Notes 4
Notes 4
Notes 4
is between the insurer and reinsurer. The insured retains the original
relationship with the insurer. The particular significance here is that IF the
claim, then the FULL amount falls on the insurer. The insured does not
apply in reinsurance. When a borker takes a risk to the market (details are
examine the slip and detail the rate to be charged along with the percentage
subject to being satisfied with the rate. The broker will move around the
later
Risk is the doubt concerning the outcome of a situation. Risk is
chance of a loss.
Risk register: This is a centrally held in hard or soft form register of all the
Underwriting income and investment income are the two main sources of
Reinsurance has two types - facultative (one off) and treaty (protfolio
management)
Risk management involves 5 steps: identify, assess, evaluate, mange and
transfer.
The insured has a direct relationship with the insurer and no relationship
When looking for reinsurance, the underwriter works at two levels - one is
The two ways of measuring risk within a risk register are probability and
severity.
Pure premium rating method: This approach reflects the expected losses. It
Exposure is the measurement of how big a risk is. For example in Property
Liability or
classification, in
exposure and the benefits may not always be the same e.g. in Products
Pure premium needs adjustment for all the working expenses and normal
Technical rate and book rate are critical for long term underwriting profit
commercial discounting
Investment income does not form part of the book price formula
take back some of the coverage enhancements, they provided during the
soft market.
Pure Premium = Total Amount of Claims Incurred per Year divided by the
Leakage is the term for any additional costs incurred by the insurer beyond
those necessary to fulfil its claim obligations under the insurance contract,
or settling of the
claim, failures of service or replacement goods suppliers to act efficiently or
At the same time, poor claims handling can also hit the company's bottom
A claim can be very simple or very complex to handle but in any case, it's
claims team forgets to recover all that is owed to it i.e. recovering the
The insurer recovers amounts (claim) from the Third Party and / or Third
An ex-gratia payment relates to the event when the claim is not covered but
Ex-gratia payments are totally a matter of grace on the part of the insurer,
defraud)
Leakage relates to the losses a company has every right to recover but does
future claims for losses. The technical reserves required can be classified as
how each asset changes in price, relative to how every other asset in the
with higher expected returns are riskier. For a given amount of risk, MPT
return. Or, for a given expected return, MPT explains how to select a
portfolio with the lowest possible risk(the targeted expected return cannot
and for specific quantitative definitions of risk and return, MPT explains
distribution. (ii) correlation between asset classes is not fixed but can vary
that investors are not rational and markets are not efficient.
interest rate and liquidity scenarios. Banks and other financial institutions
provide services, which expose them to various kinds of risks like credit
insurer
There are two main sets of Reserves - premium (unearned premium and
critical.
some differences in view of the way insurance sector works. Reserves for
insurer will have claims that, for some reason or other, have not yet been
reported and the insurer does not know about. Such claims are called as -
years.
ICAI.
Stakeholders in an Insurance Business - Government / Regulator,