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CII > IF1- Chapter 2 > Flashcards

IF1- Chapter 2 Flashcards

1
Q

who are the 5 main participants in the market

A

buyers- PH/insured
insurers- sellers
intermediaries- brokers
aggregators- price comparison websites
reinsurers- further means of spreading the risk

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2
Q

5 main types of buyers

A

private individuals
companies
partnerships
public bodies
charities, associations, clubs

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3
Q

Definiton of companies

A

large multinational or self employed- limited liability companies have seperate legal existence from those who own the company

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4
Q

definiton of partnerships

A

do not have seperate legal existance- each of the partners being jointly and severaly liable- medical, veterinary, legal professions

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5
Q

definiton of public bodies

A

local authorities and schools

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6
Q

who are exempt from insurance

A

policemen

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7
Q

charities, associations and clubs what type of insurance do they require

A

liability risks for damage to owned property

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8
Q

type of insurer as defined by ownership

A

Properietary companies
mutual companies
captive insurers
proctected cell companies
lloyds

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9
Q

definition of properietary companies

A

registered under Companies Act 1985- owned by shareholders who contribute to capital, profit after expenses belongs to shareholders
Limited liability companies- plc companies
publically quoted companies

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10
Q

private properietary companies

A

shares owned by a few or single shareholder- shares not available to general public- ltd companies, often small to meduim

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11
Q

mutual companies

A

owned by PH- PH share in profits of company by lower premiums
PH are liable for any losses made by company-
Trend for insurers owned in this way to become proprietary companies due to demutalisation

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12
Q

captive insurers

A

established by parent companies providing cover primarily to parent company

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13
Q

benefits of captive insurers

A

tax efficient method of transferring risk-
premuims payable to captive may be tax deductible
captive established in favourable tax rate areas- Isle of man, bermuda
Captive insurers dont offer insurance to general public
Avoiding paying extra premuims to meet overheads- use of reinsurance

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14
Q

Protected Cell companies

A

‘ring’ fences assets of participating cells allowing them to operate as distinct insurance entities
PCC single entity
PCC used as risk transfer vechiles and also for niche products
Minimum establishment and administration costs due to tax favourable areas

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15
Q

Takaful insurance

A

roots in Islamic financial services industry

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16
Q

Rules of islamic law

A

forbids sale where there is risk to the buyer unless risk is reasonable
gambling forbidden- traditional insurance policies viewed as form of gambling
Forbidden to make money from money (interest)- wealth can only be made through assets and investments

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17
Q

The state

A

acts as an insurer in welfare benefits, pension- guarantor to the insurance sector for terrorism and flood risks

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18
Q

syndicates

A

groups of private individuals or corporate investors who carry the risks- underwriting members or names

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19
Q

managing agents

A

syndicates outsource day to day running of business to managing agent- regulated by FCA and PRA

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20
Q

capital and member/names

A

capital provided by corporate investors - used to have personal liability with no limit- no longer the case after series of exponential losses

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21
Q

what did reconstruction and renewal lead to

A

equitas created and no new individual names with unlimited liability permitted to join lloyds

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22
Q

member agents

A

advises on advantages and disadvantages of investing in the market- communication channel between member and various managing agents

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23
Q

subscription market

A

not sensible for single underwriter to accept 100% of a risk- each underwriter the broker approaches will accept a percentage share for their syndicate

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24
Q

london market and gross income

A

members of International Underwriting association- main providers of insurance and reinsurance companies- income 53.1 billion in 2023

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25
Q

contract certainty

A

all parties are aware of coverage and terms of policy before a risk starts

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26
Q

distinctions for contract certainty

A

Certainty as to final share of risk each insurer takes
documentation within 30 days
if broker involved in placement, brokers and underwriters share the responsibility for making sure contract certainty achieved

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27
Q

intermediaries

A

agent bringing two parties together- ‘agent’ authorised by one party ‘principal’ to bring principal into contractual relationship with a third party

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28
Q

Who are we regulated by and what are exemptions

A

FCA- if exempt intermediary must adopt status of an appointed representative or introduced appointed representative

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29
Q

Insurance distribution directive

A

ancillary insurance intermediary- distributes insurance on an ancillary purpose

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30
Q

authorised person

A

individual or firm authorised by FCA to engage in regulated activities

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31
Q

Appointed representatives

A

individual or company appointed by ‘principal’ AR can act for more than one principal
Includes those with non-insurance main products- EG motor garage

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32
Q

issues with AR

A

shortcomings from principal firms not having enough control-
inadequate oversight and control once AR begins regulated activities

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33
Q

introducer appointed representatives

A

scope of appointment by the firm limited to effecting introduction and distributing ‘non real time financial solutions’
principals responsible for IAR

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34
Q

services provided by intermediaries

A

intermediaries act on behalf of client when placing business- advises whether product recommended is a personal recommendation

35
Q

intermediaries service for clients

A

decide best market and negogiate
provide advice around policy wordings
review client needs

36
Q

intermediaries service for insurers

A

commiting insurer to cover risk
settling claims on behalf of insurer

37
Q

broker networks

A

market consolidation- benefits such as centralised services, cost saving

38
Q

consolidators

A

companies growing by acquisition- insurers want to transact business due to potential for growth

39
Q

what do some consolidators demand

A

preferential rates and enhanced commission- blurs line between insruers and intermdiaries

40
Q

what is legislative reform act 2008

A

removed ‘divestment rule’- where broking and underwriting activities must be completely seperated

