Glossary of Terms
Claims Service Company (Third Party Administrator) The independent firm that is hired by the self-insured employer to provide claims management services. Generally referred to as the Service Company or TPA, these firms also often provide loss control services to the self-insured employer.
Self-Insured Retention (Specific Retention) The primary portion of any single occurrence or loss which is assumed (self-funded) by the self-insured entity. This is often referred to as the "SIR". In the excess workers' compensation field, this amount will usually range from $200,000 to $500,000.
Specific Excess Insurance This insurance provides catastrophic protection up to the policy limit (typically $5,000,000, $10,000,000 or $20,000,000) for any one accident or occurrence which exceeds the self-insured retention. Excess policies normally reimburse the insured for the actual loss paid in excess of the SIR. For example, if an employer had an SIR of $300,000 and suffered a paid claim of $400,000, the specific excess policy would reimburse the employer $100,000.
Loss Fund (Aggregate Retention) The total of all insured claims that must be paid by a self-insured employer during a one, two, or three year period (while loss funds are typically thought of in annual terms, some smaller self-insureds establish two or three year funds). When self-insured employers purchase aggregate excess insurance, the loss fund will be stipulated in the aggregate excess policy and is normally expressed as a percentage of the workers' compensation manual premium.
Aggregate Excess Insurance (Stop Loss) Excess Workers' compensation insurance which protects against an unusually heavy year of claims (for a smaller self-insured employer, this may be a two or three year period). Aggregate excess coverage will reimburse the self-insured employer in the event the total paid claims incurred during the policy period exceed the specified loss fund. For example, if a policy were written specifying a $750,000 loss fund for a one year period and the paid losses from that year were $900,000, the aggregate excess policy would reimburse the employer $150,000.
Minimum Term Loss Fund Just as many policies have minimum premiums, excess workers' compensation policies which include aggregate coverage have minimum loss funds as a policy condition. This means that regardless of the final audited payrolls, the aggregate coverage is subject to a minimum dollar loss fund. This minimum loss fund is a term loss fund and is tied to the term of the policy (one, two, or three years).
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