Ch 2 The Insurance Market Flashcards
What is HMRC ?
Her Majesty’s Revenue and Customs (HMRC) refers to the tax authority of the U.K. government.
Tax on general insurance premium is levied by
GOVERMENT
Who are exempt from IPT ?
Most long-term insurances, together with reinsurance and insurance on ships, aircraft and
goods-in-transit (internationally), are exempt from IPT.
Tax percentage levied on electrical appliances
20%
Tax rate for travel insurance
20%
EL insurance in the UK must be placed with an
Authorised insurer
In some province of Canada the liability aspects of motor insurance must be insured with the
Provincial government agency
Insurance Market structure
Buyers (policyholders/ insurerd)
Insurers ( sellers)
Intermediaries ( those who bring buyers and sellers together)
Comparison websites (aggregators)
Reinsurers (a further means of spreading risks )
Under which buyer they have a separate legal existence from those who owns the co
Limited liability companies
Which buyer do not have a separate legal existence
Partnership, each of the partners being jointly and severally liable
Who are the major buyers of insurance
Public bodies and includes local authorities and schools
Some public bodies are exempt from compulsory insurance requirements
Police forces..as an example do not have to insure their motor vehicles
Whenndo most exempt bodies still choose to insure risk
Where there is a real castrophe potential
Which buyer may act for members by arranging group covers or schemes
Charities, association and clubs
In which buyer the insured name is expressed as committee and members for teh time being
Unincorporated associations
Any insurers wishing to transact insurance in uk must be authorised by
PRA (Prudential Regulation Authority ) and FCA (Financial Conduct Authority )
Who can be distinguished from one another in terms of ownership and function
Insurers
FCA strategic objective
Is to make sure that the relevant makets function well
Types of insurers defined by ownership
Proprietary cos
Mutual companies
Captive companies
Protected cell cos
Lloyd’s
Which cos have a share value in the recognised financial exchanges
Publicly quoted companies
Co which are owned by the shareholders
Proprietary companies
Under which cos, company’s profit after expenses and reserves , belong to shareholders
Proprietary companies
Proprietary cos are limited or unlimited liability cos
Limited liability Co s as shareholders liability for teh Cos debt is limited to the nominal value of teh shares they own
Mutual cos are owned by the
Policyholders
Under mutual cos, share in the profits of the co by the way of
Lower premium
Mutual cos are limited by
Guarantee, with a policyholders maximum liability usually limited to their premium
Who are self managed pools of insurers
Mutual indemnity associations
Which insurer is a tax efficient of transferring teh risk
Captive insurance
Which insurers do not offer insurance to general public
Captive insurers
Who created a new kind of captive insurer, the protected cell company
In 1997, Guernsey
PCC operates in two parts
Cores
Unlimited number of cells
Which entity has a single board of directors..is a single entity …
Protected cell companies
Types of insurers defined by function
Composite cos
Specialist insurers
Which companies represent major part of the company market
Composite companies
Which issuers tend to issue policies for only one class of insurance
Specialist insurers
Type of insurance that has its roots in the Islamic financial service industry
Takaful
Takaful in Ana Arabic word meaning
Guaranteeing each other
On which type of transactions..takaful insurance Co is based on the ruling of sharia law
Financial and commercial transactions
Takaful insurances embraces the islamic principles of
Mutuality and cooperation
Shared responsibility
Joint indemnity
Common interest
Solidarity
Takaful insurance products need to be approved by
Islamic scholars ( to ensure they are compliant )
Who is the 1st one to offer Islamic insurances policies for building and contents
Major high street bank
Who acts as a guarantor to the insurance sector for terrorism risks and flood risks
The State
What is levied by the government on general insurance premium in the UK
Insurance premium tax (IPT)
What % of IPT is for domestic and electrical appliances
20%
Who are exempt from IPT
Long-term insurances, together with reinsurance and insurance on ships, aircraft and goods in transit ( internationally)
When should insurer account to HM revenue and customs (HMRC)
Quarterly
What is MIb s purpose ( Motor Insurers Bureau )
Was to enter the agreement with the government to compensate the victims of negligent, uninsured or untraced motorist
MIB
It’s a pvt co ..limited by guarantee
MIB functions on
2 separate agreements
1.Untraced Drivers Agreement