41
Q

direct marketing and distribution

A

employees of the insurer sell the insurance products or direct mailing to promote sales

42
Q

indirect marketing

A

intermediaries paid by insurer to promote products on insurers behalf

43
Q

delegated authority

A

known as binders give flexibility to intermediaries

44
Q

managing general agents

A

specialist type of intermediary with authority to act for one or more insurers

45
Q

bancassurance

A

arrangement between bank and insurance company- products sold to banks clients- leads to m and a

46
Q

benefits of bancassurance

A

access to each parties resources
lower risk to business and value chain efficiency
opportunities for joint product development and market development

47
Q

PCW/ aggregators

A

web based tools to collect info
Aggregation- retrieval for goods and services online

48
Q

reinsurance

A

transfer of risk by using reinsurers- can be individual risk basis, event or portfolio

49
Q

purposes of reinsurance

A

large losses shared between reinsurers
losses shared by risk by risk basis
smooth peaks and troughs in trading results
protect portfolio

50
Q

smoothing peaks and troughs

A

insurers keen to ensure their trading results show gradual trends rather than huge peaks- stability
reinsurance spreads cost of large losses over period of time

51
Q

Facultative reinsurance

A

protecting portfolios- reinsurance on a single risk
insurers also need to protect pool of accumulated funds

52
Q

captives usually only offer cover to companies…

A

owned by same parent company

53
Q

types of insurer

A

specialist reinsurance companies- don’t transact original (direct) business
lloyds syndiactes
insurance companies that also act as insurers

54
Q

Types of reinsurance terms

A

retroceding- transfering their risks to other insurer
risk is placed- retrocession

55
Q

2 main reinsurance centres

A

lloyds
international underwriting association

56
Q

tasks of underwriter

A

manage pool effectively and profitably
assess risk
decide whether to go ahead with risk or not
determine t and c - scope of voer
calculate premiums to cover claims, reserves, expenses and profits

57
Q

loss adjusters

A

acts for the insurer
investigate circumstances
decide if policy covers the loss
emergency measures for EG property
negogiate amounts claimed- recommendation for settlement to insurers

58
Q

loss assessors

A

acts for the insured
determine exact cause for loss
gather evidence to suggest fraud/ accelerants
if lack of maintenance caused damage
proximity of cause of a loss

59
Q

acturies:

A

applies probability and theory to insurance, investment, financial and risk management- life insurance
probability of loss and prediction of claim numbers and future values

60
Q

risk managers

A

develop formal strategy for probability of loss and prediction of claim numbers-
meets solvency II requirements
members of trade associations- Airmic

61
Q

functions of risk managers

A

identification, analysis, economic or control risks that threaten business
provision of guidance on best practices and transfer of appropriate risks

62
Q

compliance officeres

A

oversight and function reports to governing body
communicating policy to staff
regular reports on governance, finance
review stages of business
perform role of money laundering

63
Q

internal auditors

A

monitor and evaluate how risks are managed- business being governed
They look into wider issues such as company reputation
under solvency II- auditors role in asessing reliability of financial reporting and compliance

64
Q

association of british insurers

A

market association- 300 member companies
Gather relevant statistics, framing codes of practice
public voice of sector

65
Q

british insurance brokers association

A

non statutory trade association for insurance intermediaries- 1800 firms
promote member views on legislation
nominating memberes to sit on committees

66
Q

lloyds market association

A

provides representation, info, services to underwriting businesses- all lloyds member agents are members of LMA
represent members interest to governments, regulators, EU

67
Q

london market group

A

brings together specialist commercial reinsurance- works with government to promote london market
encourage young ppl to see insurance as a career

68
Q

international underwriting association of london

A

IUA worlds largest organisation for internional and wholesale insurance and reinsurance companies
strengthen business environment- transform business process
deliver knowledge and expertise

69
Q

Managing General agents association-

A

function provision of underwriting services to insurers
their clients often SME

70
Q

Chartered insurance of loss adjusters

A

impartial specialists- membership consists of individual loss adjusters rather than firms that employ them

71
Q

institute and faculty of acturies:

A

UKs only chartered body dedicated to acturies- 32000- they operate as single entity
provides manuals of practices- provide education

72
Q

association of insurance and risk management in industry and commerce

A

Airmic-promotes interest of corporate insurance buyers and those involved in risk
membership individual or corporate
support by training, info, and encourage best practices

73
Q

insurtech 2019

A

trade body- to position UK as leading force in technological innovation

74
Q

PPI

A

designed to cover monthly loans and credit card payments opposed to replacing percentage of insureds income

75
Q

liability insurance

A

legal liability to pay compensation and costs awarded against insured in favour of another party- death , disease

76
Q

employers liability

A

compensate in respect of legal liability to pay damages to employees arising out of injury, disease, illness, death

77
Q

public liability

A

compensate in respect of claims from members of public- accidental injury

78
Q

products liability

A

cover for 3rd party injury or damage caused by products

79
Q

directors and officers liability

A

costs incurred by individual directors and officers for financial loss

80
Q

professional indemnity

A

protects people acting in professsional capacity against claims alleging injury or loss from negligence

81
Q

pecuniary insurance

A

relating to money- intangibles such as income, revenue or value
also covered; political risk, business interuption
credit

82
Q

fidelity guarantee

A

financial results from lack of fidelity arising from dishonesty of employee- losing money or stock

83
Q

cyber insurance

A

protects businsses for 3rd and first party losses arising from cyber attacks

84
Q
A

CII (3 decks)

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