Chapter 1 Flashcards
What are:
a) Composite Company
b) Life Company
c) General Insurance Company
Three broad types of insurance companies.
A) Transacts both long-term business’(life) and general business’ such as motor, household, aviation, PL.
B) life/pensions/only able to transact long-term business’.
C) Only able to transact general business’.
What do composite, life and general insurance companies make up?
What is the exception to this rule?
The single large market. The insurance marketplace refers to the mechanism by which buyers and sellers come together rather than location (with the exceptions of the London Market)
What is a proprietary company?
PROPRIETARY = SHARHOLDERS NOT POLICY HOLDERS.
A proprietary insurance company in the UK is a for-profit insurer owned by shareholders. Its primary aim is to generate profits for these shareholders, contrasting with mutual insurers which are owned by and serve the interests of their policyholders.
What are the two basic needs insurers have have reinsurance?
- To limit annual fluctuations. Smoothing the underwriting result.
- To be protected in a catastrophe
What is a Mutual company?
Owned by the policy holders?
What happens to the profits in:
A) a Mutual Company
B) a Proprietary Company
A) The policyholders own the company therefore the profits are enjoyed in the form of lower premiums.
B) The shareholders own the company and the profits are enjoyed through dividends.
Other than a Mutual Company, what company is owned by its policy holders?
A Limited by Garantee company
What is the name given to the transition of a mutual company into a proprietary company even if they keep the word Mutual in there name?
Demutualisation.
Lloyds does not transact insurance, what does it do?
Underwrites members of Lloyds who make up the Lloyds market/syndicates.
What is the aim of the Lloyds Franchise structure?
improve market profitability and allow monitoring and guidance of franchisees with Lloyds as the franchisor approving buisness plans, new syndicate applicatios and having the ultimate power to eject buisnesses that are unable to comply.
What is a Captive Insurer?
Where a parent company creates a subsidiary company to underwrite certain of its own or its groups insurable risks.
What is Takaful Insurance?
Based on Sharia law surrounding financial and commercial transactions. Based on the principle than an transaction risk and profit should be shared between participants.
What are the three principles in Sharia law that make insurance contract to there principle beliefs?
Gharar (uncertainty)
Maisir (gambling)
Riba (interest)
What is a reinsurance treaty and what are the three main types?
A treaty is a reinsurance agreement with a direct insurer outlining fixed terms, usually under an annual agreement.
1) Proportional
2) Non-Proportional
3) Facultative
What is a proportional, non-proportional and facultative treaty?
1) Proportional - the insurer and reinsurer take a stated proportion of each risk/premium/claim.
2) Non-Proportional - allows an insurer to retain the first part/layer of cover and transfer the balance to the reinsurer.
3) Each reinsurance requirment is negotiated individually
