Chapter 4: Market Security Flashcards
Define ‘solvency’
having more assets than liabilities
Define ‘assets’
items of value or resources a business owns or controls and can be tangible or intangible. This is normally premiums and investment income
Define ‘incurred but not reported’
The additional amount to be reserved for unpaid claims
Define ‘capital’
the difference between assets and laibilities
Define ‘liabilities’
Any situation where money is owed to another person or organisation
Define ‘liquidity’
The ease with which assets can be converted into cash
What are the main objectives of solvency ii?
Better regulation, deeper integration of EU insurance market, enhanced policyholder protection, and improved competitiveness
What are the three pillars of solvency ii?
Quantitative requirements, supervisory reviw, disclosure
Define ‘solvency capital requirement’
The amount of assets available in excess of liabilities
Define ‘minimum capital requirement’
a lower threshold needed for an insurer. If this is breached regulatory intervention is likely
Define ‘own risk and solvency assessment’
Internal review undertaken by insurers to manage risk, overseen by PRA
What business risks does an insurer face?
Credit risk, operational risk, market risk, liquidity risk, group and capital risk, enterprise risk
Define ‘credit risk’
Premiums not being paid, or a reinsurer becoming insolvent
Define ‘operational risk’
Underwriters write outside their authority, building has been damaged and office cannot operate, or market systems cannot be used
Define ‘market risk’
Investments falling or loss in exchange rates
Define ‘liquidity risk’
Cash flow issues
Define ‘group and capital risk’
managing clash between syndicate and company paper
Define ‘enterprise risk’
risks that can affect the netire business
What does the Financial Services and Markets act 2023 do?
Revoke the EU regs and brings responsibility for controlling financial services back to the PRA and FCA.
Which body is most likely to review an insurer’s overall risk management policy?
PRA
Define ‘European Insurance and Occupational pensions Authority (EIOPA)’
The overarching EU supervisory body for Solvency II. Aim for stability, transparency, and protecting policy holders.
Define ‘Lloyd’s chain of security’
Systems in place so that Lloyds remains solvent
What are the links in the Lloyds chain of security?
Syndicate level assets, members funds at Lloyd’s, and central assets
What are the links in the Lloyds chain of security?
Syndicate level assets, members funds at Lloyd’s, and central assets
