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LETTER OF CREDIT (LOC) - A financial promise issued by a bank that ensures funds will be available if requested. For captives, LOC’s (1) can be used in place of or in addition to cash or other capital, and (2) to securitize the fronting insurer’s reinsurance created by the captive.

LIMITED LOSSES - Losses with claim sizes of specific occurrences limited to a particular value; for example $750,000.