Chapter 3 - Main classes of business written in the London Market

Question 1

What’s the difference between yacht and commercial vessels?

Answer 1

Yacht - Saliing, motor, inland
Commercial - Cargo, Cruise/passenger, specialist

Question 2

What type of insurance is Marine Hull Insurance?

Answer 2

First party insurance - covering loss due to physical damage of the vessel named on the policy

Question 3

Builder’s risk insurance

Answer 3

Covers physical damage and liability insurance. Insured can be either the owner of the vessel and/or the builder. Value of the vessel increases as the ship is built.

Question 4

Loss of earnings - marine

Answer 4

Covering scenarios where the vessel can’t be used/carry passengers/cargo etc. Policy Limit is expressed as a period of days.

Question 5

Cargo insurance

Answer 5

Covers physical damage to goods whilst on journey. Doesn’t cover liabilities if the cargo damages someone/their property

Question 6

Stock throughput insurance

Answer 6

End-to-end product covering in transit and storage process.

Question 7

Jeweller’s Block insurance

Answer 7

Physical loss/damage. Generally excludes mysterious disappearance and inventory losses

Question 8

Specie insurance

Answer 8

Covers physical loss/damage to precious items (gemstones, metals, valuable documents such as tickets)

Question 9

Fine art insurance

Answer 9

Covers physical damage / loss to art. Includes paying out for depreciation in value if the art is damaged.

Question 10

Cash in transit insurance

Answer 10

Covers liability of the carrier in respect of the goods being carried.

Question 11

War and strikes insurance

Answer 11

WAR: Usually excluded from main marine wordings, but can be bought separately. Covers physical damage/loss due to war/civil war type risks including capturing/seizures.

STRIKES: physical damage/loss due to strikes and damage caused by those acting from a political/religious motive.

Question 12

Marine liability insurance

Answer 12

Covers legal liabilities by injuring others/their property. Also if a vessel owner, can include injury/death of crew, pollution damage from escaped cargo, damaging others cargo, damaging others property.

Port authorities, ship builders, marina owners, vessel owners all buy this for various reasons.

Question 13

Political Risks insurance

Answer 13

Covers loss due to non payment of payment obligation / political risk perils to assets

Question 14

What is off shore energy? What are the three phases and how are they insured?

Answer 14

Energy in open water.
Exploration (locating the O&G) - physical damage/liability insurance.
Construction (building the rig) - physical damage/liability, Operational (operating the rig) - physical damage/liability. sometimes war and terrorism included here.

Question 15

Property insurance

Answer 15

Covers physical damage insurance for buildings (incl fixtures, machinery and fittings. If industrial building, usually also incl the raw materials that go into the manufacturing process + the product before shipment)

Question 16

Stock insurance

Answer 16

Physical damage covering stock at insured’s premises. Makes regular declarations to ensure stock is not changing in value and therefore underinsurance.

Question 17

Theft Insurance

Answer 17

Covers loss due to theft (when entry is forced)

Question 18

Glass insurance

Answer 18

Covers damage to glass of a building

Question 19

Pecuniary Insurance

Answer 19

Covers monetary loss rather than physical loss/damage

Question 20

Money insurance

Answer 20

covers risks of money / valuable documents

Question 21

Fidelity gurantee insurance

Answer 21

Responds to fraudulent acts during the policy period

Question 22

What are the 2 types of construction insurance?

Answer 22

Contractors all risks (CAR)
Purchased by main contractor on behalf of all the sub-contractors

Erection all risks (EAR)
Purchased by the contractor responsible for putting up machinery/steel structures, etc

Question 23

Onshore energy insurance
What’s diff between midstream and downstream?

Answer 23

Midstream - pipelines
Downstream - refining/processing of petrochem products

Applied to lots of different energy sources such as O&G, mining, renewables, etc

Covers physical loss/damage and liabilities related to construction of such facilities

Question 24

Basic Business Interruption insurance

Answer 24

Covers loss of income. Basic cover only reacts to physical loss/damage to insured property

Question 25

Contingent business interruption?

