Module 6 Flashcards
Reinsurance
transfer of risk from one insurer to another
other insurer agrees to indemnify for some or all of financial consequences of certain loss exposures
Primary Insurer
the insurer transferring the risk to the reinsurer
Reinsurer
The insurer that assumes some or all of the potential consequences of loss exposures of the primary insurer
Reinsurance Agreement
.Contract between primary insurer and reinsurer that sets out details of reinsurance and type of accounts to be transferred
Insurance Risk
uncertainty about the adequacy of insurance premiums to pay losses
Retentions
the amount retained by the primary insurer to reinsurance transaction
Reinsurance premium
.consideration paid by primary insurer for the reinsurer assuming some or all of the primary insurer’s risk
ceding commission
The part paid by the reinsurer to the primary insurere to cover part or all of the primary insurer’s policy acquisition expenses
Retrocession
.reinsurance agreement where reinsurere transfere all or part of the reinsurance risk it has asssumed or will assume to another reinsurer
Retrocedent
.the reinsurere that transfers or cedes all or part to another reinsurere
Retrocessionaire
the reinsurere that assumes all or part of reinsurance
Large-line capacity
an insurer’s ability to provide larger amounts of insurance for property loss exposures or higher limits of liability for liability loss exposures than it is otherwise willing to provide
Line
the maximum amount of insurance or limit of liability that an insurer will accept on a single loss exposure
Surplus relief
a replenisment of policy holder’s surpluse provided by ceding commission paid to the priamry insurer by the reinsurer
Policyholder’s surplus
an insurer’s total assets minus its total liabilities
Portfolio reinsurance
reinsurance that transfers to the reinsurere liability for an entire type of insurance, territory or book of business af ther trimary insurer has issued the policies
novation
an agreement under which one insurer or reinsurer is substituted for another
Describe the purpose of retrocession
retrocedent transfer all or part of a reinsurance risk to another reinsurer, the retrocessionaire
Describe some of the practical business goals that reinsurance can help an insurer achieve
insuring large exposures
protecting policyholders’s surplus from adverse loss experience
financing insurer’s growth
List all six principal functions that reinsurance performs for primary insurers
increase large l ine capacity
provide catastrophe protection
stabilize loss experience
provide surpluse relief
facilitate withdrawal from a market segment
provide underwriting guidance
Describe how increasing its large-line capacity allows an insurer to grow
allows a primary insurere to assume more significant risks than its financial condition and regulations would otherwise permit
Name the three ways in which a primary insurer can use reinsurance to stabilize its loss experience
limit liability for single loss exposure
limit liability for several loss exposures affected by a common event
limit liability for loss exposures that aggregate claims over time
Explain how a primary insurer may completely eliminate the liabilities it has assumed under the policies it has issued
through novation - one insurer/reinsurer is substituted for another
not considered portfolio reinsurance because the substitute insurer assumes the direct obligations to insureds covered by the underlying insurance
Professional reinsurer
primary business is serving reinsurance needs
Direct writing reinsurer
a professional insurere whose employees deal directly with primary insurers (as opposed to reinsurance intermediaries)
Reinsurance intermediary
works with primary insurers to develop reinsurance programs and that negotiates contractes of reinsurance between primary insurer and reinsurers.
recives commission for placement and other services
Reinsurance pools, syndicates and associations
groups of insureres that share the loss exposures of the group usually through reinsurance
Reinsurance pool
.a reinsurance association that consists of several unrealted insurers or reinsurers thave have joined to insure risks that the individual members are unwilling to individually insure
Syndicate
a group of insureres or reinsurers involved in joint underwriting to insure major risks that are beyond the capacity of a signle insurere or reinsurere. Each syndicate member accpets predetermined shares of premiums, losses, expenses and profts
Association
An organization of member companies that reinsure by fixed percentage the total amount of insurance appearing on policies issued by the organization
Identify the three sources from which reinsurance may be purchased
professional reinsureres
reinsurance departments of primary insurers
Reinsurance pools, syndicates, associations
Describe the role of a reinsurance intermediary
.represent a primary insurer
work with that insurer to design a reinsurance program that is then placed with a reinsurer or reinsurers