A glossary of financial services operations, from loss runs to loan spreads.
These are the terms that come up when financial services work meets automation, defined in plain language, with how the work is done today and where automation helps.
ACATS transfer
An ACATS transfer moves a brokerage account's securities and cash from one firm to another through the Automated Customer Account Transfer Service, the National Securities Clearing Corporation system that standardizes transfers between participating firms.
ACORD forms
ACORD forms are standardized insurance forms published by ACORD, a nonprofit standards body, and used across the industry for applications, certificates of insurance, loss notices and other common transactions.
Agency management system (AMS)
An agency management system (AMS) is the core software an insurance agency or brokerage uses to manage its clients, policies, service activities, documents and accounting.
Appetite guide
An appetite guide is a document in which a carrier or MGA describes the risks it wants to write: the classes of business, territories, sizes, limits and risk characteristics it will consider.
Bordereau (bordereaux)
A bordereau (plural bordereaux) is a periodic report, usually monthly, that an MGA, coverholder or ceding insurer sends to its carrier or reinsurer, listing the risks written, premium collected or claims handled on its behalf.
Construction draw
A construction draw is a construction loan disbursement, usually monthly, for work completed and materials delivered since the last draw, released once the lender checks the request against the budget, an inspection and lien waivers.
Credit reporting dispute (ACDV)
A credit reporting dispute is a consumer's challenge to what a lender or other furnisher reports to credit bureaus, made directly or through a bureau, which forwards it as an automated credit dispute verification (ACDV).
Debt service coverage ratio (DSCR)
The debt service coverage ratio (DSCR) divides cash flow available to pay debt by the debt payments due over the same period, so a DSCR of 1.25 means cash flow is 25% above debt service.
Direct bill
Direct bill is the arrangement in which the insurance carrier invoices and collects premium from the insured and pays the agency its commission separately, usually on a periodic commission statement.
First notice of loss (FNOL)
First notice of loss (FNOL) is the initial report to an insurer that a loss has occurred, which opens the claim and starts the claims process.
GAP coverage
GAP coverage, short for guaranteed asset protection, pays the difference between a vehicle loan or lease balance and the actual cash value the borrower's insurer pays after a total loss.
Golden dataset
A golden dataset, sometimes called a golden set or evaluation set, is a collection of real examples with verified correct answers, used to measure how accurately an AI system performs a task.
Human in the loop
Human in the loop describes an AI system designed so that a person reviews, corrects or approves its outputs before they take effect, rather than the system acting on its own.
Indirect lending
Indirect lending means making loans through a third party, usually a car dealer, that takes the borrower's application at the point of sale and sends it to one or more lenders for a decision.
Know your customer (KYC)
Know your customer (KYC) is the set of checks a financial institution carries out to verify a customer's identity, understand the purpose of the relationship and assess the customer's money laundering and fraud risk.
Loan spreading
Spreading, or financial spreading, means transferring a borrower's financial statements and tax returns into a lender's standard template so the borrower's financial position, cash flow and repayment capacity can be analyzed consistently.
Loss mitigation
Loss mitigation is the set of options, such as forbearance or a loan modification, that a mortgage servicer offers a borrower who is behind on payments or likely to fall behind, to avoid foreclosure.
Loss run
A loss run is a report from an insurance carrier listing the claims made under a policy or a set of policies over a period, usually the last three to five years.
Managing general agent (MGA)
A managing general agent (MGA) is an insurance intermediary with authority from one or more carriers to underwrite and bind policies on their behalf, and often to issue policies and handle claims.
Not in good order (NIGO)
Not in good order (NIGO) describes a form or request that a custodian, carrier or other institution cannot process because it is incomplete, inconsistent or missing a required signature or document.
Policy administration system (PAS)
A policy administration system (PAS) is the core system a carrier or MGA uses to quote, rate, issue, endorse, renew and cancel policies.
Policy checking
Policy checking is the review an agency or carrier performs to confirm that an issued insurance policy matches what was quoted, bound and applied for.
Registered investment adviser (RIA)
A registered investment adviser (RIA) is a firm paid to give investment advice and registered with the Securities and Exchange Commission or state securities regulators, depending mainly on how much it manages.
Rent roll
A rent roll is a schedule of every unit or tenant in an income-producing property, showing occupancy, rent and lease terms, and it is the starting point for underwriting a loan on the property.
Sanctions screening
Sanctions screening is how a financial institution checks its customers, counterparties and payments against sanctions lists, such as those of the US Treasury's Office of Foreign Assets Control (OFAC), to avoid dealing with sanctioned parties.
SEC marketing rule
The SEC marketing rule, Rule 206(4)-1 under the Investment Advisers Act of 1940, governs how registered investment advisers advertise, prohibiting misleading content and setting specific conditions for performance, testimonials, endorsements and third-party ratings.
Statement of values (SOV)
A statement of values (SOV) is a schedule of every property location an insured wants covered, with the values at risk and the characteristics underwriters use to price it.
Stipulations (stips)
Stipulations, usually called stips, are the conditions a lender attaches to a loan approval, typically documents the borrower must provide, such as proof of income, residence or insurance, before the loan can fund.
Submission clearance
Submission clearance is the process a carrier, MGA or wholesaler uses to determine whether a new submission is for a risk it is already working on or has written, and whether it may proceed.
Suspicious activity report (SAR)
A suspicious activity report (SAR) is a confidential report a US financial institution files with FinCEN, the Treasury's Financial Crimes Enforcement Network, when it detects possible money laundering, fraud or other financial crime.
Third-party risk management (TPRM)
Third-party risk management (TPRM) is the program a financial institution uses to identify, assess and oversee the risks of relying on vendors and partners, from due diligence before a contract to monitoring throughout the relationship.
Wholesale broker
A wholesale broker is an intermediary that works with retail agents rather than insureds, placing risks that need access to specialty or excess and surplus (E&S) markets the retail agent cannot reach directly.
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