• A cap is an agreement obliging a seller to make payments to a buyer, with each payment based on the amount by which the reference price (or level) or performance (or value) of one or more underlying interests exceeds a predetermined number, sometimes called a strike rating or strike rate. price.

  • Capacity is the largest amount of insurance or reinsurance available from a company or the market as a whole. Capacity is defined by financial strength and is also used to refer to the extra volume of business (premium volume) that a company or the entire market can write on the basis of excess (untapped) capital i.e. excess capacity.

  • Capital is found in captive insurance, a catch-all term that has one of three different meanings: the amount initially required to create a captive, or the initial amount paid; the total amount of that paid-in capital plus other forms of capital such as letters of credit; or the sum of the two plus the accumulated surplus. The difference between captive capital and other forms of insurance capital is that it is generally considered by owners to be risk capital, ready to be expended by adverse business outcomes. That’s why you rarely hear about “depreciation of capital” in unwitting financial discussions. Instead, one hears about “decrease in capital.”

  • Capital adequacy refers to the funding required by a risk financing mechanism, such as a captive insurance company, to meet insured obligations. In relation to enterprise risk management (ERM), the term refers to the amount of capital required to meet a certain economic capital constraint (eg, a certain probability of ruin), usually calculated at the enterprise level.

  • The Capital Asset Pricing Model (CAPM) is an asset valuation model that describes the relationship between expected risk and expected return on market assets. CAPM states that the intersection point of the regression equation between asset returns and returns on systematic factors is 0 percent in an efficient market, but it does not necessarily imply a single source of systematic risk.

  • Capital at risk is capital available to support the self-insurer or risk underwriter’s retention of risk. Such “risk capital” may be required by a captive insurance company to pay losses in the event that the premium collected is insufficient to cover losses and expenses. As a rule, this is an amount in excess of the authorized capital, and therefore can be used as collateral for the ceding companies. Also referred to as excess funds or risk capital.

  • Capital attribution is enterprise risk management (ERM), the allocation of capital at the enterprise level to the various business segments (e.g. lines of business, regions, projects) that make up an enterprise, taking into account the relative risk of each segment for the purpose of measuring segment performance with risk adjustment.