ECON Midterm 3 Flashcards
Insurance
money that is paid in advance of a potential problem to deal with the financial consequences of that problem.
Reinsurance
like insurance except it is bought by insurance companies from other larger insurance companies (or from consortiums of insurance companies).
Externalities
effects of a transaction that hurt or help people who are not a part of that transaction
International terrorism
the group or individual striking a target is crossing an international border or striking a target on behalf of a group in another country
Domestic terrorism
the group or individual is striking a target within their own country.
Which changes occurred in insurance markets in the aftermath of the 9/11 terrorist attacks?
Insurance companies began to exclude acts of terrorism from policy coverages.
Major new construction projects were denied coverage for a while.
Owners of major commercial landmarks had difficulty obtaining insurance.
The lost income of the 3,000 who died in the attacks has been estimated to be about Blank______ billion.
5
___ costs are the consequences to the victims of terrorism and others regarding how behaviors change in response to an attack.
indirect
When negative cost externalities occur:
society has a desire to reduce output, while the firm does not.
Costs related to the direct physical damages (e.g., buildings, transportation facilities, and planes) were estimated by The Institute for Analysis of Global Security to be between Blank______ billion.
$10 and $13
Examples of drastic instances that can wipe out insurance companies
Floods, Earthquakes, Terrorism
Who is the last resort if reinsurance runs out of money?
The Federal Gov
What are 2 basic forms of insurance?
Homeowners and Auto insurance
What is an example of self protection?
Buying cameras for your home
What are the direct and indirect costs of terrorism?
Direct: Destruction of things, loss of lives
Indirect: Changes in behavior, higher insurance
