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.

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Here are some key insurance terms and their definitions:

# a b c d e F g h i j k l m n o p q r s t u v w x y z


F scale

See Fujita scale

Family takaful

See takaful, family


Fees are fixed charges made by a professional individual, company or organisation in return for the provision of professional advice or services. In the insurance industry, fees usually relate to the remuneration paid by either an insurer or an insured to an intermediary for placing and handling insurance business. Unlike commission payments, fees are paid independently of premium. Compare to: commission.

Fidelity insurance

A form of insurance purchased by employers to protect them against the results of dishonest and disloyal acts committed by their employees. Such acts tend to be theft, fraud, embezzlement and breach of contract, leading to financial loss for the employer. The cover is known as employee dishonesty insurance in the US.

File and use

A system in which insurers file new policy wordings and/or key amendments to existing policy wordings with the appropriate regulator for approval and may then begin to use these new or amended wordings provided that the regulator has raised no questions or concerns within a set time period following the time that the wordings were filed, for example 30 days.

First party

In insurance terms, the first party typically refers to the insurer. In certain circumstances, however, such as a 'first party insurance'; the term first party denotes the insured. Compare to: second party, third party.

Flag of convenience (FOC)

A ship's flag indicates the country or territory in which that ship is registered and consequently the territory or country that is responsible for the ship's safety standards and any applicable taxes and wage levels. Some shipowners register their ships in territories or countries other than those of which they are a citizen and thereby receive the flag of their chosen territory or country as a 'flag of convenience'. They can only do this if the territory or country in which they wish to register their ship allows them to do so and if their own territory or country allows them to register elsewhere. The reasons for registering elsewhere usually concern paying lower taxes and wages to workers. Underwriters insuring ships and cargo carried on ships tend to consider the risk to be higher on ships carrying a flag of convenience.

Flag of vessel

See flag of convenience


Flexa refers to the following perils: fire; lightning; explosion; and aircraft.

Flexa insurance

A property insurance covering Flexa perils.


The natural phenomenon of a large volume of water overflowing onto dry land. Flooding may be caused by a river, reservoir or lake overflowing and the breaking of flood defences such as levees, or from a sea storm or excess rainfall, which can lead to a large volume of water falling directly onto saturated land.

Flood insurance

Covers property damage caused by flooding. The cover is often purchased as an additional peril and added to an all risks property policy or a difference in conditions policy by way of endorsement.

Forest fire

See wildfire


Similar to a deductible or excess in that it refers to the portion of an insured loss borne by the insured (rather than the insurer) and may be arranged as an agreed amount or an agreed percentage of the policy limit. A franchise differs from a deductible or excess, however, in that once the amount or percentage level is exceeded, the insurer becomes liable to pay the entirety of the claim (rather than just that part that exceeds this level, as with a deductible or excess arrangement). Compare to: deductible.

Freedom of establishment

The principle of freedom of establishment is part of the EU's creation of a single market in insurance services.

Under freedom of establishment, any insurance operator (such as an insurer or broker) established in the territory of an EEA state is automatically entitled to establish a presence in other EEA states in order to provide services in those states on an on-going basis. Such operators may establish themselves through local agency, branch or subsidiary operations or associated companies but must receive authorisation in order to set up a company or establish operations. Freedom of establishment provisions effectively extend to Switzerland through special bilateral agreements between Switzerland and the EU. Related terms: establishment business. Compare to: freedom to provide services.

Freedom of services (FOS)

See freedom to provide services

Freedom to provide services (FOS)

Within the European Economic Area, insurance may be placed under freedom to provide services, which is part of the EU's creation of a single market in insurance services. The principle extends the idea of cross-border business to remove national borders between EEA states for the purposes of providing services and thereby extend the licensed or 'admitted' market to the whole of the EEA.

