property insurance Flashcards
STARR
STARR. Different ways of managing risk. S- sharing T- transfer A- avoidance R- retention R- reduction
CANHAM
Pure risks have certain characteristics and can be remembered using the acronym CANHAM:
C- calculable A- affordable N- non-catastrophic H- homogenous A- accidental M- measurable
Reinsurance
Reinsurance is like insurance for insurers. It transfers risk from one insurer to another insurer. To reduce the total amount of loss it is liable for, one insurer may pay the other insurer a premium to assume a portion of the risk. The company reducing its risk is called the ceding insurer. The company assuming the risk is called the reinsurer.
There are two ways this can work:
- ) the reinsurer considers each risk before allowing the transfer from the ceding company. (this is called facultative reinsurance)
- ) the reinsurer accepts all risks of a certain type from the ceding company. (this is called treaty reinsurance)
Stock Insurer
a stock insurer is a business formed as an corporation and owned by its stockholders (also known as shareholders)
this company is run by a board of directors elected by the stockholders.
profits from the insurance operation may be distributed to the stockholders as dividends.
the policies issued by stock insurers are called non-participating (or non-par) policies since dividends never go to policyholders in this arrangement.
mutual insurer
a mutual insurer is owned by its policyholders (customers), also known as policyowners.
mutual insurers elect a board of directors who oversee the operations of the company.
funds that remain after paying claims and operating costs may be distributed to policyowners as dividends.
in a mutual insurance company, dividends are considered a return of premium and are not taxable.
reciprocal insurers
reciprocal insurers are unincorporated groups of people that agree to insurer each others losses under a contract.
the members of the reciprocal group are called subscribers.
lloyds associations
most lloyds associations need to be sold by surplus lines intermediaries because they are only licensed in a few states.
insurer unusual risks like celebrities hair or athletes feet.
risk retention group
a risk retention group is an insurer formed for the sole purpose of providing liability insurance for its policyholders.
the policyholders must all be members of the same type of business.
risk retention groups are regulated by the state where they are headquartered and can operate in other states as well.
risk purchasing groups
risk purchasing groups are formed for the sole purpose of providing liability insurance for its members.
unlike risk retention groups, risk purchasing groups are not insurers themselves and are not regulated as such; they only purchase insurance on behalf of their members.
what insurance can the government provide that is not ordinarily provided by private insurers?
war risk insurance;
nuclear energy liability insurance;
flood insurance; and
federal crop insurance
at the state level, the government is involved in providing unemployment insurance and may provide workers compensation insurance through state funds.
CLOAC
CLOAC Elements of a legal contract: C- consideration L- legal purpose O- offer A- acceptance C-competent parties
aleatory contracts
the value received by each party of the contract is unequal.
policy structure
DICEE:
D- declarations I- insuring agreement C- conditions E- endorsements and additional supplementary coverages E- exclusions
nonconcurrency
non concurrency is the result of 2 or more policies covering the same property but providing different or non-identical coverage. this situation is not ideal because it can cause gaps in coverage and disputes in payment. non-concurrency is most commonly seen in commercial insurance policies.
basic cause of loss form covers what perils?
basic cause of loss form covers:
fire- must be hostile; intentional (arson) not covered
lightning- natural electricity
internal explosion- any explosion in a covered location
in addition, extended coverage perils WCSHAVVER & V&MM are also included