Glossary

Terms used across the Nextera products, grouped by domain. These are general industry and standards definitions, not Nextera-specific ones — where a Nextera product uses a term differently, the product’s own pages say so.

Reinsurance and broking

Attachment point — The loss level at which an excess-of-loss layer begins to respond.

Bordereau (plural bordereaux) — A schedule listing individual risks or claims under a treaty for a period. Premium bordereaux and claims bordereaux are how detail moves between cedant, broker and reinsurer. Every counterparty tends to want a different format.

Brokerage — The reinsurance broker’s own remuneration, normally a percentage of premium.

Cedant (ceding company) — The insurer that issued the original policy and passes part of the risk to a reinsurer.

Ceding commission — Commission paid by the reinsurer to the cedant on proportional business, compensating for acquisition and administration costs already incurred.

Cession — The portion of a risk passed from cedant to reinsurer.

Facultative — Reinsurance of a single risk, negotiated individually. The reinsurer assesses that one risk and chooses whether to accept it.

Firm order — The cedant’s confirmation that it wishes to proceed at agreed terms, after quoting.

IBNR — Incurred But Not Reported. Losses that have occurred but have not yet been notified, estimated actuarially.

Layer — A band of loss in a non-proportional cover, written as “limit excess of attachment”, e.g. “USD 5m excess of USD 5m”.

Non-proportional (excess of loss) — Reinsurance responding only when a loss exceeds an agreed threshold. Premium bears no fixed relationship to the loss share.

Outstanding — Claims notified but not yet paid.

Proportional (pro-rata) — Reinsurance where the reinsurer takes an agreed share of premium and pays the same share of losses. Quota share and surplus are the two forms.

Quota share — A proportional treaty ceding a fixed percentage of every risk in the portfolio.

Reinstatement — Whether, and at what cost, an excess-of-loss layer refreshes after being eroded by a loss.

Retention — What the cedant keeps for its own account.

Retrocession — Reinsurance of a reinsurer. The same relationship, one level up.

Signed lines — Each reinsurer’s final accepted share of a placement. Where a placement is oversubscribed, written lines are signed down proportionally.

Slip — The document setting out the risk, terms and conditions offered to the market.

Stop loss (aggregate excess) — Non-proportional cover responding to the cedant’s total losses over a period.

Surplus — A proportional treaty where the cedant retains a fixed “line” and cedes the surplus above it, so the ceded percentage varies by risk size.

Technical account — The periodic statement of amounts due between parties for a treaty or set of transactions: premiums, commissions, brokerage, taxes, claims and adjustments.

Treaty — Reinsurance covering a portfolio of risks under a standing agreement, with risks in scope automatically covered.

Insurance distribution and bancassurance

Appointment — The insurer’s formal authorisation of a producer to sell its products. Carries an expiry date.

Bancassurance — Distribution of insurance through a bank’s channels and customer base.

Channel conflict — Where two channels can approach the same customer with the same product. A commercial decision the system has to express.

Clawback — Recovery of commission already paid when a policy lapses or is cancelled within a defined period. Usually on a sliding scale by month, and it must reach back through the hierarchy to recover override as well as direct commission.

Free-look period — A cooling-off period during which a customer may cancel for a full refund, reversing premium, commission and revenue share.

Override — Commission paid to a manager or agency on business written by producers beneath them in the hierarchy.

Persistency — The share of policies still in force after a period, commonly 13 or 25 months. Low persistency turns first-year commission into clawback.

Producer — Anyone who sells: agent, broker, bank staff member, or direct channel.

Product mapping — In bancassurance, the layer reconciling the insurer’s product definition with how the bank actually sells it — channels, segments, licensed staff, attached banking products and effective dates on both sides.

Rating factor — An input used to calculate price.

Referral model — A bancassurance model where the bank identifies interest and passes the customer to the insurer, who sells. Bank staff generally cannot advise.

Revenue share — The overall economic arrangement between bank and insurer: commission, profit share, access fees, marketing contributions and clawback.

