An agreement be an insurer allowing a broker to accept insurances of a defined category on the insurer's behalf.


An agent whose ordinary course of business is to sell goods with the possession of which he is entrusted by his principal. A debt factor is one who collects debts on behalf of a principal.

Factory Mutuals

A group of U.S. mutual insurance companies specialising in the insurance of factories highly protected against fire.

Facultative obligatory treaty

A reinsurance treaty under which an insurer may elect whether to offer a risk of a specified type for reinsurance, the reinsurer being obliged to accept it if offered. Same as Open cover (1).

Facultative reinsurance

The reinsurance of risks that the original insurer may elect whether or not to offer for reinsurance, the reinsurer being free to accept or reject the offer.

Facultative treaty

A contract setting out how facultative reinsurance shall be handled by an insurer and a reinsurer.

Failure of consideration

When a risk for which the insurer has accepted a premium fails to attach there is said to be a failure of consideration and the insured, if he acted in good faith, may recover the premium.

Family income benefits

Benefits under an endowment assurance, in addition to the principal sum assured, which provide an income for dependants for the period between the death of the assured and the maturity date of the policy.

Faute lourde

Gross negligence though without wrongful intention. (Cf. dol.)

Fidelity guarantee

An insurance guarantee to A against the dishonesty of B or B's failure to perform an obligation.

Field staff

The sales force of an insurance company / The employees of an insurance company who are in contact with the public, as opposed to those at head office.

Final pensionable salary

A definition in a pension scheme of what constitutes the final salary with reference to which the pension will be calculated. It may provide for averaging over a period, (See Pensionable salary.)

Final salary scheme

A pension scheme under which the rate of pension is based on the Final pensionable salary (q.v.) before retirement.

Financial reinsurance

Reinsurance for a single premium based mainly on the net present value of future known or expected losses.

Fine arts insurance

The insurance of works of art, traditionally undertaken in the U.S.A. by inland marine underwriters.


In fire insurance "fire" means actual ignition of something that should not be on fire, the cause being accidental or fortuitous in origin.

Fire extinguisher

An appliance, mechanical or otherwise, used for the extinguishment of fires.

Fire insurance

Term used to cover not only insurance against fire but the insurance of additional perils such as explosion and weather.

Fire interruption insurance

Insurance against pecuniary loss consequent upon a fire or other perils commonly covered by a fire insurance policy.

Fire loss

A claim under a fire insurance policy.

Fire mark

A plaque affixed to the wall of a building bearing the name or device of an insurance company and often its policy number, to denote that the building or its contents was insured by that company. Fire marks of the l7th and 18th century were nearly always of lead. Cf. Fire plate.

Fire plate

Term used to describe the successors to the fire mark (q.v.), in the later 19th and earlier 20th century. They are mostly of copper or tin and do not bear a policy number.

Fire prevention

Measures taken to prevent the outbreak of a fire.

Fire protection

Measures taken to protect property from loss by fire and to minimise such loss.

Fire resistance

A measure of the extent to which a building by its construction will resist fire and so reduce its spread.

Fire stop

A seal to close an imperfection of fit between components of a construction in order to restrict the penetration of flame or smoke.

Fire surveyor

One who inspects property to determine the degree of hazard to which it is subject from fire and to assess the premium payable for fire insurance.

Fire wall

A wall that divides a property into separate fire areas.

Fireproof construction

Formerly used in fire insurance practice to distinguish buildings that conform to a high standard of construction, although no building is in fact completely fireproof.

Fires Prevention (Metropolis) Act 1774

An Act, not confined in its operation to London, that empowers persons with an interest in a building insured against fire to require an insurance company to apply policy moneys to reinstatement of the building after a fire.

First line reinsurance

Same as Flat line reinsurance.

First loss

In credit insurance, an excess (q.v.).

First loss insurance

Property insurance where the sum insured is accepted to be less than the value of the property but the insurer undertakes to pay claims up to the sum insured.

First party insurance

Insurance to provide benefits for a person as distinct from third party insurance which provides for one's liability to another.

First surplus treaty

A reinsurance treaty whereby a reinsurer agrees to reinsure a stated proportion of any insurance in a given range of amounts over and above an agreed proportion retained by the original insurer, the losses being shared proportionately between the insurer and the reinsurers who are party to the treaty. For higher amounts there may be second, third, fourth, etc., surplus treaties with other reinsurers.

First Three

The first three leading underwriters on a broker's slip, not necessarily the first three underwriters to have signed.

