P&L FUNDAMENTALS
Uncertainty about the chance of loss.
What is Risk?
The coverage approach that protects against all types of losses except for those specifically listed as exclusions.
What is Open-Peril (or Special Form)?
The market phase where coverage is widely available, competition is high, and low prices are offered to attract customers.
What is a Soft Market?
What are the equations for the Loss Ratio and the Expense Ratio?
loss ratio= inccured losses + LAE/ Premiums Earned
Expense Ratio =expense incurred/premiums written
The planned assumption of risk where a company sets aside its own funds out of pocket to pay for expected losses.
What is Self-Insurance?
The cause of loss, such as fire, windstorm, or theft.
What is a Peril?
A type of insurance policy that only covers losses from specific hazards that are explicitly listed in the policy.
What is Named-Peril (or Basic/Broad Form)?
Premiums that have been paid by the insured but have not yet been earned by the insurer because the policy term hasn't ended.
What is Unearned Premium?
The premium amount you must use as the denominator when calculating the Loss Ratio.
What is Net Premiums Earned?
The market phase is where it is difficult for buyers to find coverage, and they must pay higher prices
What is a Hard Market?
A condition or situation that increases the chance of loss in an insured risk, like faulty wiring.
What is a Hazard?
The cause-of-loss form in a BPP policy that is the most limited, covering only specific perils.
What is the Basic Form
This 1945 federal act exempts the insurance industry from anti-trust laws, allowing insurers to pool past claims information.
What is the McCarran-Ferguson Act of 1945?
An insurer's Combined Ratio result that indicates an underwriting loss.
What is a ratio greater than 1.0 (or over 100%)?
The sum of the Loss Ratio and the Expense Ratio.
What is the Combined Ratio?
The secondary loss impact, such as lost business income, that occurs because of a direct loss.
What is Indirect Loss?
A single insurance policy that covers multiple assets or locations under one total coverage limit.
What is Blanket Insurance?
A separate, licensed insurance company created by a parent business to insure its own risks.
What is a Captive Insurance Company?
The policy type where the premium is adjusted after the coverage period based on the insured's actual losses.
What is a Retrospective Rating Plan?
A licensed, separate insurance company created and owned by a parent business to insure its own risks.
What is a Captive Insurance Company?
The unbroken, primary event that leads to a loss or damage, without which the loss would not have occurred.
What is Proximate Cause?
A person takes care of another person's property.
What is a Bailee?
This is the federal act that provides a government backstop for insurance claims resulting from certified acts of terrorism.
What is the Terrorism Risk Insurance Act (TRIA)?
A BPP endorsement that temporarily increases the limit for business personal property during specific, pre-determined times of the year.
What is the Peak Season Endorsement?
This financial ratio's numerator is Losses Incurred plus Loss Adjustment Expenses
What is the Loss Ratio?