Lease accounting (PSAK 116 / IFRS 16)

Commencement date — The date the lessor makes the underlying asset available for use. Recognition and initial measurement happen here, not at signature.

IBR (incremental borrowing rate) — The rate a lessee would pay to borrow, over a similar term and with similar security, the funds needed to obtain a similar asset in a similar economic environment. Used when the rate implicit in the lease is not readily determinable, which is most of the time.

Identified asset — An asset specified explicitly or implicitly in a contract. If the supplier has a substantive right to substitute an alternative asset and would benefit from doing so, there is no identified asset and therefore no lease.

IFRS 16 — The international lease accounting standard, replacing IAS 17.

Lease liability — The obligation to make lease payments, measured at present value and subsequently at amortised cost.

Lease term — The non-cancellable period, plus periods covered by extension options reasonably certain to be exercised, less periods covered by termination options reasonably certain to be exercised.

Low-value exemption — An optional exemption assessed on the asset’s value when new, in absolute terms — not by materiality to your financial statements. Elected lease by lease.

Modification — A change in scope or consideration not part of the original terms. Adding the right to use an additional asset at a commensurate price creates a separate lease; other modifications remeasure the existing one.

PSAK 73 / PSAK 116 — The Indonesian adoption of IFRS 16. PSAK 73 was issued in 2017 and effective 2020; PSAK 116 is the same standard renumbered to align with IFRS numbering, effective 2024. They are not two standards.

Remeasurement — Adjusting the liability and ROU asset when assumptions or payments change. Whether the discount rate is revised depends on the trigger.

Right-of-use (ROU) asset — The lessee’s right to use the underlying asset, measured initially from the liability plus prepayments, initial direct costs and restoration costs, less incentives.

Short-term exemption — An optional exemption for leases of 12 months or less at commencement with no purchase option. Elected by class of underlying asset.

Variable lease payments — Payments that vary. Those depending on an index or rate are included in the liability using the index at commencement; those depending on usage or sales are excluded and expensed as incurred.

Internal control (ICoFR)

Assertion — What management implicitly claims about a balance: existence/occurrence, completeness, valuation/allocation, rights and obligations, presentation and disclosure.

COSO — The Committee of Sponsoring Organizations, whose Internal Control — Integrated Framework is the reference framework for ICoFR. Five components: control environment, risk assessment, control activities, information and communication, monitoring.

Compensating control — A control that reduces the severity of a deficiency elsewhere — but only if it operates at a precision that would catch the same misstatement.

Design effectiveness — Whether a control, if performed as described, would prevent or detect the misstatement. Concluded before operating effectiveness is tested.

Detective control — A control that finds an error after it has occurred.

Exception — An instance where a control did not operate as designed. Requires a root cause and a conclusion; it is not automatically a deficiency.

ICoFR — Internal Control over Financial Reporting. Provides reasonable, not absolute, assurance about the reliability of financial reporting.

ITGC — IT general controls: access to programs and data, program changes, program development, computer operations. If ITGCs are ineffective, automated controls and system-generated reports depending on them are unreliable.

Key control — A control whose failure alone could result in a material misstatement. Only key controls need the full testing rigour.

Material weakness — A deficiency, or combination of deficiencies, where there is a reasonable possibility that a material misstatement would not be prevented or detected on a timely basis.

Operating effectiveness — Whether a control was actually performed, consistently, throughout the period.

Precision — How finely a review control would catch an error. An imprecise review control is the most frequently criticised category in ICoFR.

Preventive control — A control that stops an error occurring.

RCM (risk-and-control matrix) — Risk → control → assertion → owner → frequency → evidence. The backbone of an ICoFR programme.

Re-performance — Independently executing the control to verify its result. The strongest form of test evidence; inquiry alone is the weakest and is never sufficient by itself.

Significant deficiency — Less severe than a material weakness, but important enough to merit attention by those responsible for oversight.

Three lines — First line: management owns and operates controls. Second line: risk, compliance and internal control set the framework and monitor. Third line: internal audit provides independent assurance.

