T_Glossary 5 Flashcards
Retention
In the context of reinsurance, a company’s retention is the amount of any particular risk that it wishes to retain for itself. It will then re-insure the excess over that amount.
In the context of persistency, retention refers to the extent that a company is able to prevent policies from lapsing or surrendering earlier than expected.
extra risk (how does extra risk arise)
an extra risk arises where a proposal for life insurance is not acceptable at standard rates
fair value reserve
this is a reserve calculated using fair value accounting principles. a market consistent method of valuation is an example of fair value reserving.
financial reinsurance
reinsurance where the main purpose is to provide a capital benefit to the ceding company. there will be an element of risk transfer.
free assets
this term is used to refer to that part of a lic’s assets that are not needed to cover its liabilities. the liabilities may or may not include capital requirements.
group contract
this is a contract that covers a group of lives, where the name of the group is specified but the individuals within the group may not be.
gross premium valuation method
this is a method for placing a value on a life insurance companies liabilities that explicitly values the future office premiums payable, expenses and claims. claims possibly includes future discretionary benefits.
indemnity
under the principle of indemnity, the insured is restored to the same financial position after a loss as before the loss.
index linked
a life insurance contract is index linked if the benefits are linked directly to a specified investment index or economic index, and are guaranteed to move in line with the performance of that index.
internal rate of return defn
the rate of return at which the discounted value of the future profit cash flows arising under a contract is zero.
