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
