Chapter 1: Structure of the insurance industry Flashcards
What is a composite company?
An insurance company that transacts both long-term business (life) and general business, such as motor, household, aviation and public liability.
What is a life company?
A life insurance and pensions company that is only able to transact long-term business (life).
What is a general insurance company?
An insurance company that is only able to transact general business such as motor, household, aviation and public liability.
What is the purpose of an insurance broker?
An insurance broker can provide independent advice and access a wide range of insurance providers to help find solutions for all types of insurance needs, including the most difficult of risks.
What is an intermediary?
An intermediary is an agent who is usually appointed by a party to seek the best cover and price and recommend an insurance company and/or insurance policy. They may even be authorised to purchase it on behalf of the client.
Why do insurers purchase reinsurance?
- To limit (as much as possible) annual fluctuations in the losses that affect their underwriting account, often referred to as ‘smoothing the underwriting result’
- To be protected in case of a catastrophe (both man-made and natural).
What is a financial mutual?
A financial mutual is an organisation that supplies financial services products, and which is owned by its customers, or members.
What is a treaty in reinsurance?
A treaty is when a reinsurer agrees to take a part of all the insurances that a direct insurer underwrites. A treaty is usually an annual contract agreed in advance and its terms are fixed.
What is a proportional treaty?
A proportional treaty is where the insurer and reinsurers take a stated proportion of each risk and share the premium (and claims) on the same basis.
What is a non-proportional treaty?
Non-proportional treaty allows an insurer to retain the first part (or layer) of cover and transfer the balance to the reinsurers.
