A - Baer & Rendall - stucture of the industry

Question 1

BAER RENDALL

Describe
INDIVIDUAL UNDERWRITERS

Answer 1

• such as Lloyds of London
• not an insurer, do not have any liability of policies
• UW members who accept risk on their own account (similar to a stock exchange)

Question 2

BAER RENDALL

5 objectives of IBC

Answer 2

1) Discuss general insurance
2) Collect and analyze statistical information
3) Study legislation
4) Invest in research
5) Promote better public understanding of insurance

Question 3

BAER RENDALL

3 levels of regulation

Which level of regulation is the favored one (legislation, regulation, guidelines)?

Provide 3 advantages and 2 disadvantages to that level of regulation

Answer 3

1) legislation
2) regulation (from Lieutenant Governor in Council)
3) guidelines (from superintendent)

GUIDELINES

Advantages

1) flexible
2) less obtrusive
3) Less likely to be misinterpreted in court
4) less likely to be the subject of litigation

Disadvantages
1) can be vague
2) can be obtusely worded
often making it impossible to know if guidelines have been breached

Question 4

BAER RENDALL

5 main areas of focus of the Canadian Insurance Regulation

Answer 4

1) Solvency
2) Canadianization (foreign cies to maintain sufficient assets in Canada to protect canadian policyholders and to avoid expatriation of large amounts of capital)
3) Tax Revenues
4) Promote honesty and competence of intermediaries
5) Improving insurance contracts and promoting marketing integrity

Question 5

BAER RENDALL

2 reasons why insurance industry was singled out for public oversight of solvency

Answer 5

1 - large nb of bankruptcies of insurers which led to concerns that policyholders would not have their obligations paid for
2 - short term price competition not in public’s long term interest, to ensure their obligations are paid for