GLOSSARY

List of Financial Terms in alphabetical order:

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Valuation In general, the term refers to determining the current worth of an asset. In the insurance industry, it specifically refers to examining the in-force business on a predetermined schedule (quarterly or annually) to calculate the policy reserve liability.

Value at Risk (VaR) Total value of the potential risk of loss while holding a specific market position. Under the amended Basle Accord, banks can now use VaR models to compute the market risk in their portfolios that must be covered by the various tiers of capital for capital adequacy purposes.

VaR See Value at Risk.

Variable Annuity An annuity whose premiums are invested in a variety of investment vehicles (stocks, bonds, etc.). The annuity holder decides the allocation of their funds between the different investments that are offered and receives a return that varies based on the performance of the investments selected.

Variable Costs Unit costs and/or operating expenses that vary proportionately with business volume.

Variable Life Insurance A type of life insurance policy where the cash value of the policy and the death benefit fluctuate based on the investment performance of a separate account fund. Premiums are invested into a fund that includes a variety of investments and securities. The owner of the policy determines the distribution of his funds among different investment choices. The value of the life insurance benefit is based on the performance of the investments in the fund. (Similar to Unit linked Life Insurance.)

Variable Rate Loan A loan that carries a fluctuating (floating) interest rate that is tied to changes in an index rate. Rates are revised at predetermined intervals. Many commercial loan rates are adjusted against changes in the London Interbank Offered Rate (LIBOR).

Variable Universal Life A type of variable life insurance where the insured selects between investment options for a portion of the premium payment. The insured's beneficiaries receive compensation upon the insured's death based on a minimum payment plus the return on the investments selected. The insured assumes some degree of investment risk, but is guaranteed a minimum return.

Venture Capital Financing for start-up companies that entails greater risk than is normally acceptable, but offers the potential for higher returns. In return for their investment, venture capitalists may receive a share of the company's profits, preferred stock and/or common stock from the company. Sources of venture capital include small business investment companies (SBIC), specialized areas of banks, individual investors, investment banks and venture capital partnerships.

Virtual Insurance Company A term used to describe an insurance company that outsources all of its functions and operations while it retains all aspects of the risk.

Vostro Account A current (transactional) account for a bank that is held on the books of a bank in another country and is usually denominated in the currency of that country. The bank holding the account refers to it as a vostro account ("your account with us"). This account is typically viewed as a reciprocal arrangement related to the nostro account ("our account with you"). The terms "nostro" and "vostro" are frequently used in the context of foreign exchange transactions and the related transfer of funds.

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