AAL: Average Annual Loss. This is the expected modelled loss, over a certain period of time, typically one year, it is based on historical or modelled time series data.

AEP: Aggregate Exceedance Probability. It expresses the cumulative probability of all losses (e.g. the sum of all possible claims) in a year will exceed a certain loss size or threshold. It takes into account ALL possible claims in a random year. This is done through simulation algorithms and it samples from a catalogue of historical and synthetic scenarios. Event footprints are specified by natural peril and by geographical region.

AIR: Catastrophe Software Risk Modelling company. AIR Worldwide is owned by Verisk.com Analytics .

ATC: Building codes. International system of construction building codes. ISO and RMS are codes also available for modelling the different construction features used in modelling property insurance and reinsurance business worldwide.

CRESTA: Standard accumulation mapping used for Catastrophe key areas, based on hazard intensity of earthquake zones around the globe. Initially based on Mercalli intensity subzones by country. (see www.cresta.org, swissre.com)

DLM: Detailed Loss Model. A model that uses detailed policy information; geocoded as either coordinate level, latitude, longitude and anyway better than postcode or zipcode. For example AIR Worldwide Touchstone and Catrader or RMS DLM and ALM Risklink.

ECHAM6: Global atmospheric circulation methodology from Max Plank Institut für Meteorology, Max Plank Institute for Meteorology. ECHAM6 is the sixth generation of the atmospheric global circulation model ECHAM. This model was used as the primary influence for modelling ETC or Extra tropical cyclone activity in Europe, more particularly to model the phenomenon of super storms clustering at the high return periods, for example 0.5% VaR or above. A Negative Binomial distribution was used for the counting process, but much debate was generated in the Industry around the Solvency II validation process.

EQECAT: Catastrophe Software risk modelling company based in Oakland, California, EE UU. Now part of Corelogic.com group.

GROSS LOSS: The insurer´s loss after policy deductibles, site attachment points and limits are applied. Facultative insurance, primary layers are also taken into account as part of Gross loss.

EIOPA: European Insurance and Occupational Pensions Authority (EIOPA) is part of the European System of Financial Supervision, based in Frankfurt.

LOB: Line of Business, for example small commercial property, marine or aviation, personal lines, agricultural books, Excess & Surplus, High value homeowners, automobile, Large Commercial.

OEP: Occurrence Exceedance Probability: probability of a single largest loss exceeds a determined amount threshold. Distribution of Maxima or Peak Over Threshold extreme distribution is OEP.

PLA: Post Loss Amplification . Refers to amplified claim payments due to higher repair costs from a shortage of materials and labour or the the fact mass claims are settled on a blanket basis. Typically this effect of mega earthquakes or following a high frequency season, for example US 2004. At the start of 2005 repair costs were already in excess of 40% higher.

PRA: Bank of England insurance & reinsurance regulator. Prudential Regulation Authority .

PML: Probable Maximum Loss. PML is the value of the largest expected monetary loss that could result from a catastrophe. It is based on engineering estimates for fire insurance. Typically up to 90% of the value of a single, four wall geocoded building address or a complex site with multiple buildings insured under the same insurance policy.

RETURN PERIOD: An estimate of the frequency (in years) that a Re/Insurance portfolio will have a loss of a certain size, given a claim has occurred from either a natural or man made disaster .

RMS: Software Risk Management Solution based in Newark, California, EEUU owned by the Daily mail group.

SOLVENCY II: European Re/Insurance regulation. Solvency II reviews the prudential regime for insurance and reinsurance undertakings in the European Union.

TSI: Total Sums Insured. Total value of buildings, contents, time element or business interruption under a single policy or book of business.