Chapter 4 - Market Security Flashcards

1
Q

What is the equation for solvency?

A

assets > paid claims + unpaid claims + operating costs

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2
Q

What are the objectives of solvency II?

A
  • better regulation
  • deeper integration into the EU market
  • enhanced policy holder protection
  • improved competititveness of EU insurers
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3
Q

What are the three pillars of solvency II?

A
  1. quantitative requirements
  2. supervisory view
  3. disclosure
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4
Q

What is solvency capital requirement?

A

amount insurer must keep of assets in excess of liabilities

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5
Q

What is minimum capital requirement?

A

Lower than SCR, if breached regulatory intervention likely

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6
Q

What are example business risks faced by insurers?

A
  • credit / counterparty risk
  • market risk
  • operational risk
  • liquidity risk
  • group and capital risk
  • enterprise risk
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7
Q

What are EIOPA’s core responsibilities?

A
  • increase stability of the financial system and transparency of markets and financial products
  • protection of policyholders
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8
Q

Who carries out day to day supervision of Solvency II in the UK?

A

The PRA

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9
Q

Describe the chain of security at Lloyd’s

A
  1. syndicate’s premiums
  2. if premiums not sufficient to pay claims, member’s funds at Lloyds can be used
  3. Central fund is the absolute backstop, all insurers contribute 0.35% of their written premium annually
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10
Q

What do rating agencies look at?

A
  • ability to pay claims
  • operating performance
  • business profile
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11
Q

What happens if broker chooses insurer that can not pay claims?

A

They could be liable to a professional negligence claim

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12
Q

What happens if an insurer’s rating drops?

A

may lose business

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