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Arm 56B > ARM 56B > Flashcards

ARM 56B Flashcards

(106 cards)

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1
Q

Retrospective rating plan

A

A rating plan that adjusts the insured’s premium for the current policy period based on the insured’s loss experience during the current period; paid losses or incurred losses may be used to determine loss experience.

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2
Q

Experience rating

A

A rating plan that adjusts the premium for the current policy period to recognize the loss experience of the insured organization during past policy periods.

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3
Q

Maximum premium

A

The most an insured organization is required to pay under a retrospective rating plan, regardless of the amount of incurred losses.

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4
Q

Minimum Premium

A

The least an insured organization is required to pay under a retrospective rating plan, regardless of the amount of incurred losses.

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5
Q

Loss Limit

A

The level at which a loss occurrence is limited for the purpose of calculating a retrospectively rated premium.

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6
Q

Basic Premium

A

A fixed cost element of the retrospective rating formula that includes acquisition expenses, loss control services, premium audit, general administration of the insurance, an adjustment for limiting the retrospective premium to a stated maximum, and a provision for the insurer’s profits and contingencies.

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7
Q

Insurance charge

A

A component or basic premium that provides the insured with premium to compensate it for the risk that the calculated retrospective rating insurance premium may be higher than the maximum premium or lower than the minimum premium.

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8
Q

Converted losses

A

An element of the retrospective rating formula that includes the actual losses incurred increased by a factor (loss conversion factor) that reflects loss adjustment expenses.

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9
Q

Loss Conversion factor

A

A factor applied to incurred losses so that the converted losses reflect unallocated loss adjustment expenses.

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10
Q

Excess loss premium

A

A component of the retrospective rating insurance premium formula that compensates the insurer for the risk that an individual loss will exceed the loss limit.

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11
Q

Tax multiplier

A

An element of the retrospective rating insurance premium formula that covers the insurer’s cost for state premium taxes, license fees, insurance organization assessments, and residual market loadings that the insurer must pay on all written and collected premiums.

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12
Q

Incurred loss retrospective rating plan

A

A retrospective rating plan in which the insured pays a deposit premium during the policy period, the insurer adjusts the premium based on the insured’s actual incurred losses.

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13
Q

Paid loss retrospective rating plan

A

A retrospective rating plan in which the insured pays a deposit premium at the beginning of the policy period and makes additional payments, usually monthly, to reimburse the insurer for the insured’s losses as they are paid and in which the total amount paid is subject to the minimum and maximum premium.

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14
Q

Reinsurance

A

The transfer of insurance risk from one insurer to another through a contractual agreement under which one insurer ( the reinsurer) agrees, in return for a reinsurance premium, to indemnify another insurer (the primary insurer) for some or all of the financial consequences of certain loss exposures covered by the primary’s insurance policies.

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15
Q

Primary insurer

A

In reinsurance, the insurer that transfers or cedes all or part of the insurance risk it has assumed to another insurer in a contractual agreement.

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16
Q

Reinsurer

A

The insurer that assumes some or all of the potential costs of insured loss exposures of the primary insurer in a reinsurance contractual agreement.

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17
Q

Reinsurance agreement

A

Contract between the primary insurer and reinsurer that stipulates the form of reinsurance and the type of accounts to be reinsured.

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18
Q

Insurance risk

A

Uncertainty about the adequacy of insurance premiums to pay losses.

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19
Q

Reinsurance premium

A

The consideration paid by the primary insurer to the reinsurer for assuming some or all of the primary insurer’s insurance risk.

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20
Q

Retention

A

The amount retained by the primary insurer in the reinsurance transaction.

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21
Q

Retrocession

A

A reinsurance agreement whereby one reinsurer (the retrocedent) transfers all or part of the reinsurance risk it has assumed or will assume to another reinsurer (the retrocessionaire).

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22
Q

Ceding commission

A

An amount paid by the reinsurer to the primary insurer to cover part or all of the primary insurer’s policy acquisition expenses.

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23
Q

Retrocedent

A

The reinsurer that transfers or cedes all or part of the insurance risk it has assumed to another reinsurer.

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24
Q

Retrocessionaire

A

The reinsurer that assumes all or part of the reinsurance risk accepted by another reinsurer.

