Study 4 - Principles and Practices Summary Notes Download
Terms | Definitions |
|---|---|
 What are captive insurers and how do they operate? | very large industrial or commercial organizations may form their own insurance companies |
| Define fronting and give examples. | arrangement where an insurer issues a policy at the request of another insurance company with the latter carrying a large part of the risk and the former being paid for the use of its name. |
| What is the main objective of cooperatives? | Originally the main objective of cooperatives was the mutual benefit for their members. |
| Who owns a mutual insurance company? | It is owned by the policyholders. |
| How does an assessment mutual insurance company operate? | members elect a board of directors from among their numbers. A premium note was signed by policyholders. |
| How does a reciprocal insurance exchange operate? | Members of an exchange (subscribers) agree to share in the payment of each other's losses to the extent that these losses are covered by insurance policies issued by the exchange. |
| How is capital raised to organize a stock insurance company? | the capital invested by the shareholders is put to work in the business of insurance. |
| Define incurred loss and give examples. | the losses paid plus the change (positive or negative) in out-standing loss reserves within a given period of time. |
| What expenses does an insurance company have? | Insurance companies have many expenses. They include salaries, office expenses, marketing. |
| What are the TWO (2) main sources of an insurer's revenue? | The two main sources of revenue for an insurer are an underwriting gain, excess premiums from policyholders and income from investment. |
| What is the responsibility of the board of directors? | The board of directors are responsible for selecting the CEO of the company and voting on the representing the will of the shareholders. |
| What is the responsibility of the CEO? | The Chief Executive Officer is responsible for managing the operations of the company. This includes creating the general direction of the company. |
| What is the purpose of insurance pools? | Insurance companies join together and form pools to take on risk that no individual insurer wishes to take on. i.e. nuclear insurance association of Canada. |
| Why is the organizational structure of all insurers not the same | The organizational structure of insurers vary due to the size and scope of their business. |
| What common functions must be carried out by all insurers? | Administration, Finance and accounting, Actuarial, branch operations, marketing, underwriting, claims, |
| Who regulates and monitors insurance companies? | The office of the superintendent of financial institutions regulates and monitors insurance companies. |
| What is the full name of OSFI and what is its purpose? | office of the superintendent of financial institutions is responsible for the constant supervision and enforcement of safeguards so in adequately financed insurance companies are not established. |
| How are foreign insurers regulated? | Foreign insurers are regulated the same as Canadian insurers plus additional regulations. |
| What is Lloyd's? | Lloyd's is an insurance market. It consists of independent businesses which provide capital to the market and underwriter in syndicates. |
| Describe the functions of the following: (i) Lloyd's brokers | Lloyd's brokers place risks in Lloyd's market on behalf of clients. |
| Describe the functions of the following: (ii) Syndicates | Syndicates are groups of members who employ professional underwriters to accept risk on their behalf. Each syndicate is run by a managing agent. |
| Describe the functions of the following: (iii) Lloyd's underwriters | The risks placed with underwriters originate from clients and other brokers and intermediaries all over the world. |
| Describe the functions of the following: (iv) Managing agents | is responsible to employ the underwriting staff and manage the syndicate on the members behalf. A managing agent must be a company specifically established for the purpose of managing a syndicate. |