Walkthrough — Tracing one transaction end to end to assess design effectiveness.

Internal audit

Assurance mapping — Recording who else already provides assurance over each area, so internal audit directs effort where it is the only assurance.

Audit charter — The board-approved document establishing internal audit’s purpose, authority, reporting lines and right of access.

Audit universe — The complete population of auditable entities, processes, systems, locations and themes that planning draws from.

Cause — Why a gap exists. The element of a finding most often skipped, and the one that determines whether remediation actually works.

Condition — What is currently happening.

Coverage — The proportion of the audit universe, weighted by risk, audited within a cycle.

Criteria — What should be happening: policy, standard, regulation or control design.

Effect — What the gap could lead to, quantified wherever possible.

Engagement opinion — The overall conclusion on an audited area. A separate scale from the individual finding rating.

Follow-up — Verification that agreed management actions were completed and that they addressed the cause.

Independence — Internal audit’s organisational freedom from the activities it audits. Objectivity is the individual equivalent.

Risk acceptance — Management’s explicit decision not to act on a finding, recorded at an appropriate level of authority. Not the same as an overdue action.

Terms of reference — The agreed scope, objectives, period and criteria for an engagement.

Working papers — The record of what was tested and found. The professional standard: a competent reviewer with no prior connection can read them and understand the conclusion.

Carbon accounting

Activity data — What happened, in physical units: litres of fuel, kWh of electricity, kilometres travelled, tonnes of waste.

Additionality — Whether an offset’s reduction would have happened anyway without the credit revenue.

Base year — The reference year against which targets and reductions are measured.

Emission factor — The conversion from activity data to emissions. Country- and year-specific.

GHG Protocol — The most widely used greenhouse gas accounting standard, defining scopes, boundaries and the fifteen Scope 3 categories.

GWP (global warming potential) — The warming a gas causes relative to CO₂ over a period, conventionally 100 years. Values are revised as the science advances, and which set you use is a methodology choice.

Location-based Scope 2 — Emissions calculated using the average emission factor of the grid you are connected to.

Market-based Scope 2 — Emissions calculated using the emission factor of the electricity you contractually purchased. Both methods should be reported.

Operational control — An organisational boundary approach consolidating 100% of emissions from operations where you set operating policy. The most commonly chosen.

Permanence — Whether an offset’s carbon stays out of the atmosphere.

Recalculation — Restating the base year after structural change, so comparisons stay like for like. Without it, selling a factory looks like a reduction.

Retirement — Permanently cancelling an offset credit in a registry so nobody else can claim it. What makes an offset claim auditable.

Scope 1 — Direct emissions from sources you own or control, including refrigerant leakage.

Scope 2 — Indirect emissions from purchased electricity, steam, heating and cooling.

Scope 3 — All other indirect emissions in the value chain, across fifteen categories. Usually the majority of the total.

tCO₂e — Tonnes of carbon dioxide equivalent. The common unit.

Finance systems

Allocation — Spreading a cost across dimensions on a defined driver.

Analysis dimension — A separate axis attached to a posting: cost centre, department, branch, product line, project, entity. Using dimensions rather than overloading account codes is the central design decision in a SunSystems implementation.

Chart of accounts (COA) — The list of accounts transactions are posted to. Answers “what kind of value is this?” and nothing else.

Consolidation — Combining entities into group statements, including intercompany elimination and currency translation.

Functional currency — The currency of the primary economic environment in which an entity operates.

Journal — A balanced set of postings recorded together with a date, source and description.

Provisional posting — An unposted entry, allowing an impact to be modelled before it is committed.

Reporting currency — The currency the financial statements are presented in, which may differ from the functional currency.

Revaluation — Restating monetary balances held in foreign currency at a current rate, with the gain or loss posted.

Subledger — A subsidiary ledger — purchasing, sales, fixed assets, or an insurance platform — producing entries that reach the general ledger.

Transaction currency — The currency a transaction actually occurred in.