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CII LM2 > Chapter 2a - Non- marine Risks Written In The London Market > Flashcards

Chapter 2a - Non- marine Risks Written In The London Market Flashcards

1
Q

Non-marine classes of business

A

Physical Damage:

  • Agricultural crop and forestry/hail
  • Bloodstock/livestock
  • Contingency
  • Personal accident and health
  • Property including onshore energy
  • Business interruption
  • Homeowners

Non-marine liability:

  • Directors and Officers
  • Errors and Omissions/Professional indemnity/Professional negligence and Med Mal
  • Public liability
  • Products liability
  • Employers liability
  • General liability/comprehensive general liability

Non-marine other:

  • Financial guarantee
  • Extortion/malicious product tamper/contamination
  • Product recall
  • War
  • Terrorism and political violence
  • Cyber
  • Mergers and acquisitions
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2
Q

Aviation classes of business

A

Physical damage:

  • Physical damage to aircraft
  • Property insurance for airport buildings
  • Drone/unmanned aerial vehicle

Liability:
- Airline liability

Other aviation:

  • Aviation war
  • Loss of licence
  • Loss of use
  • Aviation repossession
  • Contingent hull, liability, or war
  • Space
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3
Q

Marine classes of business

A

Physical damage:

  • Vessels
  • Cargo
  • Offshore energy

Marine liability:

  • Shipowners liability
  • Professional negligence
  • Ports liability

Other types of marine cover:

  • Loss of hire/earnings
  • Specie/jewellers block
  • Fine art
  • Cash in transit
  • Political risks
  • Contract frustration or trade credit
  • Bond risks
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4
Q

Motor insurance

A

Standard motor written by composite insurers and specialist insurers

Some motor written in London Market

Overseas motor also written, split into:
EU/EEA
USA/Canada
Rest of world

Physical damage and liability covered

Innocent victim must be protected - insurers can’t always rely on insurance law due to this, so must fully understand nature of risk before agreeing to cover it.

LM uses delegated underwriting contracts

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5
Q

Agricultural crop and forestry/hail insurance

A

Crops farmed commercially
- main peril is loss of crop
- hazard is weather or disease
Eg. Loss of crop through hail or frost damage

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6
Q

Bloodstock/livestock insurance

A

Bloodstock: Covers racehorses and show jumpers
Livestock: Covers all animals that can be reared commercially

Perils - sickness, injury, total loss for racehorse, loss of value (unable to breed when put to stud), loss by disease.

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7
Q

Contingency insurance

A

Concert/event cancellation/abandonment - cost of refunding tickets and rearranging event

Over redemption - cost of more redemption than expected(coupons etc)

Prize indemnity - covers cost of prize for charity event if won or drinks for hole in one

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8
Q

Personal accident and health insurance

A

Personal Accident:
- Benefits policy, benefits paid weekly/monthly for agreed period for injury or lump sum for permanent disablement

Personal accident and sickness:
- sudden onset illness eg heart failure

Kidnap and ransom

  • payment of ransom
  • cost of medical treatment and payment of salary
  • payment for hostage negotiators
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9
Q

Property insurance including onshore energy

A

Made up at least 1/4 of Lloyd’s business in 2018 and IUA.

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10
Q

Property: Construction insurance

A

Construction insurance:

  • Head contractor take out CAR insurance
  • Policy period should match contract period
  • Maintenance period for 12 months after completion
  • Covers loss/damage to BWs, machinery movement, BI, PL and EL, damage to plant (machinery)
  • EAR can be absorbed by CAR policy but often bought separate
  • EAR covers loss/damage to equipment, liability if insured/equipment causes damage
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11
Q

Property: Property insurance

A

Property:
Cover depends on uses of property
- Buildings
- Machinery
- Stock
Can purchase “all risks” or just fire by itself and add on any further perils if needed.
- fire can include damage caused by putting it out
- not a chemical reaction where no ignition
Other cover: lightning, explosion, earthquake, aircraft, riots/strikes, malicious acts, storm/flood/EOW, impact damage, sprinkler leakage, subsidence

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12
Q

What does Expediting Expenses cover for under Property/Onshore energy?

