To celebrate the launch of Axco's new brand, we're going back to basics. In the Insurance Essentials article series, Axco defines key insurance terms to clarify understanding of the global insurance market and to aid the professional development of those wishing to join or learn more about the industry.

Axco is the definitive source of insurance market information and has developed new ways to deliver information to its users faster and smarter, saving time and resource and allowing businesses to make better-informed decisions.

Each week, a new set of definitions will be released.

Here are some key insurance terms and their definitions:

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1/24th method: A method of calculating earned premium on the basis of a two-year (24-month) policy term.

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Accommodation basis: A basis on which an insurer may grant particular (usually undesirable) cover or certain terms and conditions of cover in order to 'accommodate' an existing relationship with a broker and/or insured.

Accumulation: The aggregate of individual risks that could be affected by a single loss occurrence, where a single loss event may affect many individual insured risks.

Acquisition costs: This term covers any and all costs incurred by an insurer or reinsurer in acquiring business. Such costs may include commissions, brokerage and taxes paid, with commission paid to intermediaries making up the largest proportion.

Admissible assets: A UK term that refers to those assets deemed acceptable for consideration in determining an insurance company's 'net assets', for example for the purposes of determining the company's solvency margin. Such assets might include bonds, shares and loans.

Admitted: Typically used to refer to an insurance company or insurance intermediary that is authorised by the relevant local supervisory authority. The term may also be used to refer to the business written by an 'admitted' insurance company or placed by an 'admitted' intermediary. Compare to: non-admitted.

Admitted assets: A US term used to denote those assets that may be taken into account under statutory US accounting principles for the purpose of calculating an insurer's surplus to policyholders.

Advance loss of profits (ALOP): A form of business interruption cover that relates to the expected profits of a new business or an extension to an existing business. The cover insures against loss of profit resulting from delay in the completion of contract works when a said delay is due to a loss insured under a CAR or EAR policy. Related terms: advance profits insurance.

Affinity groups: Subgroups of personal lines consumers defined by a common factor such as age, occupation or shared interest. Affinity groups are used primarily for marketing purposes.

Agency agreement: A written contract between an agent and a principal that declares the terms under which the agent operates on behalf of that principal. Agency agreements typically contain information relating to the responsibilities of each party, the extent of the agent's authority, commission levels and details on the handling of monies, for example premium and claims money.

Agent: An insurance agent is an individual or an organisation that solicits, negotiates or effects contracts on behalf of a principal (an insurer or reinsurer). An agent typically holds the right to carry out certain tasks and functions on behalf of its principal and acts within the bounds of authority designated in an agency agreement. Typically, agents that represent only one principal are known as tied agents whilst those that work for several are called independent agent; however, precise definitions of terms such as 'captive', 'exclusive', 'independent', 'multi-tied' and 'tied' agents often vary between markets. Compare to: broker. See also: agent, independent/agent, tied.

Agent, independent: An insurance agent that works on behalf of several insurers and is permitted to sell any of those insurers' products. Related terms: independent agent.

Agent, shipping and forwarding: A freight forwarder. The term 'shipping and forwarding agent' has now been replaced largely by a freight forwarder.

Agent, tied: An insurance agent that works exclusively for one insurance company and has in-depth knowledge of that company's products. Tied agents may also be referred to as captive agents or exclusive agents. Compare to: agent, independent. Related terms: agent, captive / agent, exclusive / captive agent / exclusive agent.

Aggregate excess insurance: A type of cover that becomes effective when losses exceed a certain amount during the period of insurance. The 'amount' is predefined.

Aggregator: An online company or website that gathers and analyses information from different sources on the products and services offered by different companies and filters it through one website. In insurance markets, aggregators tend to manifest themselves as price comparison websites.

All risks: A form of property insurance that covers any loss or damage arising from any cause or peril that is not specifically excluded under the terms of the insurance policy. All risks policies contain exclusions, which typically relate to inevitable causes of loss such as depreciation and wear and tear but may also be used to exclude any uninsurable or complex aspect of a risk. Increasingly, the term 'all risks' is being replaced by terms such as "special perils", "open perils" or "accidental loss or damage". Compare to: named perils. Related terms: accidental loss or damage.

Alternative dispute resolution (ADR): A term encompassing various methods of resolving legal disputes other than through litigation. Such methods include arbitration, conciliation, mediation and adjudication, with arbitration most commonly adopted.

Alternative risk transfer (ART): Term used to group and describe alternative risk transfer techniques such as the use of captives, pools and finite risk insurance.

Arbitration: A form of alternative dispute resolution in which both parties agree an independent and impartial arbitrator. The arbitrator decides the outcome of the dispute; this decision is called an award. Should the parties involved dispute this award, they may seek the advice of an umpire. Arbitration can be binding or non-binding.

Assumed reinsurance: Reinsurance business or premium written by an insurer/reinsurer accepted from another insurer.

Automatic reinstatement: A policy provision through which the sum insured or indemnity limit is automatically reinstated following a loss. May apply to both insurance and reinsurance cover.

Average (marine): In marine insurance, the term 'average' signifies one of two types of partial loss: general average or particular average.

Average (non-marine): In non-marine insurance, 'average' is used in property business to protect insurers against the possibility that the insured has under-declared the value of the insured property. Average allows an insurer to reduce its claims payment in proportion to the amount for which the property was underinsured when cover was taken out.

Average, condition of: A policy condition in property insurance that requires that the amount of a claims payment be reduced proportionately in the event of underinsurance. This means that the payment will be in proportion to the sum insured rather than the actual value of the property at risk at the time of the loss. Any sum insured that is stated as "subject to average" in the policy wording is liable to be reduced through average.

Average, general: A partial loss in marine insurance that is due to actions taken and/or expenses incurred in protecting a ship, its crew and its cargo. Such actions can include the voluntary and deliberate sacrifice of cargo and expenses can be the towing of the ship to a port. General average is a mechanism for recovering the costs of these types of losses and expenses from those who benefit ultimately from their having taken place (where the losses and expenses have been incurred for the 'greater good'). In practice, most general average losses are shared proportionately between cargo owners and shipowners. Related terms: general average.

Average, particular: A partial loss in marine insurance that is caused by an insured peril. In practice, the term 'particular average' is applied to any claim for damage to a ship or to cargo that is not due to general average sacrifice.

Award: A form of monetary payment that may be compensatory in nature and may be mandated by a court ruling.

Award, arbitration: The decision reached by the arbitrator in a process of arbitration. An arbitration award is akin to a court ruling and does not necessarily or exclusively signify monetary payment.