Introduction to Property-Casualty Insurance 5

Question 1

The ability of an insurer to meet its financial obligations as they become due, even those resulting from insured losses that may be claimed several years in the future.

Answer 1

Solvency

Question 2

An insurer domiciled in a country other than the United States.

Answer 2

Alien Insurer

Question 3

An insurer licensed to operate in a state but incorporated in another state.

Answer 3

Foreign Insurer

Question 4

An insurer doing business in the jurisdiction in which it is incorporated.

Answer 4

Domestic Insurer

Question 5

An insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders.

Answer 5

Stock Insurer

Question 6

An insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them.

Answer 6

Mutual Insurer

Question 7

An insurer to which a state insurance department has granted a license to do business within that state.

Answer 7

Admitted Insurer

Question 8

An insurer not authorized by the state insurance department to do business within that state.

Answer 8

Nonadmitted Insurer

Question 9

State laws that permit producers with a surplus lines license to write business for an acceptable “nonadmitted insurer when protection form admitted insurers is not available.

Answer 9

Surplus Lines Law

Question 10

State law under which insurance rates are set by a state agency or rating bureau and all licensed insurers are required to use those rates.

Answer 10

Mandatory Rate Law

Question 11

An insurance rating law in which the rates and supporting rules must be filed with and approved by the state insurance department before they can be used.

Answer 11

Prior-approval Law

Question 12

An insurance rating law in which the insurer must file rates and supporting rules with the state insurance department prior to their use, but the rates can then be used immediately without specific approval.

Answer 12

File-and-use Law

Question 13

An insurance rating law in which the rates must be filed with the state insurance department within a specified period after they are put into use.

Answer 13

Use-and-file Law

Question 14

An insurance rating law under which prior approval is required only if the new rates exceed a certain percentage above (and sometimes below) the rates previously filed.

Answer 14

Flex Rating Law

Question 15

An insurance rating law that allows insurers to develop and use rates without having to file with or get approval from the state insurance department.

Answer 15

Open Competition

Question 16

Regulation of the practices of insurers in regard to four areas of operation: sales practices, underwriting practices, claim practices, and bad-faith actions.

Answer 16

Market Conduct Regulation

Question 17

State law that specifies certain prohibited business practices.

Answer 17

Unfair Trade Practices Law

Question 18

The process conducted by state insurance regulators, of verifying the solvency of insurers and determining whether their financial condition enables them to meet their financial obligations and to remain in business.

Answer 18

Solvency Surveillance

Question 19

An association of insurance commissioners from the fifty U.S. states, the District of Columbia, and the five U.S. territories and possession, whose purpose is to coordinate insurance regulation activities among the various state insurance departments.

Answer 19

National Association of Insurance Commissioners (NAIC)

Question 20

The primary financial statement prepared by insurers and required by every state insurance department.

Answer 20

NAIC Annual Statement

Question 21

The amount the insurer estimates and sets aside to pay on an existing claim that has not been settled.

Answer 21

Reserve

Question 22

An information and early-warning system established and operated by the NAIC to monitor the financial soundness of insurers.

Answer 22

Insurance Regulatory Information System (IRIS)

Question 23

A state-established fund that provides a system for the payment of some of the unpaid claims of insolvent insurers licensed in that state, generally funded by assessments collected from all insurers licensed in the state.

Answer 23

Guaranty Fund