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LM2 > Chap 5-7 > Flashcards

Chap 5-7 Flashcards

1
Q

What is the minimum required limit of indemnity for EL policies

A

£5m

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2
Q

What is the Consumer Rights Act 2015?

A

Contract terms + notices must be fair
Unfair term will not be binding on consumer

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3
Q

What is the Contracts (Rights of Third Parties) Act 1999?

A

Gives 3rd party right to enforce a contract if:
- the 3rd party is expressly identified by name/description/class
- the contract makes express provision for the enforcement

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4
Q

What is Insurance Premium Tax?

A

Standard: 12%
Higher: 20%
Higher = for travel insurance, express warranty, those sold in conjunction w/ purchase of vehicles/electrical appliances

Insurer responsible for collecting + paying generally quarterly

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5
Q

What is exempt from Insurance Premium Tax?

A
  • Most long-term insurances
  • (re)insurance on ships, aircraft + international goods in transit
  • Most risks outside UK
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6
Q

IPT: £1000 premium, 20% brokerage + standard IPT - what happens?

A

Client pays broker £1000 + £120 IPT (12%)
Broker keeps £200 (20%) + pays UWR £800 + £120 IPT

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7
Q

What is the Senior Managers + Certification Regime (SM + CR)? (+ 3 parts)

A

Focuses on most senior individuals

3 parts:
- Senior Manager’s Regime (rules by PRA + FCA - must be approved by regulators)
- Certification Regime (‘significant harm function’ - approved by firm, certify annually)
- Rules of Conduct

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8
Q

According to SM+CR, when establishing if an individual is ‘fit and proper’, they must demonstrate..

A
  • honesty, integrity and reputation
  • competence and capability
  • financial soundness
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9
Q

Compulsory insurances: USA, Turkey, Aus, Germany

A

USA: worker’s comp, motor insurance for commercial vehicles
Turkey: earthquake risks for property owners
Aus: 3rd party motor insurance
Germany: 3rd party liability insurance

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10
Q

What are the 3 ways agency can be created in law?

A
  • Agreement
  • Ratification
  • Neccesity
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11
Q

What is a Single Tied Agent, vs a Multi-Tied Agent?

A

Single: A representative of the insurer, not the insured
Multi: Similar, but agent is selling a number of different insurers’ products (but only one per insurer)

Cannot offer independent advice to a client about products in the wider market

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12
Q

What is an Open Market Correspondent?

A

An intermediary, but not a Lloyd’s approved coverholder - introduce business to Lloyd’s directly or via Lloyd’s broker

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13
Q

What is a risk transfer TOBA?

A

Any money, once collected by the broker, is deemed paid to the insurer, even though it is not physically in their bank account

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14
Q

(Under IDD) What information must brokers disclose on remuneration received to the client?

A
  • the nature of it
  • the basis of it (fee/brokerage)
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15
Q

A client has agreed to pay a broker a flat fee for its services. When must this be agreed?

A

Before the client incurs any fees

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16
Q

What type of distribution role was, for the first time, introduced by the Insurance Distribution Directive?

A

Those that sell direct to customers

17
Q

When should client money be paid out to clients after receipt by the broker, according to Client Assets Rules (CASS)?

A

One business day

18
Q

What is the fine for the most serious data breaches ICO can levy (Data Protection Act)?

A

£17.5m, or 4% annual turnover (whichever is higher

19
Q

When assessing the risk of brokers under the ‘three pillar framework’, the FCA considers…

A
  • the firm’s conduct
  • event-driven work
  • a review of issues and products when required
20
Q

What is exposure modelling?

A

Looks at the way different risks an insurer writes combine to create a concentration of risk in one area

Probable Maximum Loss = realistic likely maximum loss of total of all sums insured

21
Q

What is loss modelling?

A

Financial impact of certain events occuring

22
Q

When calculating a premium for employers’ liabs, what is the premium most likely to be based on?

A

Payroll

23
Q

When calculating a premium for products/public liabs, what is the premium most likely to be based on?

A

Turnover

24
Q

When calculating a premium for professional indemnity, what is the premium most likely to be based on?

A

fees earned

25
Q

What are other considerations of premium calculations, other than prem base/rate?

A
  • operational costs
  • reinsurance costs
  • profit margin
  • contribution to claims reserves
  • taxes
26
Q

Why might an insurer have a trust fund?

A

Some overseas regulators require insurers to maintain physical funds within the country’s borders in relation to risks located in the country

Amount held calculated on reserves held on open claims

27
Q

How long do Lloyd’s syndicates wait before they usually review and ‘close’ the year

A

Three years

28
Q

What system is used in the London Market to quote, negotiate and bind business electronically?

A

PPL

29
Q

What is the main reason why insurers carry out exposure modelling?

A

To determine the amount of reinsurance required

30
Q

What is the main benefit of electronic placing?

A

It makes administration more efficient

31
Q

What is Financial Guarantee insurance?

A

Insurer agrees, on event specified, it will pay out (i.e. changes in interest rates, financial failures etc)

on the edge of gambling - permission from Lloyd’s (prem <2% syndicate capacity) or 6% for exempt classes (i.e. credit risk)

32
Q

What is General Average?

A

If someone makes a sacrifice to save everyone else, then everyone will chip in to pay back the loss

33
Q

What is Sue and Labour?

A

Insured agrees to take steps to safeguard property/minimise losses.
Insurer will pay for steps taken

34
Q

What is salvage in Marine?

A

Someone coming to rescue you when in trouble - they have earend a ‘reward’ in saving you

35
Q

What is collision liability in Marine?

A

Liability to pay for damage to another vessel/its cargo should insured be part of the blame

Standard hull policy covers 75%

LM2 (4 decks)

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