GLOSSARY

List of Financial Terms in alphabetical order:

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Umbrella Policy A policy that insures losses in excess of amounts covered by other liability insurance policies. In some instances, the policy may also protect the insured in cases not covered by the usual liability policy.

Underlying Security The security that must be delivered in the event that a put or call option contract is exercised.

Underwriter The person that assesses and classifies the risk that a 1) proposed insured poses to an insurance contract, or 2) proposed borrower may pose for a loan offered by a financial institution based on the credit standards of that institution.

Underwriting In insurance, the term refers to the process of examining and selecting risks for insurance and determining in what amounts and on what terms the insurance company will accept the risk. The ultimate goal of the underwriting process is to spread the risks out among a wide enough pool of insureds. Securities underwriting refers to the process in which a firm purchases an issue of securities from a company on a commitment basis for resale to investors.

Unearned Premium The portion of an insurance premium that applies to the unexpired portion of the policy period. For example, in the case of health insurance being paid in advance prior to the term of coverage, the entire premium is considered unearned until the term of coverage begins. Half way through the term, half of the premium is considered unearned and so on.

Unit In the securities industry, the term refers to a minimum amount of securities allowed for trading on an exchange. It can also refer to a group of specialists who trade in a specific security, maintaining a fair and open market for that security.

Unit Investment Trust (UIT) An investment vehicle (offered by a large investment firm) that consists of a fixed portfolio of securities (e.g., bonds, shares, or mortgage-backed securities). Units in the trust are sold to investors through brokers. The trust expires on a future date based on the maturity dates of the securities in the portfolio. Upon expiration, the investor receives a proportion of the remaining principal and income in the trust. UITs are a form of mutual fund that is most commonly found in European countries.

Unit Linked Annuity Contracts A type of annuity where the contract owner assigns the funds in the annuity to a variety of different investment funds offered by an insurance company. The cash value that results is based on the performance of the different investments. The return on these contracts is not at a guaranteed rate.

Unit Linked Life Insurance A type of life insurance policy where premiums are invested into asset backed funds that include a variety of investments and securities. The owner of the policy determines the distribution of his funds among the different investment choices. The value of the life insurance benefit is based on the performance of the investments in the fund (variable life insurance in some countries).

Universal Banks A term originally used to describe the German banking system, where banks offered both bank and non-bank financial services and were formally linked to commercial firms through equity holdings and shared directorships. Universal banks in various forms are present not only in Germany, but also in Switzerland, Sweden, the Netherlands, Austria, Belgium and Luxembourg. In the U.S., there are no universal banks because U.S. law only allows banks to hold equity investments in commercial firms under limited conditions, such as holding equity that is exchanged for debt obligations in a company restructuring under bankruptcy protection.

Universal Life Insurance A form of life insurance that combines low cost term protection with a savings component. The policy is highly flexible and allows the insured to increase or decrease premium payments and coverage at different intervals over the life of the policy.

Unsecured See Unsecured Loan.

Unsecured Loan A loan that is made based on the reputation and credit history of the borrower and is not secured (or backed) by collateral. The borrower signs a promissory note that states the loan conditions and terms. Credit card lending is an example of an unsecured loan offered to individuals.

Unsecured Loans See Unsecured Loan.

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