Alternative Risk Transfer (ART) — financing risks outside of the commercial insurance regulatory system, which is designed to protect unsophisticated insurance buyers. Also refers to transferring risk using non-traditional methods—for example, combining insurance and noninsurance techniques.
Directors and Officers (D&O) Liability Insurance — a type of liability insurance covering directors and officers for claims made against them while serving on a board of directors and/or as an officer. D&O liability insurance can be written to cover the directors and officers of for-profit businesses, privately held firms, not-for-profit organizations, and educational institutions. In effect, the policies function as "management errors and omissions liability insurance," covering claims resulting from managerial decisions that have adverse financial consequences. The policies contain "shrinking limits" provisions, meaning that defense costs—which are often a substantial part of a claim—reduce the policy's limits. This approach contrasts with commercial general liability (CGL) policies, in which defense is covered in addition to policy limits. Other distinctive features of D&O policies are that they: (1) are written on a claims-made basis, (2) usually contain no explicit duty to defend the insureds (when covering for-profit businesses), and (3) cover monetary damages but exclude bodily injury (BI) and property damage (PD).
Fiduciary — as defined by the Employee Retirement Income Security Act (ERISA), an individual or corporation that: (1) exercises any discretionary authority or discretionary control in managing a pension or benefit plan or exercises any authority or control in managing or disposing of its assets; (2) renders investment advice for a fee or other compensation, with respect to any monies or other property belonging to the plan; or (3) has any discretionary authority or responsibility in administering the plan. ERISA, which was passed in 1974, not only formalized the law associated with the administration of employee pension and benefit plans; it also broadened the scope of such liability so that it became a "personal" rather than simply a "corporate" liability. The effect of this change was that soon after ERISA's enactment, insurance companies began offering fiduciary liability insurance policies, which were specifically designed to cover this newly legislated exposure.
Fiduciary Bond — guarantees that the individuals or legal entities appointed by the court to oversee the property of others will execute those appointed duties in good faith and be accountable for any deficits that may occur.
Risk — (1) Uncertainty arising from the possible occurrence of given events. (2) The insured or the property to which an insurance policy relates.
Trustee — a person appointed to manage the property of another.