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25
Large-line capacity
An insurer's ability to provide larger amounts of insurance for property loss exposures, or higher limits of liability for liability loss exposures, than it is otherwise willing to provide.
26
Line
The maximum amount of insurance or limit of liability than an insurer that an insurer will accept on a single loss exposure.
27
Surplus relief
A replenishment of policyholder's surplus provided by the ceding commission paid to the primary insurer by the reinsurer.
28
Policyholder's surplus
Under statutory accounting principles (SAP), an insurer's total admitted assets minus its total liabilities.
29
Portfolio reinsurance
Reinsurance that transfers to the reinsurer liability for an entire type of reinsurance, territory, or book of business after the primary insurer has issued the policies.
30
Novation
An agreement under which one insurer or reinsurer is substituted for another.
31
Professional reinsurer
An insurer whose primary business purpose is serving other insurer's reinsurance needs.
32
Direct writing reinsurer
A professional reinsurer whose employees deal directly with primary insurers.
33
Reinsurance intermediary
An intermediary that works with primary insurers to develop reinsurance programs and that negotiates contracts between the primary insurer and reinsurer, receiving commission for placement and other services rendered.
34
Reinsurance pools, syndicates, and associations
Groups of insurers that share the loss exposures of the group, usually through reinsurance.
35
Reinsurance pool
A reinsurance association that consists of several unrelated insurers or reinsurers that have joined to insure risks the individual members are unwilling to individually insure.
36
Syndicate
A group of insurers or reinsurers involved in joint underwriting to insure major risks that are beyond the capacity of a single insurer or reinsurer; each syndicate member accepts predetermined shares of premiums, losses, expenses, and profits.
37
Association
An organization of member companies that reinsure by fixed percentage the total amount of insurance appearing on policies issued by the organization.
38
Treaty reinsurance
A reinsurance agreement that covers an entire class or portfolio of loss exposures and provides that the primary insurer's individual loss exposures that fall within the treaty are automatically reinsured.
39
Facultative reinsurance
Reinsurance of individual loss exposures in which the primary insurer chooses which loss exposures to submit to the reinsurer, and the reinsurer can accept or reject any loss exposures submitted.
40
Adverse selection
The decision to reinsure those loss exposures that have an increased probability of loss because the retention of those loss exposures is undesirable.
41
Facultative certificate or reinsurance
An agreement that defines the terms of the facultative reinsurance coverage on a specific loss exposure.
42
Pro rata reinsurance
A type of reinsurance in which the primary insurer and reinsurer proportionately share the amounts of insurance, policy premiums, and losses (including loss adjustment expenses).
43
Loss adjustment expense (LAE)
The expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy.
44
Flat commission
A ceding commission that is a fixed percentage of the ceded premiums.
45
Profit-sharing commission
A ceding commission that is contingent on the reinsurer realizing a predetermined percentage of excess profit on ceded loss exposures.
46
Sliding scale commission
A ceding commission based on a formula that adjusts the commission according to the profitability of the reinsurance agreement.
47
Quota share reinsurance
A type of pro rata reinsurance in which the primary insurer and the reinsurer share the amounts of insurance, policy premiums, and losses (including loss adjustment expenses) using a fixed percentage.
48
Loss ratio
A ratio that measures losses and loss adjustment expenses against earned premiums and that reflects the percentage of premiums being consumed by losses.
49
Catastrophe excess of loss reinsurance
A type of excess of loss reinsurance that protects the primary insurer from an accumulation of retained losses that arise from a single catastrophic event.
50
Surplus share reinsurance
A type of pro rata reinsurance in which the policies covered are those whose amount of insurance exceeds a stipulated dollar amount, or line.
51
Bordereau
A report the primary insurer provides periodically to the reinsurer that contains a history of all loss exposures reinsured under the treaty.
52
Line guide
A document that provides the minimum and maximum line a primary insurer can retain on a loss exposure.
53
Excess of loss reinsurance (non-proportional reinsurance)
A type of reinsurance in which the primary insurer is indemnified for losses that exceed a specified dollar amount.
54
Attachment point
The dollar amount above which the reinsurer responds to losses.
55
Subject premium
The premium the primary insurer charges on its underlying policies and to which a rate is applied to determine the reinsurance premium.
56
Working cover
An excess of loss reinsurance agreement with a low attachment point.
57
Co-participation provision
A provision in a reinsurance agreement that requires the primary insurer to retain a specified percentage of the losses that exceed its attachment point.
58
Per risk excess of loss reinsurance
A type of excess of loss reinsurance that covers property insurance and that applies separately to each loss occurring to each risk.
59
Loss occurrence clause
A reinsurance agreement clause that defines the scope of a catastrophic occurrence for the purposes of the agreement.
60
Per policy excess of loss reinsurance
A type of excess of loss reinsurance that applies the attachment point and the reinsurance limit separately to each insurance policy issued by the primary insurer regardless of the number of losses occurring under each policy.
61
Per occurrence excess of loss reinsurance
A type of excess of loss reinsurance that applies the attachment point and reinsurance limit to the total losses arising from a single event affecting one or more of the primary insurer's policies.
62
Clash cover
A type of per occurrence excess of loss reinsurance for liability loss exposures that protects the primary insurer against aggregations of losses from one occurrence that affects several insureds or several types of insurance.
63
Extra contractual damages
Damages awarded to the insured as a result of the insurer's improperly handling a claim.
64
Excess of policy limits loss
A loss that results when an insured sues an insurer for failing to settle a claim within the insured's policy limits when the insurer had the opportunity to do so.
65
Aggregate excess of loss reinsurance