Under freedom to provide services, any insurance operator (such as an insurer or broker) whose head office is in an EEA state is automatically entitled to provide insurance services (on a temporary basis) in another EEA state without being required to be established there. Details of any such operator's intended operations must be provided to the authorities of the home state. Related terms: cross-border business Compare to: freedom of establishment.


May refer to goods transported in bulk by air, rail, road or water (and in this sense is synonymous with 'cargo'), or to the transportation of such goods. In insurance circles, the term 'freight' is more likely to be used in reference to the cost of the transportation of goods or to the remuneration paid to the carrier (eg shipowner) for the transportation of goods, including the profit that the carrier derives from carrying his own goods but not any payment received for transporting other people's goods or payment from passengers.

Freight forwarder

A person or party that arranges overseas shipments of goods. Freight forwarders are responsible for goods from the point of origin to the final destination but they do not usually take possession of those goods at any point.

Freight forwarders' liability

A form of liability cover that is designed to protect freight forwarders against the loss of or damage to goods for which they are responsible during the period for which they are responsible for them. Freight forwarders' liability can also cover loss of or damage to any third party property, such as containers and transport vessels, as well as any errors and omissions claims brought against the freight forwarder. Related terms: freight forwarder.

Freight insurance

A form of cover designed to cover the insurable interest of a cargo owner in the goods that the cargo owner owns, or to cover the insurable interest of a shipowner in the goods that the shipowner is transporting. Either way it is a contract to cover either party's interest in the goods arriving at their destination at the right time and in the right condition; it is not a contract to cover the goods themselves (or rather, loss of or damage to them). Freight insurance relates to the insurance of 'freight' in its original sense, ie the cost of the transportation of goods or to the remuneration paid to the carrier (eg shipowner) for the transportation of goods, including the profit that the carrier derives from carrying his own goods but not any payment received for transporting other people's goods or payment from passengers. Compare to: cargo insurance.

Frontier business

See cross-border business


A means through which, for a fee, an admitted insurer accepts a risk that it does not intend to bear. This insurer will then cede said risk 100% to an insurer or reinsurer that is not authorised to transact business by the usual means in the country or state in question (ie is a non-authorised or 'non-admitted' company).

Fujita scale

The Fujita scale is named after meteorologist and researcher Tetsuya Fujita. The scale was introduced in 1971 and became used as an official classification system for assessing the damage caused by tornados as of the mid-1970s. It measures the intensity of a given tornado not by wind speed but by assessing the damage that the tornado causes to man-made structures. Damage is assessed after the tornado event, whereupon a Fujita scale 'value' is assigned to the event and wind speed estimated accordingly. Fujita scale values range from F0 (gale) to F5 (incredible), and F6 (inconceivable) is also sometimes included in the scale. Related terms: Fujita scale values. See also: Enhanced Fujita scale.

Fujita scale values

Fujita scale values are the values assigned to tornado events under the Fujita scale, which measures the intensity of a given tornado by assessing the damage that the tornado causes to man-made structures.

Fujita scale values are as follows:

  • F0 (gale) - would typically result in damage to chimneys and signboards.
  • F1 (moderate) - could overturn mobile homes and caravans and lift up roof tiles and surfaces.
  • F2 (strong) - would cause significant damage, such as tearing off the roofs and walls of frame houses, lifting cars into the air and uprooting large trees.
  • F3 (severe) - can cause similar damage to an F2 tornado but would uproot most trees, including forest trees, and tear off the roofs and walls of well-constructed houses as well as overturning trains and cars.
  • F4 (devastating) - capable of levelling well-built houses and throwing cars.
  • F5 (incredible) - can cause damage to steel-reinforced concrete structures and lift and throw strong frame houses. Very rare.
  • F6 (inconceivable) - has never been recorded and would be all but impossible to distinguish from the destruction caused by F4 or F5 tornados. The F6 value has been called a hypothetical modification of the Fujita scale.

This article covers some of the terms you need to know to better understand the insurance industry. If you are interested in upskilling in insurance, take a look at the various online insurance training programmes we have on offer at the Axco Academy.