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IF1 - Insurance, Legal and Regulatory > Chapter 2: The Insurance Market > Flashcards

Chapter 2: The Insurance Market Flashcards

1
Q

Name the five types of insurer.

A
  • Proprietary companies
  • Mutual companies
  • Captive companies
  • Protected cell companies
  • Lloyd’s
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2
Q

What is a proprietary insurer?

A

Conventional insurers owned by shares. E.g. limited or PLC companies.

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3
Q

What is a mutual insurer?

A

Owned by the policyholders. Share profits by way of lower premiums.

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4
Q

What is a mutual indemnity association?

A

A self-managed pool of insurers owned by the policyholders. Common in marine insurance.

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5
Q

What is a captive insurer?

A

Created by the parent company to provide insurance solely to that parent.

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6
Q

What is a protected cell company?

A

A special type of captive insurer where the assets of the ‘celled’ companies are ringfenced and thus treated as separate insurance entities.

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7
Q

What is a Takaful insurance company?

A

Specialist policies designed to circumvent the anti-gambling beliefs of Islamism.

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8
Q

What is a composite insurer?

A

One which offers numerous classes of business.

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9
Q

What is a specialist insurer?

A

One which offers a particular type of business.

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10
Q

Name the 4 actors within the Lloyd’s market.

A
  • Syndicates
  • Managing agents
  • Names
  • Member’s agents
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11
Q

What is the role of a Lloyd’s syndicate?

A

The groups of individual or corporate members who carry the risks. Sometimes also referred to as ‘Names’.

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12
Q

What does a Lloyd’s managing agent do?

A

Handles the administrative work on behalf of syndicates. The employ the underwriters and claims adjusters.

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13
Q

What liability do Lloyd’s names have?

A

Limited liability. Names with unlimited liability are no longer permitted to join Lloyd’s.

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14
Q

What does a member’s agent do at Lloyd’s?

A

They advise syndicates (names) on the pros and cons of investing in the Lloyd’s market. They also act as a comms channel between the investors and the managing agents who conduct business on their behalf.

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15
Q

How is business placed at Lloyd’s?

A

Details of the risk are stated on the Market Reform Contract (slip). They will then go to the underwriters for quotes. The first will indicate their share then the Broker tries to fill the rest by asking other underwriters.

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16
Q

What is an intermediary?

A

An agent who brings together two parties to form a legally binding relationship.

17
Q

Define agent.

A

A person who acts on behalf of a principle to bring them into a legal relationship with another.

18
Q

When is an intermediary FCA exempt?

A

If they are:
- An appointed representative (AR), or
- An introducer appointed representative (IAR).

19
Q

What is an Authorised Person?

A

A firm regulated by the FCA.

20
Q

Define ‘Appointed Representative’.

A

Someone appointed by a regulated principle to bring third parties into legal relationships with that principle. E.g. AMEX offering insurance on behalf of Chubb.

The principle is responsible for overseeing ARs.

21
Q

What is an Introducer Appointed Representative?

A

Responsible for promoting the services of the principle but not subject to the same level of regulation as ARs.

Popular as a marketing channel for the Principle.

22
Q

How does direct and indirect marketing differ in terms of insurance?

A

Direct - the Insurer or its employees will sell their product to those who may buy it.

Indirect - intermediaries are paid by the insurer to promote products.

23
Q

What is a binder?

A

A delegated authority scheme which allows an insurer to issue cover on behalf of another company which provides insurance capacity. I.e. an MGA.

24
Q

What is Bancassurance?

A

An arrangement wherein an insurer’s products are sold to a bank’s customers.

25
Q

What is reinsurance?

A

Where an insurer takes out cover to protect itself against a large claim payment in the event of a loss.

Can be bought for a particular risk or portfolio of risks. Latter may be useful in the event of a large incident e.g. a storm.

26
Q

What is the purpose of reinsurance?

A
  • Smooth peaks and troughs in trading results (good for shareholders).
  • Provides support for entering new classes of business.
27
Q

What is facultative reinsurance?

A

When an insurer takes out cover to protect against a loss on a particular risk.

28
Q

What is retroceding?

A

Where a reinsurer seeks reinsurance cover.

29
Q

What is the IUA?

A

International Underwriting Association of London - the largest representative for international wholesale insurance companies in the world.

30
Q

Which group of buyers may be exempt from compulsory insurances?

A

Public bodies.

31
Q

How has consolidation taken place recently in the insurance market?

A
  • Broker Networks
  • Consolidators (companies which acquire others) e.g. Ardonagh.
32
Q

What is home insurance?

A

Protects against loss to the property cause by fire, theft, etc.

Indemnified on a ‘new for old’ basis.

33
Q

What is PPI?

A

Payment protection insurance.

Covers payments to creditors. E.g. credit card payments.

34
Q

What does health insurance cover?

A
  • Personal accident
  • Sickness
  • Private medical insurance
  • Short-term income protection (if the injured cannot work)
  • Critical illness
35
Q

What are the different types of commercial property insurance?

A
  • ‘All risks’ cover
  • Breakdown (of plant machinery)
  • Glass
  • Livestock
  • Money (covers risks of loss or destruction to money)
36
Q

What are the types of pecuniary insurance?

A
  • Fidelity guarantee (employee dishonesty)
  • Legal expenses
  • Credit (debtor defaulting on payment)
  • Business interruption
  • Political risk (for political revolution or change)
  • Guaranteed asset protection (cover the cost of the remainder of a car payment)
37
Q

What does marine cargo insurance cover?

A

Loss or damage to goods.

38
Q

What does marine freight insurance cover?

A

The sum paid for transporting goods or for vessel hire.

39
Q

What does marine hull insurance cover?

A

Damage to the ship or other ships in a collision.

IF1 - Insurance, Legal and Regulatory (11 decks)

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