A type of excess of loss reinsurance that covers aggregated losses that exceed the attachment point, stated as a dollar amount of loss or as a loss ratio, and that occur over a specified period, usually one year.
66
Cut-through endorsement
An endorsement that provides that in the event of the insolvency of the primary insurer, the reinsurer directly assumes the obligations of the primary insurer.
67
Captive Insurer, or captive
A subsidiary formed to insure the loss exposures of its parent company and the parent's affiliates.
68
Single-parent captive (pure captive)
A captive insurer owned by one company that insures all or part of the loss exposures of that company or its subsidiaries.
69
Group Captive
A captive insurer owned by a group of companies, usually operating similar businesses, rather than a single parent.
70
Association captive
A group captive sponsored by an association.
71
Risk retention group
A group captive formed under the requirements or the liability risk retention act of 1986 to insure the parent organizations.
72
Agency captive
A type of group captive that is owned by insurance agents or brokers rather than by the organizations insured.
73
Rent-a-captive
An arrangement under which an organization rents capital from a captive, to which it pays premiums and receives reimbursement for its losses.
74
Protected cell company (PCC)
A corporate entity separated into cells so that each participating company owns an entire cell but only a portion of the overall company.
75
Risk shifting
The transfer of risk of loss to an insurer.
76
Risk distribution
The sharing of risk by an insurer among its insureds.
77
Fronting company
A licensed insurer that issues an insurance policy and reinsures the loss exposures back to a captive insurer owned by the insured organization.
78
Direct writing captive insurer
A captive insurer that issues policies directly to its parent(s) and affiliates and does not have a fronting company.
79
Noninsurance risk control transfer
A noninsurance risk transfer in which the transferor transfers a loss exposure to the transferee, thereby eliminating the possibility that the transferor will suffer a loss from the transferred exposure.
80
Noninsurance risk financing transfer
A noninsurance transfer in which the transferor transfers to the transferee the financial burden of losses by obligating the transferee to pay money to (or on behalf of) the transferor after the transferor after the transferor or some third party suffers a loss.
81
Segregation
A risk control technique that separates or duplicates an organization's activities or property so that no single cause of loss can simultaneously affect all the organization's activities or property.
82
Leasehold
The right to occupy or use real or personal property for any period of time.
83
Sale-and-leaseback (sale-and-leaseback arrangement)
A transaction through which an organization that owns property transfers its risk by selling the property while retaining the right to occupy or use it under a lease with the new owner.
84
Obligee
The party to a surety bond that receives the surety's guarantee that the principal will fulfill an obligation or perform as promised.
85
Surety
The party (usually an insurer) to a surety bond that guarantees to the obligee that the principal will fulfill an obligation or perform as required by the underlying contract, permit, or law.
86
Principal
The party to a surety bond whose obligation or performance the surety guarantees.
87
Guarantor
A person or organization that has promised to perform a duty in the event the party whose duty it was initially (the principal) fails to perform it.
88
Exoneration
The removal of a duty.
89
Subrogation
In a surety agreement, the substitution of one party for another whose debt or performance the substituting party satisfies and that entitles the substituting party to the rights that belonged to the defaulting party.
90
Indemnity
In a surety agreement, the right of a surety to seek reimbursement from the principal for the resources the surety expended when it performed the principal's duty.
91
Waiver
The intentional relinquishment of a known right.
92
Exculpatory clause (exculpatory agreement)
A contractual provision purporting to excuse a party from liability resulting from negligence or an otherwise wrongful act.
93
Waiver of subrogation
A special type of waiver that is a pre-loss voluntary relinquishment by an insurer or its right to seek reimbursement of its payment for damages that were caused by a party other than the insured.
94
Indemnitor
Party in a hold-harmless agreement who assumes the other party's liability.
95
Indemnitee
Party in a hold-harmless agreement whose legal liability is assumed by the indemnitor.
96
Additional insured endorsement
An endorsement that adds coverage for one or more persons or organizations to the named insured's policy.
97
Named insured endorsement
An endorsement that, similar to an additional insured endorsement, adds coverage for one or more persons or organizations to the named insured's policy and elevates the new insured to the status of a named insured, giving it special rights and obligations.
98
Mutual benefit bailment
An arrangement in which the bailor pays the bailee for work or service related to the bailed property and from which both the bailee and the bailor expect to benefit.
99
Bailment
The temporary possession by one party (the bailee) of personal property owned by another party (the bailor) for a specific purpose, such as cleaning or repair.
100
Gratuitous bailment
An arrangement in which the bailee receives no compensation and owes a lower degree of care.
101
Free on board destination (FOB destination)
A shipping condition in which ownership passes from the seller to the buyer when the carrier delivers the goods to the buyer's premises.
102
Free on board (FOB) point of origin
A shipping condition in which ownership passes to the buyer as soon as the carrier picks up the goods from the seller's premises.
103
Cost, insurance, freight (CIF)
Selling terms under which the seller's price includes the cost of insurance and freight charges until the goods reach a foreign port of importation and in which the seller's responsibility for loss or damages to the goods is the same as under cost and freight (C&F) terms.
104
Installment or condition sales contract
A sales contract in which the seller commonly reserves ownership rights until the buyer meets all the contractual conditions, most notably the buyer's final installment payment.
105
Fungible goods
Commodities or bulk goods, all parts of which are presumed to be uniformed.
106
Vicarious liability
A legal responsibility that occurs when one party is held liable for the actions of a subordinate or associate because of the relationship between the two parties.

Arm 56B (2 decks)

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