2.Uninsured Drivers Agreement
Uninsured Drivers Agreement
Is concerned with TP perpsnal injury or TP property damage,when there is no motor insurance policy I’m force
Who is able to reinsurer a risk that it holds because it stands to lose financially as a result of any claim payment
Insurer
The insurer is able to pass any ( or all ) of the risk to another insurer as
Reinsurance
Reinsurance may be used to share losses
On a risk by risk basis
Do insurer and reinsurer has a contractual relationship
NO
Who prefer to see stability in insurance companies
INVESTORS
Who helps by spreading the cost of very large losses over a period of time
Reinsurance
When insurers arrange reinsurance on a single known risk its known as
Facultative reinsurance
Insurers arrange facilities to enable them to place a range of risks that fall within the agreed criteria .These arrangements are called
TREATIES
When insurer decides to underwrite a new class of business they must register their intention to do so with the
PRA
What would create significant problems for the placing of insurance risks
The practice of each insurer accepting only its own net share
Extra capacity provided particularly by which arrangements
TREATY ARRANGEMENTS
Once new class of business is agreed by PRA then they would need support of
REINSURERS
Who usually offer cover to cos owned by the same parent co
CAPTIVES
Reinsurer are limited or unlimited
Often limited liability cos with substantial amounts of paid up capital
Reinsurance accepts risk from
Insurer ( also known as reinsured) or through reinsurance broker
Main Types of reinsurance
Specialist reinsurance cos that do not transact original ( direct) insurance business
Lloyd’s syndicates
Insurance cos that also act as reinsurer
Reinsurance is provided to
Insurance cos
Lloyd’s syndicates
Other reinsurers
Reinsurers they too seek to transfer some of their risks to other Reinsurers.This is called
Retroceding and the risk placed in this way is called retrocession
The insurer who buys the reinsurance cover is known as
Reinsured , cedant or the ceding office
2 main reinsurance centres are
Lloyd’s
the International Underwriting Association of London (IUA)
The largest representative organisation for international wholesale insurance and reinsurance cos in the world
International Underwriting Association of London (IUA)
Whos responsible fpr representing its members cos ,the provision of information services and research
The international underwriting association of London (IUA)
Public function of LUc (London underwriting Centre)
To produce clause wordings for the London market notably for marine insurance
Task of underwriters
Is to manage the pool as effectively and profitably as possible
Chartered loss adjusters are members of
CILA * Chartered Institute of loss adjusters
Who are independent professionally qualified persons
LOSS ADJSUTERS
Who are loss accessors
They are expert in dealing with insurance claims for the insured / policy holder, preparing and negotiating claims on their behalf
Who carries variety of function on behalf of insurers which are relevant to risk assessment
Surveyors
What is best known in crime scene investigation
Forensic analysis
Professionally qualified persons who apply probability and statistical theory to problems of insurance investment ,financial and risk management and demography
Actuaries
Technique used by actuaries are
Probability of loss and teh prediction of claim nos and future values
The cos actuarial function has a key role to play in meeting
Solvency II
Main role is to ensure that their firm abides by the rules and regulations set down by the regulator
Compliance officer
Many risk managers are members of
Trade associations
IRM ( institute of Risk Management)
Association of Insurance and Risk Managers in Industry and Commerce
Who is the largest of the insurance market association
ABI ( Association of British Insurers ) formed in 1985
Also confers with the Govt.on matters of interest to its members
ABI ( Association of British Insurers )
The AbI falls under 2 councils
The general insurance Council
The life insurance council
It’s a co limited by guarantee which has a chief executive and is governed by an elected board mainly compromised of senior market figures
IUA ( International Underwriting Association of London )
Much of the business of member cos is centred upon the LUC in the city of London
IUA (International Underwriting Association of London
Major non statutory trade association for insurance intermediaries
BIBA ( British Insurance Brokers Association)
Members Agent
Is effectively form of specialist adviser.They specifically advise potential individual members on the adv and disadv of investing in the Lloyd’s markets, syndicate selection and performance, reserve requirement and compliance issue .