A

Cover to pay for extra costs eg overtime, air freight charges for parts to repair

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13
Q

What will property insurers never cover??

A
  • Inherent vice (inevitable natural behaviours such as iron rusting)
  • Trade risks eg failure of creditor to pay their bills
  • Normal settlement of new buildings
  • War risks
  • Radioactive contamination
  • Anything insured elsewhere
  • Any property insured for marine perils
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14
Q

What risks would property insurers provide as ‘buy-backs’?

A
  • Fraud and employee dishonesty
  • Theft
  • Subsidence
  • Jewellery
  • Goods in transit
  • Fixed glass
  • Sanitary ware
  • Money
  • Land, bridges, and civil engineering works
  • Crops and trees
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15
Q

What does property insurance use as one of the options for indemnifying the insured in event of loss or damage?

A

Concept of reinstatement

- Insurer agrees to make good the property lost or damaged and takes over property during period of reinstatement

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16
Q

What would Property insurers expect to be on more specialist policies?

A
  • Buildings in CoC
  • Livestock
  • Consequential loss
  • Computers
  • Vehicles licensed for road use
  • Own steam and other pressure plant
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17
Q

What would you use Day One Average Memorandum / Day One Reinstatement for?

A

Ensuring an adequate sums insured.
- Counteracts impact of inflation given building reinstatement may take years

Policy shows SI in two parts:

  • Cost of reinstating as new everything on the policy at prices on the first day (Base/Day Kne or Declared Value)
  • Agreed percentage uplift on declared value (takes into account inflation)

End result is SI which meets reinstatement costs incurred in total.

18
Q

What is an onshore energy risk?

A

A property risk where subject matter insured is specific to energy industry.

UW considerations

  • Location (proximity to cities)
  • Activity (petrochemical? Power station? Oil refinery? Biofuel?)
  • Risk created by nature of activity (potentially explosive?)
19
Q

What does Glass Insurance cover?

A
  • Fixed glass
  • All risks cover for boarding up, replacing alarms, lettering, window frames

Can be bought as stand-alone

20
Q

What does Stock Insurance cover?

A
  • Raw materials
  • Materials being used in production
  • Finished stock in storage
  • Physical damage cover

Agreed SI based on max exposure
Pay deposit of premium at start of insurance and make regular declarations to insurer

Claims for fire, theft or damage

21
Q

What perils does Theft Insurance exclude?

A

Fire, money, war
Specifically:
Collusion - inside job
Entry gained by tricks or keys - employees being careless

22
Q

What is Pecuniary insurance for?

A

Loss suffered is monetary or financial

23
Q

Money insurance - what does it cover?

A

All risks of loss to money which is responsibility of insured.

Includes cheques, stamps, vouchers, lottery tickets. Risk is measured by negotiability.

General exclusions: war
Specific: loss from unattended vehicle, loss from use of keys, dishonesty of employees

24
Q

What does Fidelity Guarantee insurance cover?

A

Loss of property as direct result of fraudulent act

  • blanket cover for all employees
  • named employees only
  • named roles only

Insurers look at insurers risk management

  • checking references for employees
  • correct signing procedure for cheques/money
  • checking of cash held on premises
  • daily banking
  • reconciling bank accounts
  • procedures for stocktaking
  • full yearly audit
25
Q

Business Interruption - what is the purpose

A

To replace income which would have been received had loss to property not occurred and business not been interrupted.

Correct SI needs to be established so payout reflects loss.

Waiting period (the deductible/excess) is expressed in days.

26
Q

Claiming on Business Interruption

A
  • Insurers use accountants to investigate loss suffered, intention of not automatically paying out max
  • Standard BI requires some physical loss damage to property and require there to have been a recoverable claim on the property

Claims:
Supplier of raw materials suffers loss and cannot supply

Power cut off from loss at power station

27
Q

Homeowners insurance

A

Property risks written via delegated underwriting such as binding authorities or service companies.

