Insolvency And Closure Flashcards
Considerations for setting discontinuance terms
Policyholder’s reasonable expectations
Competitive considerations
What was disclosed at sales stage
Ease/simplicity of calculating terms
Cost of implementing terms
Frequency of changes required to terms
In case of serious financial position, the regulator might ask the company to:
Close to new business
Set a recovery plan under the close monitoring of the regulators
Describe closure to new business and its consequences
new policyholders are not entering into a legal agreement when product provider’s solvency may be indoubt
unlikely to reopen except large front-end expense charges where capital can rebuild quickly once new business strain released
unlikely to permit re-opening unless has substantially more than the minimum capital requirements built up
if maintains infrastructure to enable re-open, costs a drain on capital
might hvae outstanding liabilities, should possible to make cost expenses plus capital rebuilt to meet
diseconomies of scale will bite in the long term
Role of the regulator in protecting policyholders from insurance insolvency
Normally subject to a requirement by the regulator to maintain a specified level of solvency capital
regular reporting requirements
intervene in the running of a company
require insurance company to close to new buseinss
require insurance company to set up a recovery plan
perform background checks and vetting of new prospective insurance companies to ensure they have enough capital
