Players in the Insurance Market
This individual is a legal representative of an insurance company and sells only the product of that company.
What is an agent?
This term is the oldest form of reinsurance. Its essential feature is that each party to the transaction has a free choice in arranging the reinsurance. The ceding company may offer the risk to any reinsurer on its panel, while the reinsurer is quite free in his choice as to whether he will accept the risk offered
What is Facultative Reinsurance?
Pure risk refers to situations that can only result in:
What is a loss or no change?
These are conditions or situations that increase the probability of a loss occurring.
What are hazards?
may be defined as the identification, analysis, and economic control of those risks that can threaten the assets or earning capacity of an enterprise.
What is Risk Management?
The person who applies for insurance is known as this.
What is an applicant or proposed insured?
This is an agreement by which one or more reinsurers will automatically accept all reinsurance that falls within predetermined limits. The reinsurer cannot decline the risk and the direct office cannot select which risks to offer and which to retain as this is a pre-arranged agreement
What is a Treaty Reinsurance?
If the risk cannot result in financial gain and only involves a potential loss, it is categorized as:
What is pure risk?
This type of hazard involves individual characteristics such as physical condition or medical history.
What is a physical hazard?
Identification
Analysis
Control.
Steps in the risk management process?
Regulates the conduct of the insurance industry to protect the interest of policyholders
What is FSC?
The direct office decides what proportion of the risk it wants to retain and then agrees to cede the balance of the reinsurer under the treaty.
Premiums and losses are then shared in the same proportions
What is Proportional Reinsurance?
This type of risk involves the possibility of both loss and gain and is not insurable.
What is speculative risk?
This hazard involves tendencies toward increased risk, such as dishonesty or submitting fraudulent claims.
What is a moral hazard?
Elimination
Reduction
Retention
Transfer
What are the control methods in the risk management process?
This type of insurance producer is not appointed by an insurer and represents the client.
What is a broker?
This form of reinsurance deals with losses whereby the reinsurer agrees to pay an amount over and above, or in excess of, an amount that the direct office agrees to pay or retain
What is a Non-Proportional Reinsurance?
This unit of measure determines the rates charged for insurance coverage and considers factors like age and medical history.
What is exposure?
This type of hazard arises from a state of mind that causes indifference to loss, such as carelessness.
What is a morale hazard?
Physical Inspection
Organizational Chart
Checklist
These are the methods used in the identification process of risk management?
The company that issues an insurance policy is known as this.
What is an insurer (or principal)?
a) The amount that the Cedant/Reinsured retains when arranging a reinsurance program
b) The amount that includes what the Cedant and the Quota Share reinsurer retains
What is net retention?
What is the Gross Retention?
When a large number of units have similar exposure to loss, they are described as this.
What is homogenous?
The causes of loss insured against an insurance company.
What is perils?
Accidental and fortuitous – unintentional
Unexpected or unforeseen – if probability of loss is so high as to be near certain, then insurance is not possible or would be prohibitive.
Financial value – must be quantifiable, able to be valued on an objective basis.
The consequences of a pure risk or the loss a consequence of a speculative risk. They must also be particular to the individual, unlike fundamental risks, which are uninsurable if they arise out of the nature of society. E.g. inflation, devaluation, war or nuclear explosion.
Insurable interest – the person insuring must stand to suffer if loss materializes, or must have a legally recognized right to insure
Not be against public policy – not offensive to society's norms and standards
What are the features of an insurable risk?