of auto, up to preset limits.

FAIR ACCESS TO INSURANCE REQUIREMENTS PLANS / FAIR PLANS Insurance pools that sell property insurance to people who can’t buy it in the voluntary market because of high risk over which they may have no control. FAIR Plans, which exist in 28 states and the District of Columbia, insure fire, vandalism, riot and windstorm losses, and some sell homeowners insurance which includes liability. Plans vary by state, but all require property insurers licensed in a state to participate in the pool and share in the profits and losses. (See Residual Market)

FEDERAL RESERVE BOARD Seven member board that supervises the banking system by issuing regulations controlling bank holding companies and federal laws over the banking industry. It also controls and oversees the U.S. monetary system and credit supply.

FIRE INSURANCE Coverage protecting property against losses caused by a fire or lightning that is usually included in homeowners or commercial multiple peril policies.

Firewall A wall designed to contain or seal off fires in a building.

FIRST-PARTY COVERAGE Coverage for the policyholder’s own property or person. In no-fault auto insurance it pays for the cost of injuries. In no-fault states with the broadest coverage, the personal injury protection (PIP) part of the policy pays for medical care, lost income, funeral expenses and, where the injured person is not able to provide services such as child care, for substitute services.

FLOATER Attached to a homeowners policy, a floater insures movable property, covering losses wherever they may occur. Among the items often insured with a floater are expensive jewelry, musical instruments and furs. It provides broader coverage than a regular homeowners policy for these items.

FLOOD INSURANCE Coverage for flood damage is available from the federal government under the National Flood Insurance Program but is sold by licensed insurance agents. Flood coverage is excluded under homeowners policies and many commercial property policies. However, flood damage is covered under the comprehensive portion of an auto insurance policy. (See Adverse selection)

Florida Building Code (FBC) The FBC provides premium credits for dwellings built with hurricane damage resistant construction methods.  (See Roof Covering)

Florida Insurance Catastrophe Fund Structured as a tax exempt state trust fund under the direction of the State Board of Administration. A nine member advisory council provides the SBA with information and advice.

Florida Insurance Guaranty Association (FIGA) Establishes and maintains a service-oriented operation for processing covered claims of insolvent members.
 
FRAUD Intentional lying or concealment by policyholders to obtain payment of an insurance claim that would otherwise not be paid, or lying or misrepresentation by the insurance company managers, employees, agents and brokers for financial gain.

FREQUENCY Number of times a loss occurs. One of the criteria used in calculating premium rates.

FUTURES Agreement to buy a security for a set price at a certain date. Futures contracts usually involve commodities, indexes or financial futures.