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Insurance products, general features and GI markets

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Insurability critieria- which, how many?
1)policyholder must have interest in risk - tell insurance and wager apart
2)financial and reasonably quantifiable
3) independent individual risk events
4)prob of claim shd be v small
5)large numbers of potentially similar risks should be pooled in order to reduce the variance and hence achieve more certainty
6)ultimate limit on liability undertaken by insurer
7) eliminate moral hazards - as difficult to quantify, lead to selection agnst insurer and unfairness among policyholders
8) should have suff existing stat data/info to enable insurer to estimate extent of risk and P(occurence).
Exclusions - purpose?
1)avoid payment in situations where ph at advantage thro possesing more personal info abt P(clm).

without exclns, P(clm) high or cannot be estimated reasonably

exclns where risk TP covered

exclns - limit pol scope - to fine tune with target mkt

lower premiums - competitive reasons
Homogeneity of risks - what is it?
some cobs more risky and uncertain thn others.

lack of homo , more risk to insurer

even within a rating category risks can be very variable.
solvency margin? its purpose?
may have a minimum set by regulators.

uncertainty, excess of A on L,
Capital needed by an insurer - key identifying factors?
1.size, age
2.SM
3.portfolio of classes already written - diversity inherent - overall reqts and indivl reqts.
4.nature of risk of the class to be written - clm types, delays(tail lenth),variability of experience,cover, possibility of accumulations,fraudulent clms,multiple clms,risk nature changing during cover period, homogeneity of risks.
5.geographical diversity in risks - if this is a risk
6.RI arrgts that can be set up.
7.phase of insurance cycle.
main categories of providers in GI mkts?
1.Insurance companies - pvt or public
2.Lloyd's syndicates - indvl or Corporate Names
3.Self insurance - mutual grps, P&I clubs
4.Captives - owned by indtl enterprise
5.Reinsurance - London market,Lloyds,specialist RI'rs companies or depts of insurance companies.
Business Acquisition methods ?sales/channels/outlets?
brokers - tied, independent
staff
direct sales
direct marketing
Lloyds function?
u/w meet. not insure
Aim of captive?
1.insure parent's risks
2.retain premium and risk with company
3.focus on risk management
4.manage insurance spend
5.benefit from posible offshore tax advantages
Role of P& I clubs?
1.offer marine hull - liability cover - whre not offered commercially
2. mutual nature - cost effective - dont pay for insurer's prof margin
3.large, unusaul risks.
How Bus Acq outside London market?
tied, indpt, staff, direct sales
How BUs acq in London market?
specialist brokers, lloyds
Regulatory restrictions that can be imposed on a general insurer?
1.types of COBs
2.premium rate limits
3.bases
4.asset types/amounts
5.minimum SM
6.agent lisencing
7.policyholder protection laws
8.protection levies agnst Insolvency
9. anti discriminatory retrictions on info use for u/wing.
10.deposit assets backing reserves
11.restrictions on advertising
12.rating factors used
Guidance notes relevant to UK GI?
GN 12,18,20,32 and 33
12:GI acty reports
18: cert loss reserves for intnl insurers dept
20:Lloyds solv testing acty reports
32: actuaries and frdly socs- GIB
33:acty reporting - lloyds writng US bus

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