Description:
Leverage
The ability to influence a system in a way that multiplies the outcome of one's efforts without a corresponding increase in the consumption of resources. This implies that leverage is the advantageous condition of having a relatively small amount of cost, which could yield a relatively high level of returns. "Financial leverage" refers to the use of borrowed money to increase the production volume and thus the net earnings. It is measured as the ratio of total debt to total assets. The greater the amount of debt, the greater the financial leverage.
Licensing
The formal authority given to an entity to conduct insurance activities under the applicable insurance legislation.
Liquidity risk
The risk that an insurer is unable to realise its investments and other assets in a timely manner in order to settle its financial obligations as they fall due.
Loss ratio (claims ratio)
The ratio of claims incurred to earned premiums. Gives an indication of how well the pricing of an insurer matches the risks taken in the insurance contracts. [Related definitions: Claims incurred, Underwriting year basis]
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