Fixed objects

In marine hull liability insurance a distinction is drawn between "collision" with vessels and contact with "fixed objects" such as piers, wharves and fastened buoys, the latter not being covered by collision clauses.

Fixed premium

A premium fixed at the outset and not subject to adjustment during the year or other period of insurance.

Fixed rate treaty

A reinsurance treaty under which the rate of premium is fixed at the outset as a percentage of the ceding insurer's premium income less premiums paid for reinsurance effected in priority to reinsurance under the treaty.

Fixed sum excess

A provision under a policy that the insured shall bear the first Lx of any loss.

Fixed term assurance

A life assurance under which the sum assured is payable at the end of a fixed term irrespective of the insured's survival. Premiums cease on his death.

Fixed treaty

A reinsurance treaty under which the original insurer binds himself to cede, and the reinsurer binds himself to accept, the risks specified.


Chattels annexed to land or buildings which as a general rule become part of the realty so that ownership vests in the landowner, with certain exceptions for tenant's fixtures and trade fixtures.

Flag Broker

The insurance broker designated to process premiums or claims under a reinsurance that has been placed by more than one broker acting for the reinsured. Also called "Lead Broker".

Flat line reinsurance

Reinsurance of a fixed amount, whether the whole or part of the insurer's line.


Originally a group of ships but applied to groups of other vehicles and in the U.S. to a group of insurance companies in one ownership.

Fleet policy

A single policy covering a number of motor vehicles or hulls in one ownership.

Fleet rating

A rating applied to a number of motor vehicles or hulls in one ownership, having regard to claims experience.

Flexible endowment assurance

An endowment assurance which expressly allows the assured the option to surrender the policy in part or in whole at a date convenient to him after the policy has been in force for a period, usually ten years.

Flexible funding

A system of costing for pension schemes based on controlled funding (q.v.).

Flight risks

The risks attaching to an aircraft whilst in the air as opposed to ground risks.


Same as Floating policy.

Floater policy

An annual policy covering all construction projects up to a stated value undertaken by a contractor.

Floating policy

A policy where the sum insured covers different situations or persons with no division of the sum insured among them.

Flood insurance

Insurance against damage by flood which is easily obtainable where the risk is comparatively remote but not, as in parts of the U.S.A., where it is endemic and where a federal insurance scheme has proved necessary.

Foam installation

Fixed pipework connected to an apparatus producing foam which it discharges to suppress a fire.

Follow the fortunes

A clause in a reinsurance treaty whereby the reinsurer undertakes to follow the fortunes of the insurer. Thus, if the insurer settles a claim ex gratia, the reinsurer may be expected not to deny liability for his share in the settlement.

Follow the lead

The custom in an insurance market, e.g., Lloyd's, whereby once a leading underwriter (q.v.) has accepted part of an insurance, other underwriters will tend to follow him.

For declaration only

A policy which does not specify the insurance or state the premium pending subsequent declarations of specific insurances.

Force majeure

Some physical or natural restraint which prevents an intention being carried out and which is outside the control of the person who had the intention. The term thus includes an Act of God (q.v.), strikes, war and legislative or administrative intervention.

Force of mortality

The proportion of persons of exact age x who would die within one year if the observed mortality were to remain constant.

Forcible and violent means

Term used in theft insurance when cover is given only for theft following on entry by forcible and violent means, thus excluding losses following entry gained by a trick, by the use of a key, or by entering through an unlocked door or window.

Foreign company

Term used in the U.S.A. to describe an insurance company established in one U.S. state when it is operating in another.

Foreign jurisdiction clause

A clause in a policy providing that claims shall be settled in a jurisdiction other than that of the country where the insurers are based.


A substitute for export credit insurance whereby the exporter's bank buys the debt due in exchange for promissory notes guaranteed by the importer's bank.


Loss of a right in consequence of a crime or breach of engagement. Thus, rights under a life assurance policy may be forfeited if the insured fails to pay the premium. Where an insurance has been obtained by fraud on the part of the insured he forfeits both his rights under the policy and any premium paid.


Giving up part of one's salary on the understanding that one's employers will use the money forgone to buy pension or life assurance benefits.

Form of subrogation

An authority signed by the insured which enables the insurer to pursue his subrogation rights without having to prove them in some other way.


Happening by chance.

Fortuitous event

A chance happening.


The court or area of jurisdiction appropriate for a legal action.

Forward contract

An agreement for insurance to come into force at some future date.

Forward exchange rate cover

Credit insurance against the exporter's risk of loss from an unfavourable movement in the rate of exchange.