28
Q

D and O Liability insurance

A

Protects directors and officers for claims made by shareholders/investors where their behaviour has caused financial loss.

  • categorised as US or non-US
  • covers financial loss
  • can include employment claims as extension
  • written on claims made basis

Exclusions:
Fraud, insured persons making financial gain, anything being investigated or notified already before inception, pollution/war/radiation, bodily injury/emotional distress

29
Q

Errors and Omissions (EandO)

A

Interchangeable term with PI and Professional Negligence

Covers professionals against claims for breach of duty of care, negligence, errors and omissions

PI compulsory for lawyers and accountants and is a claims made policy - make a claim when a claim is made against them

30
Q

In legal systems, What is a concept of limitation?

A

After a certain period of time your right to recover in law disappears.

In English law: 6 years from alleged breach
Tort claims: 6 years reduced to 3 for personal injury

31
Q

Public Liability cover

A
  • Accidental injury to 3rd party
  • Accidental loss or damage to property
  • Nuisance, trespass to land/goods, interference with 3rd party’s right to air, light or water

When claims made the issue is if the insured is actually liable and to what extent - does another party share blame?

32
Q

Product liability cover

A

Indemnity for injury or damage but only against liability in connection to a product.

Issue is who is to blame? Many parties contribute to putting a product together.

33
Q

Employers liability cover

A

Written in wider UK composite market, not usually LM.

  • legal liability of the insured for injury to employees
  • legal cost of defending claims

ELTO - used to trace insurance in the past

34
Q

General Liability cover

A

Combined/comprehensive liability insurance bought by many as it combines different classes of liability and adds in others like advertising.

35
Q

Active Shooter insurance

A

New type of liability developed to respond to litigation faced by an insured resulting from harm involving guns/other weapons.

Add cover includes cost of crisis management, post event counselling

36
Q

Financial Guarantee Insurance

A 
Any contract of insurance where insurer agrees on occurrence of event that it will pay out. Eg:
Financial failure of companies
Change in interest rate
Change in rates of exchange
Change in property value

All event could lead to financial gain so FG is perceived to be on edge of gambling

Can be written in Lloyd’s if permission sought in normal way via business planning

Less than 2% of capacity - more likely to be given permission

37
Q

Extortion insurances

A

People threaten companies to try to gain money eg. Alleging their products have been tampered with.

Malicious product tamper insurance assists with cost of:
Removing unsafe goods
Maintaining brand image
Alternative goods
Maintaining client confidence

Insurance for accidental contamination triggered by illness

38
Q

Product Recall

A

A product is dangerous and needs to be recalled otherwise could risk large liability claim

Recall insurance pays for:

  • Advertising recall
  • extra staff
  • additional space hired
  • shipping in affected products
  • disposing of products
  • redistribution costs
39
Q

War insurance

A

Lloyd’s syndicates can’t write war or related perils risks without Lloyd’s permission.

Have to provide realistic disaster scenario returns, and since 2012, returns related to moveable risks.

40
Q

Terrorism and political violence insurance

A 
PV covers:
Terrorism
Sabotage
Riots, strikes, and civil commotions 
Malicious damage
Insurrection, revolution or rebellion
Mutiny or coup d’etat
War or civil war
41
Q

Cyber insurance

A

Standalone products covering loss of information from IT systems and networks or damage to them, and costs of immediate aftermath

1st party: Covers your own assets
3rd party: Covers risks of security breaches which leads to loss of others data

42
Q

Mergers and Aquisitions

A

Company buys another company- risks faced by both sides

During negotiations for merger or acquisition parties give each other mutual warranties and indemnities. If negotiations break down warranty and indemnity insurance will protect them.

Policies will be crafted to match actual terms of merger and acquisition transaction

CII LM2 (12 decks)

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