GLOSSARY

SALVAGE Damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage rights over property on which they have paid claims, such as badly-damaged cars. Insurers that paid claims on cargoes lost at sea now have the right to recover sunken treasures. Salvage charges are the costs associated with recovering that property.

SCHEDULE A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items.

Secondary Water Resistance The technique used to protect the interior of the building when the roof cover and underlayment blow off during a storm.

SEVERITY Size of a loss. One of the criteria used in calculating premiums rates.

Sinkhole A special form of earth movement, covered by some homeowner insurance, referring to the sudden collapse or sinking of land into empty, underground spaces eroded by water.

Sinkhole Deductible The sinkhole deductible applies to any loss covered by the Sinkhole Loss Coverage endorsement.

SOFT MARKET An environment where insurance is plentiful and sold at a lower cost, also known as a buyers’ market. (See Property/casualty insurance cycle)

SOLVENCY Insurance companies’ ability to pay the claims of policyholders. Regulations to promote solvency include minimum capital and surplus requirements, statutory accounting conventions, limits to insurance company investment and corporate activities, financial ratio tests, and financial data disclosure. (See Spread of Risk)

SPREAD OF RISK The selling of insurance in multiple areas to multiple policyholders to minimize the danger that all policyholders will have losses at the same time. Companies are more likely to insure perils that offer a good spread of risk. Flood insurance is an example of a poor spread of risk because the people most likely to buy it are the people close to rivers and other bodies of water that flood. (See Adverse Selection)

SURPLUS The remainder after an insurer’s liabilities are subtracted from its assets. The financial cushion that protects policyholders in case of unexpectedly high claims.

SURPLUS LINES Property/casualty insurance coverage that isn’t available from insurers licensed in the state, called admitted companies, and must be purchased from a non-admitted carrier. Examples include risks of an unusual nature that require greater flexibility in policy terms and conditions than exist in standard forms or where the highest rates allowed by state regulators are considered inadequate by admitted companies. Laws governing surplus lines vary by state.