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CII LM1 > Chapter 3 - Main classes of business written in the London Market > Flashcards

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

1
Q

Marine insurance - what are Honour policies?

A

Writing insurance where the purchasers insurable interest is not entirely clear.
Policy Proof of Interest

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2
Q

What does Yacht insurance cover?

A

The following types of vessels
Sailing
Motor
Inland

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3
Q

What does Commercial Vessel Insurance cover?

A

These type of vessels
Cargo
Cruise/passenger
Specialist

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4
Q

What is the key common element covered by any type of marine hull insurance?

A

First party insurance
(Damage to the insured ship - physical loss or damage)

Physical damage caused to property is known as ‘Particular Average’ in Marine.

Most policy wording also provide cover for liabilities arising under maritime law (vessel collided with another vessel)

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5
Q

How is Builders Risk insurance used in Marine?

A

Construction of vessel - expensive & lengthy.

Combined physical damage & liability cover

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6
Q

When might Loss of earnings insurance be used in Marine?

A

If shipowner can’t use ship because it is damaged and can’t earn money from it carrying passengers, cargo, or hiring it out.

I’m non-marine normally referred to as BI.

Waiting period of days before they can claim. Policy limit expressed as a period of days.

Financial provisions calculated using insurers business info such as wages bill or rent

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7
Q

Difference between cargo and goods in transit

A

Cargo = physical damage for goods being moved around

Goods in transit = liability for the entity moving items around, invade they damage goods in their care

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8
Q

What does Cargo insurance not cover that hull insurance for ships would?

A

Liabilities for cargo damaging persons on their property

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9
Q

Cargo insurers do not anticipate insuring storage as this would be static - what insurance would be used for this?

A

Stock throughput insurance

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10
Q

Stock throughput insurance

A

End-to-end
Combines transit and storage policies
Removes danger of gaps in cover

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11
Q

Jewellers block insurance

A

Covers jewellery trade
Introduced into Lloyd’s by Cuthbert Heath 19th century
Package policy covering property and liability risks
Physical loss or damage
Excluded - mysterious disappearance, inventory losses

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12
Q

Specie insurance

A

Loose gemstones
Precious metals
Valuable documents

Physical loss or damage

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13
Q

Fine art insurance

A

Paintings
Sculptures
Installations

Physical loss or damage

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14
Q

Satellite pre launch insurance

A

Moving satellite to launch pad
Cargo covers for physical loss or damage until launch insurer takes over when engines are ignited.
Aggregation is an issue where several satellites launched at once

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15
Q

Cash in Transit insurance

A 
Movement of money between locations
Head office to local branch
Bank to ATM
Company premises to bank
Risk prevention includes:
- varying routes
- mixing up truck crews 
- armed truck crews
- paper money soaked in dyes
- GPS
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16
Q

Goods in transit insurance

A

Covers liability of the carrier
Does not cover sea carriers
Covers loss or damage to goods, releasing cargo to wrong party

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17
Q

Parties in insurance
First party
Second party
Third party

A

First party = insured
Second party = insurer
Third party = anyone else

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18
Q

War and strikes insurance

A

Covers war and civil war risks
Captures and seizures
Damage caused by abandoned mines
Piracy not covered - covered in hull and also cargo

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19
Q

Why is War and Strikes insurance freely available?

A

Marine risks expected to be mobile and able to move out of danger should it arise

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20
Q

Strikes insurance covers…

A

Strikes and damage caused by terrorists or political/religious motives

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21
Q

Types of marine related liability

A
  • injury/death of crew
  • injury/death of visitors
  • pollution caused by escape of cargo etc
  • damage to cargo
  • damage to other people’s property
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22
Q

Parties who should consider liability insurance

A
  • port authorities
  • shipbuilders/ ship repairers
  • marina owners

Liability for land-based employees covered by non-marine employers liability

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23
Q

Political risks insurance (PRI)

A

Allows investors and businesses to mitigate risk arising from restriction imposed by government actions

Offers trade finance banks realistic alternative to syndicating exposure to direct competitors

Alternative for exporters to using state-funded Export Credit Schemes

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24
Q

Subclasses of PRI offered

A

Asset risks such as CEND, CCP.

Contract frustration risks such as non-payment, non-delivery, exchange transfer, non honouring of documentary letters of credit, wrong calling of bonds.

