Chapter 1: Business Nature of the London Market Flashcards
Define “Lloyds”
Define “managing agent”
Define “member”
Define “reinsurance”
Define “solvency”
Define “syndicate”
What are two key aspects of the London Market?
It is made up of organisations that are both competitors and co-insurers, and the international nature of the market.
Define “subscription market”
Risks are shared among a number of different insurers, rather than just one
Define “capacity”
Each insurer’s limit to the amount of business it can insure.
How is capacity calculated?
Total of all premiums written in a period, usually one year. It is created from the investors input.
What is another way to measure capacity beyond financial?
Limits of the risks being written across a period of time or in a geographical location- think NAT CAT
What are branch office controls?
Ensuring risks are not written in multiple offices of an insurer- to prevent a larger exposure than desired.
What are aggregates?
A reason why an insurer may not take 100% of the risk - they dont want the exposures concentrated in one place.
Define “licensing”
An insurer may not be authorised to write business in a country.
How might reinsurance affect an insurer’s choice to take on 100% of a risk?
May not take on 100% of a risk as there is not enough reinsurance available.
Define “geographical limitations”
A limitation on the amount of business that can be insured which ORIGINATES in a certain part of the world. Normally an internal control insurers use.
What are four reasons why risks may be placed partly outside the London Market?
The insured is loyal to their home market, they value understanding the culture, local knowledge, and relationships, experienced insurers, and claims service.
What is an example of an area in the London Market where risks are written 100%?
P and I clubs
What are the three main categories of insurer?
Proprietary companies, mutual companies, and captive insurers
Who owns proprietary companies?
Shareholders. They are registered under Companies Act 1985, and are limited liability companies.
How can you tell if a company is publicly quoted or privately owned?
If publicly quoted it will have plc after the name. If private, Ltd.
Who owns mutual companies?
Their policy holders.
What does it mean if mutual companies are limited by guarantee?
A policy holder’s maximum liability is limited to their premium.
What is a captive insurer?
An authorised insurance company that is owned by a non-insurance parent company.
