Chapter 2 Flashcards
What are the 5 main components of the insurance market?
1. Buyers (policyholders/insured)
- Buyers (policyholders/insureds).
- Insurers (sellers).
- Intermediaries (those who bring buyers and sellers together).
- Comparison websites (aggregators).
- Reinsurers (a further means of spreading risks).
What are the 5 main types of buyers within insurance?
1.Private Individuals …
- Private individuals.
- Companies.
- Partnerships.
- Public bodies.
- Associations and clubs.
What two authority’s are there that any company wishing to transact insurance in the UK must be authorized to do so by
Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
What does PRA and FCA stand for?
Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
What does the PRA have to by satisfied with in order to authorised you?
The PRA must be satisfied that the applicant complies with its conditions
What are the 5 types of insurance defined by ownership?
eg 1. Proprietary companies
•Proprietary companies.
• Mutual companies.
• Captive companies.
• Protected cell companies.
• Lloyd’s
Who owns a proprietary company?
Shareholders
is a proprietary company a LLC or LTD company?
Proprietary companies are limited liability companies mostly but can also be private limited comapanys
How much is an shareholder in a proprietary company liable for?
Shareholder’s liability for the company’s debts is limited to the nominal value of the shares they own (the original value)
How does a LLP differ from an LTD company in terms of ownership?
LLP is owned by shareholders who are jointly liable.
LTD are owned by few, or even one shareholder(s) and the shares are not available to the public.
Who owns Mutual companys?
Policyholders
How much is a policy holder liable for in a mutual company?
Technically - any losses by the company.
Reality - the premium they have paid.
What is the difference between a mutual company and a mutual indemnity association?
Mutual Company tends to be an insurer owned by its policyholders.
Mutual Indemnity Association is also owned by its policyholders but it is a self managed pool of insurers rather than a single insurer.
What is a captive insurer?
Established by parent company that is usually a large corporation and provides insurance, primarily if not exclusively to the parent company.
What is the benefits of a captive insurer to a large company?
Tax efficient
Don’t pay for outsourced insurers overheads
Lower overall premiums- reinsure risk