War in land
Political violence

25
Offshore energy insurance
Location and extraction of oil and gas under seabed. Upstream. Exploration phase Construction phase Operational phase
26
Non-marine: Property insurance
Physical damage for buildings Machinery fittings and fixtures Raw materials Reinstatement of building
27
Types of insurance that fall within property but should be reviewed separately
- stock insurance - theft insurance - glass insurance - goods in transit
28
Pecuniary insurance
Cover monetary loss: Money insurance (money and docs) Fidelity guarantee insurance (Fraudulent acts)
29
Construction insurance
Each party should get their own insurance but makes sense to have central policy to prevent gaps in cover. Maintenance periods can be built into policy for 12 months
30
CAR and EAR policies
Contractors all risks Erection all risks Physical damage and liability cover CAR - on behalf of sub contractors EAR - contractor responsible for putting up machinery or steel structures
31
Onshore energy insurance
Oil and gas industry after it has been located and recovered (downstream) Midstream: pipelines Downstream: refining and petrochemical processing elements
32
Business interruption
Vessel damaged and insured cannot generate income. Replace lost income after waiting period Separate policy or extension (contingent BI) - Supplier fails to provide supplies to factory - Power suppliers premises is damaged and cuts of power supply to insureds factory
33
Advance loss of profits (ALOP) | Delay in start up (DSU)
Penalty clauses invoked if project overruns and risks of loss of profit if not completed on time. This can be insured on marine or non marine. Marine - cargo Non marine - additional cover to CAR/EAR
34
Casualty (non marine liabilities)
EL - maritime EL for covering ships crew PL - any party liable for loss or damage to visiting members of the public Professional liability- lawyers doctors etc for claims made against them for incorrect advice or negligent activity. Motor liability- not written in LM General liability- purchased as freestanding policy or addition to physical damage or construction Product liability- product causing damage to someone.
35
Bloodstock/livestock insurance
Bloodstock = horses Main risk is death/illness Also infertility
36
Contingency insurance
Underlying concept that insurance requires fortuity - Event cancellation - Weather-related insurances - Prize indemnity - Death and disgrace - Over redemption
37
Personal accident insurance
PA- permenant disablement weekly or monthly benefits or lump sum. Death lump sum Personal illness/sickness Death in service
38
Kidnap and ransom
- payment for medical expenses once released - payment of ransom - provision of specialist negotiation team to assist the insured/family during the incident Existence of insurance must remain secret
39
Malicious product tamper/extortion/product recall
Tampering: - remove stock - replace stock - maintain brand loyalty Extortion: Money in exchange for - revealing information - keeping quiet
40
Intellectual property insurance
Rights to inventions Trademarks and logos Inventors patent their inventions legally to protect rights and make money Insurance covers legal costs of defending an action against your intellectual property
41
Aviation: physical damage
- Private pleasure fixed wing insurance - Commercial fixed wing aircraft - Rotary aircraft - Gliders - Microlights - Hot air balloons - Unmanned aerial vehicles/drones
42
Aviation liabilities
Passengers - injury ocurred while boarding disembarking or on plane 3rd parties (other than passengers) - baggage handlers and ground staff Products related- illness resulting from food, contaminated fuel, repairs with substandard parts
43
Loss of licence/use
Loss of use - Provides a replacement income stream after a waiting period measured in days Loss of licence - available in aviation market, for those who fail their medicals unable to Operate in their role as aircrew
44
Airport operators policies
Premises liability Products liability Hangar keeper liability
45
Reinsurance
Insurer buying reinsurance for itself to transfer some of the risk to other insurers Reinsurers can be organisations operating as insurers Viewed as good business practice Inward premium > claims + reinsurance cost + operating cost
46
Benefits of reinsurance - increasing capacity
- Increasing financial capacity Gross capacity = amount of business written. Net position = one after you have made room for more Prudent purchasing of insurance of reinsurance allows insurers to accept more risk.
47
Benefits of reinsurance - smoothing peaks and troughs
- Smoothing peaks and troughs Gradual trends favoured. Spreads cost of large losses over several years smoothing our highs and lows Allows insurer to diversify into new classes of businesss Protect portfolio
48
Benefits of writing reinsurance
Accessing other geographical areas Accessing other classes of business
49
Sellers of reinsurance
``` Limited liability companies with Large amounts of paid up capital from shareholders - Specialist companies, don’t write direct - Lloyd’s syndicates - Write reinsurance and direct Provide insurance for: - insurance companies - captive insurers - other reinsurers ```
50
Buyers on insurance
Based on supply and demand Captive insurers - company part of larger commercial organisation, takes risk only from parent company who is not impacted by general premium increase across market. Claims paid with funds from within captive. Mutuals - like minded organisations grouping together and forming insurance pool. Run by professional managers. Lawyers, architects, marine insurers
51
What does it mean to cede?
Pass risk to reinsurer
52
What is facultative reinsurance?
Reinsurance purchased for individual risk which would not fit with any other part of reinsurance
53
What is non proportional reinsurance?
Premium and claims don’t have direct correlation
54
What is Proportional reinsurance
Premium and claims shared between insurer and reinsurer in pre agreed proportions
55
Retrocession
Cession where entity ceding is already a reinsurer
56
Retrocedant
Reinsurer obtaining reinsurance for itself
57
Treaty reinsurance
Reinsurance purchased to cover a wider portfolio of risks/ class of business / whole book of business
58
Retrocessionaire
Reinsurer accepting reinsurance from an entity that is itself a reinsurer
59
Cession
Share of risk passes to reinsurers

CII LM1 (9 decks)

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