Forwarding charges

Expenses of carriage of cargo to destination from a place of refuge or port of forced discharge.

Foundations clause

A clause in a fire policy excluding damage to foundations where the sum insured does not include their value.


A minimum percentage or amount of loss which must be attained before insurers are liable to meet a claim, Once it is attained the insurers must pay the full amount of the loss / The amount of salary disregarded under an occupational pension scheme because it is taken care of by a state scheme.

Franked income

Investment income in the form of dividends or other taxable distributions from which income tax has been deducted by the payer.


Reducing liability to pay a pension by deduction of benefits payable under some other pension scheme.


A deliberate act done with intent to deceive.

Fraud or dishonesty

Terms used in a fidelity guarantee policy to describe the employee's conduct insured against. The words are not statutorily defined.

Frauds, Statute of, 1677

S.4 of this Act, still in force, provides that no action may be brought on a promise to answer for the debt, default or miscarriage of another, unless it is evidenced in writing and signed by or on behalf of the promisor.

Fraudulent mis-representation

Misrepresentation made knowingly with intent to deceive, or recklessly without care whether it be true or false.

Free asset

An asset of an insurance company that is not earmarked for the fulfilment of a limited class of obligations such as satisfying claims in one section of its business only.

Free cover

The extent to which death-in-service benefits will be made available under a group life assurance without investigation of an individual's health.

Free limits

The geographical area within which the holder of a life or health policy is covered without payment of additional premium / Limits of amount up to which an insurance will be granted automatically.

Free of particular average

A largely obsolete marine insurance expression. Where it is used insurers are not liable for partial damage other than a general average loss.

Free of premium

No further premium is payable.

Free policy

In industrial life assurance a policyholder who has discontinued his policy has in some circumstances a statutory right to a paid-up policy for a reduced sum insured, called a free policy.

Free reserves

The reserves of an insurance company for any purpose, over and above technical reserves, e.g., for outstanding claims or unexpired risk.

Freedom of establishment

The right to set up an office or establishment in a country other than that in which one has one's principal place of business.

Freedom of services

The right to provide services in a country without necessarily having an office or establishment in that country.

Freezer insurance

Insurance of the contents of deep freezers against damage caused by an undesigned change of temperature.


By the Marine Insurance Act, 1906, s.90, "freight" includes the profit derivable by a shipowner from the employment of his ship to carry his own goods or moveables, as well as freight payable to a third party, but does not include passage money.

Freight insurance

Insurance of the money earned for carrying goods.


Water other than seawater, including, rain, condensation and bilgewater.

Friendly society

A mutual society established for the relief or maintenance of its members or their relatives during sickness or other infirmity or in old age or widowhood, or for life assurance and certain other purposes.

Fringe company

A company, other than a major British company, by whom or on whose behalf insurance is written in one of the underwriting rooms near Lloyd's.

From the ground up

A statement of an original insurer's experience of a class of business offered for reinsurance is said to be from the ground up (F.G.U.) when it shows the number and distribution by amount of all claims however small even though reinsurance is required for large claims only.

Front-end loading

A system under which the expenses of a life assurance company are charged more heavily against premiums payable in the earlier years of a policy than in later years.

Fronting company

A company whose services are used by a reinsurer, the company accepting direct insurance in its own name and forthwith reinsuring it with the reinsurer.


In marine insurance frost is not considered a peril of the sea.

Frozen pension

A pension payable at a fixed rate from a future date to which a right has accrued because either a scheme member has left a pension scheme before retirement age or the pension scheme has been discontinued.


The premature determination of a contract owing to the occurrence of an intervening event or a fundamental change in circumstances not contemplated by the parties at the outset.

Frustration clause

A clause in a marine insurance policy covering war risks that excludes any claim based upon frustration of the insured voyage or adventure.

Full reinsurance clause

A clause in a facultative reinsurance contract, where all or nearly all a risk is reinsured, to give the reinsurer control over claims settlements.

Full value insurance

An insurance where the insured is required to warrant that the sum insured represents the full value of the insured property.


A provision or reserve.

Fund Convention 1971

An international convention which requires cargo owners to contribute to the cost of oil spills if the shipowner's liability limit does not suffice to meet claims.


Setting aside assets to meet an eventual obligation / Payment by an insurance broker of an insured's claim before the money is recovered from the insurers.

Future service pension

A pension that will be earned during employment in the future / Pension earned after a new pension scheme starts or after improvement of benefits in an existing scheme.