I.I.I. Glossary

529 SAVINGS PLANS- State-administered plans designed to encourage households to save for college education. Named after a part of the Internal Revenue tax code, these saving plans allow earnings to accumulate free of federal income tax and sometimes to be withdrawn to pay for college costs taxfree. There are two types of plans: savings and prepaid tuition. Plan assets are managed either by the state’s treasurer or an outside investment company. Most offer a range of investment options.

FACULTATIVE REINSURANCE- A reinsurance policy that provides an insurer with coverage for specific individual risks that are unusual or so large that they aren’t covered in the insurance company’s reinsurance treaties. This can include policies for jumbo jets or oil rigs. Reinsurers have no obligation to take on facultative reinsurance, but can assess each risk individually. By contrast, under treaty reinsurance, the reinsurer agrees to assume a certain percentage of entire classes of business, such as various kinds of auto, up to preset limits.