Answer 25

Covers income loss due to damage to an external party with affects insured’s ability to generate money

Question 26

Advanced loss of profits/delay in start up insurance

Answer 26

covers loss of profit/debt serving costs + working overtime costs for construction projects

Question 27

Employers’ libability

Answer 27

Compulsory
Covers workers’ compensation for injury at work

Question 28

Public liability

Answer 28

Loss/damage caused to members of public visiting a site/by an employee of the Insured

Question 29

Professional liability

Answer 29

Covers professionals against risk of being sued

Question 30

General liability

Answer 30

Covers different types of liability

Question 31

Products liability

Answer 31

covers risk that a client’s product causes damage to someone(thing)

Question 32

Bloodstock/livestock insurance

Answer 32

Bloodstock - horses. Livestock - farm animals.

Covers loss due to death or illness of an animal

Question 33

Contingency insurance

Answer 33

Covers loss due to events outside of the insured’s control (event cancellation, weather-related insurance, prize indemnity, death/disgrace, overredemption)

Question 34

Personal accident insurance

Answer 34

covers loss caused by accident at a pre-agreed sum

Question 35

Kidknap & ransom insurance

Answer 35

Covers costs associated with the ransom, a specialist negotiation team and medical expenses of the victim when released,

Question 36

Malicious product tamper/extortion/product recall insurance

Answer 36

covers retailers for costs associated with issue in a product to maintain the insured’s reputation

Question 37

Intellectual property insurance

Answer 37

covers legal costs of defending actions against your IP (rights insureds have to their work/inventions) or alternatively if the insured is being sued for interfering with someone else’s IP

Question 38

aviation - physical damage insurance

Answer 38

covers physical loss to various types of aircraft/flying objects. Cover does not extend to wear and tear.

Question 39

Aviation liability insurance

Answer 39

Cover is included under standard aviation policies, covering third parties, passengers and product-related liabilities.

Note that employees would be covered under the airlines Employer’s Liability insurance

Question 40

Loss of license/use insurance

Answer 40

Covers financial loss due to an individual failing their medical and not being able to operate in their role (aircrew, traffic controllers etc)

Question 41

3 types of liability insurance airport operators may get

Answer 41

premises - someone injuring themselves in the airport
products - eg if airport provides fuel for the planes/food on the airplane
hangar-keepers’ - if airport provides maintenance or storage services for the client

Question 42

Which organisations are reinsurers?

Answer 42

Either direct insurers writing on a reinsurance basis or specific reinsurance companies

Question 43

What are the 3 ways to buy reinsurance cover when considering a whole book of business?

Answer 43

Single risk (facultative basis) portfolio (treaty) or catastrophe losses

Question 44

In a claim scenario, what would happen if a reinsurer has gone insolvent?

Answer 44

The insurer is still liable to pay valid claims to the insured.

Question 45

What are the 4 benefits of buying reinsurance?

Answer 45

• Increasing capacity
• Smoothing peaks and troughs so results show gradual trends (investors liket his)
• Allowing insurer to diversify into new classes
• Protecting the portfolio

Question 46

what are the 2 benefits of writing/selling reinsurance?

Answer 46

• accessing other geographical areas. often insurers are restricted on a direct basis but can cover on reinsurance basis
• accessing other classes of business with security/safety

Question 47

Who are the 3 types of main reinsurers?

Answer 47

Specialist companies (don’t write any direct insurance)
Lloyd’s syndicates
Insurance companies who write both direct/reinsurance

Question 48

Where are the main reinsurance markets?

Answer 48

London, Bermuda, US and Europe

Question 49

What is a captive insurer?

Answer 49

Set up as part of a larger organization, only taking risk from sister companies.

Question 50

What is a mutual insurer?

Answer 50

Like-minded organizations grouping together forming an insurance pool. Often run by professional managers on before of member firms (lawyers, architects etc). Mutuals then purchase reinsurance.

Question 51

Define to cede/cedant/cession/collecting note/fac reinsurance/treaty reinsurance

Answer 51

Cede - insurer giving risk to reinsurer
Cedant - the original insurer
cession - the share of the risk passed to reinsurers
collecting note - the doc presented if there’s a claim
facultative R/I - insuring single risk
treaty R/I - insuring portfolio

Question 52

Define non-proportional reinsurance/proportional reinsurance, retrocedant, retrocession, retrocessionaire

Answer 52

non proportional - excess of loss reinsurance. pays for loss that exceeds the ceding company’s limit up to a certain value

proportional - premium/claims shared between a reinsurer and an insurer (e.g. quota share)

retrocedant - a reinsurer passing risk to a retrocessionaire

retrocession-actofre-insuringthroughareinsurer
retrocessionaire - the reinsurer taking risk from a retrocedent