Chapter 7: General Insurance Markets Flashcards
Reinsurance for insurance providers can be obtained from (5):
- the London Market
- Lloyd’s
- specialist reinsurance companies
- direct insurers who also write reinsurance
- capital markets
Direct insurers
provide insurance for individuals and companies
3 Groups of direct insurers
- Composite insurance companies
- Insurance companies that specialise in writing business in a selection of classes of general insurance
- Insurance companies that write all classes of general insurance
Composite insurance companies
Insurance companies that write both general insurance and life insurance
Corporate structure of general insurers
Most insurance companies are proprietary companies limited by shares.
However, some mutual insurance companies do exist; they are more common in some markets than in others.
Reinsurance companies
Provide cover for insurance providers.
London Market
That part of the insurance market in which
insurance and reinsurance business is carried out
on a face-to-face basis
in the City of London.
Focus of the London Market
Commercial insurance:
insurance & reinsurance cover to COMPANIES.
3 specialisations of the London Market
- larger direct insurance risks (both property and liability) that are beyond the capability of other direct insurance companies.
- international risks
- reinsurance
8 Participants in the London Market
- Lloyd’s syndicates
- captives
- P&I Clubs
- Pools
- companies owned by a group of insurance or reinsurance companies
- UK subsidiaries or branches of overseas companies or reinsurance companies
- reinsurance departments of UK composite companies, or reinsurance subsidiaries of these companies
- small professional reinsurance companies set up by (or acquired by) large broking firms for the specific purpose of transacting London Market business
Lloyd’s of London
A unique insurance institution.
It began in Edward Lloyd’s coffee shop in 1860s, before being incorporated by the Lloyd’s Act of 1871.
It is NOT an insurance company -
it is a marketplace made up of members
who provide capital
and accept liability for risks that are underwritten
in return for a share of profits earned on those risks.
Corporate Name
A limited-liability company
whose only business is to provide capital
to Lloyd’s.
“Limited liability”
means that the corporate member cannot lose any more than the capital it has provided.
Syndicates
Groups of Lloyd’s members who collectively coinsure risks.
Individual syndicates often specialise in particular types of insurance.
Captive insurance company
An insurer that is
… wholly owned by an industrial or commercial enterprise
… and set up with the primary purpose of insuring the parent or associated group companies
… and retaining premiums and risk within the enterprise.