Many brokers operating in the London market are known as
Lloyd’s brokers
Most risk are placed using a
MRC ( Market Reform Contract ) still known as slip
Document can be used as the evidence of the final contract rather than a formal policy being issued
MRC ( Market reform Contract /also knwn as slip
Leader
A broker who will obtain a quotation from an underwriter recognised as a leader in a particular class of business
Subscription underwriting
Each underwriter that the broker approaches will accept a percentage share .this sharing of the risk between a number of insurers is knwn ad subscription underwriting
Who manages central risk data capture and money movement systems for the entire London market
Xchanging
Which insurance will b placed by a single underwriter
MOTOR
Involved putting all the business from the 1993 year and prior into a specialist reinsurer known as equitas
Reconstruction and renewal
Individuals provides financial backing for Lloyd’s syndicates
NAMES
One of the main ingredients of a valid contract ( of insurance or otherwise)
Meeting of minds
Within how many days contractual document should be shared to the client
30 calender days for commercial or seven working days for consumers
If a broker is involved then its whos responsibility foe making sure that contract certainty is achieved
Both the broker and the underwriters
An insurance intermediaries is an
Agent
Whos is an agent
An agent is one who is authorises by one party , termed the principal to bring that principal into a contractual relationship with another , termed the Third Party
Authorised person
Is an individual or firm authorised by FCA to engage in regulated activities
Umbrella organisation have been created that are known as
Broker networks
Who is the largest of the insurance market association
ABI ( Association of British Insurers )
Who confers with the govt on the matters of interest to its members
ABI ( Association of British Insurers )
ABI works under 2 Council
The general insurance Council
Life Insurance Council
Who is the major non statutory trade association for insurance intermediaries
BIBA ( British insurance Brokers Association )
Who seeks to maintain and improve highest standards of business behaviour and to protect the interest of its members for the benefit of the general public
BiBA ( British insurance Brokers Association )
Which is the world’s largest representative organisation for international and wholesale insurance and reinsurance cos
IUA (International Underwriting Association of london)
IUA (International Underwriting Association of London) is a merger of
ILU ( institute of London Underwriters) representating marine companies and the London insurance and reinsurance market association, (LIRMA) representing non marine and reinsurance interests
An independent trade body,Representing the interest of insurance and reinsurance brokers operating in the London and international markets
LlIBA ( London and International Insurance Brokers Association)
Which type of buyer is the largest multinational corporation with a multi million pound worldwide premium spend to the self employed sole trader working from home
Companies
What is company’s solvency margin
Is the difference between its assets and its liabilities
What is marketing means as per chartered institute of marketing
Means the management process which identifies, anticipates and supplies customer requirements efficiently and profitably
Marketing mix
In insurance terms, marketing process involves making decision on product, price ,promotion and place ( the later two involving distribution)
Specialist type of intermediary who also has delegated authority to act for one or more insurers
Managing General Agent (MGA)
Bancassurance
The arrangement between a bank and an insurance Co whereby insurance products are sold to the banks customers ..traditionally through its Bank branches
Who uses Web based extraction tools to collect and analyse information from different data sources
A price comparison website
Term used for information retrieval for goods and services on internet
Aggregation
Who acts as a partial regulator for those organisations offering insurance within that marketplace
Lloyd’s
Group of pvt individuals also known as names or corporate members who actually carry the risks ( they provide the financial banking)
Syndicates
Which agents are dual regulated
Lloyds managing agents
Managing agent
Each syndicate outsources the day to day running of the insurance business to an organisation known as managing agent
Effectively a form of specialist financial adviser
A members agent
Most risk are not placed using a prosal form but using a
Market reform contract (MRC) still known as slip
Which document can be used as the evidence of the final contract .rather than a formal policy being issued
MRC/ slip
Subscription underwriting
Each underwriter that the broker approaches will accept a percentage share.This sharing of the risk between a number of insurers is known as subscription underwriting.
Who manages central risk data capture and money movement systems for the entire London market ( so both Lloyd’s and cos)
Xchanging
Who will manage the collection of the net premium from the broker and the distribution to the appropriate Lloyd’s and London Co market insurers
Xchanging
Which individuals provide financial backing for Lloyd’s syndicates
Names
An insurance intermediary is an
Agent
AII ( ancillary insurance intermediary)
Is a person that distributes insurance on an ancillary purpose and whose principal activity is not insurance distribution
Appointed representative (AR)
May br an individual or a company that is appointed by an authorised person (the principal) under the terms of a contract
May b acting for an insurer or for an intermediary that is itself directly authorised by the PRA or FCA
Appointed representative (AR)
Who may act for more than one principal
AR (appointed representative)
The expression broker is widely used within the insurance market.A firm that uses this term in its title
Usually provides independent advice
Which type of intermediary does not need to be authorised by FCA
An appointed representative
Who has responsibility for ensuring that an insurance Co abides by the rules and regulations set down by the regulator
Compliance oversight function
What best describes the main type of insurance risks dealt with in the London market
Complex or worldwide large risks
An intermediary who provides advice but does not need to be directly authorised by the UK regulator is
Appointed representative
A loss adjusters role is primary to
Process more complex claims from start to finish
Within the Lloyd’s market ,what is the role of the marketing agent
They manage the underwriting of one or more syndicates
Which regulators ensures that UK insurance Co has adequate solvency levels
PRA ( Prudential Regulation Authority )
Between which 2 parties the contract of certainly exist in the London market
The insured and the insurer
