Chapter 2: The Insurance Market Flashcards
(63 cards)
Who make up the five main components of the insurance market?
- Buyers (insureds)
- Sellers (insurers)
- Intermediaries (brokers)
- Comparison websites (aggregators)
- Reinsurers
Who authorises companies to transact insurance in the UK?
Prudential Regulation Authority (PRA)
What are the five types of insurer by ownership?
Not including reinsurers
- Proprietary
- Mutual
- Captive
- Protected cell
- Lloyds
What is a proprietary insurer?
Owned by shareholders. Limited liability companies registered under the Companies Act 1985
What is a mutual insurer?
Owned by their policyholders who share in the profits by way of lower premiums. Limited by guarantee (policyholders liability for loss is limited to their premium)
What is a captive insurer?
An insurance company established by a company whose business is not insurance in order to primarily, often solely, manage the parent company’s risk
What is a protected cell company (PCC)?
A special type of captive insurer. Operates in two parts, with a core and an unlimited number of “cells” overseen by one board. The assets of each cell are ring fenced and they can operate as distinct insurance entities
What is a composite insurer?
Issues policies for several classes of business
What is a specialist insurer?
Tend to issue policies only for one class of business
What is a takaful?
An insurance company that embraces Islamic principles under Sharia law. Works on the principle that in any transaction risk, profit, and loss bearing should be shared between the participants. Means “guaranteeing each other”
What type of insurance company does not provide insurance to members of the general public?
A captive insurer
What is the Corporation of Lloyd’s?
Oversees and supports the wider Lloyd’s of London market. Ensures it operates efficiently and acts as a regulator
Who provides the underwriting capacity at Lloyd’s?
Private individuals (known as names) or corporate members
What is a Lloyd’s syndicate?
Groups of names or corporate members
What is a managing agent?
A company established to manage one or more Lloyd’s syndicates on the members behalf
What is a members agent?
A specialist financial advisor that advises potential members on investing in the Lloyd’s market and the syndicates. Also act as an intermediary between members and the syndicates they have invested in
How are most risks placed at Lloyd’s?
Using a Market Reform Contract (MRC), also known as a “slip”
Where does the term underwriting come from?
In the days of the Lloyd’s coffee shop a merchant would put up details of their next venture on a board. Anyone willing to cover the venture would write their name under the details - hence underwriting
The signature at the bottom of a slip is sometimes called scratch because of the sound made when someone wrote their name on the board
What happens when the slip is fully placed, either at Lloyd’s or in the wider London market?
(Bureau cases)
The information is submitted to an organisation called XChanging by the broker. XChanging Ins-Sure Services will capture details of the risk and manage the collection of premiums less brokerage from the broker and distribution to the insurers. They may also prepare formal policy documentation on the insurers behalf if requested
What is the IUA?
International Underwriting Association of London
What is the agreed definition of contract certainty?
Contract certainty is achieved by the complete and final agreement of all terms between the insured and insurers by the time they enter into the contract, with contract documentation issued promptly thereafter
What are the 3 elements of contract certainty?
- Details of the contract
- Final signed line
- Issuance of documentation
When should policy documentation be issued by?
30 calendar days for commercial customers, seven working days for retail customers
Who is responsible for contract certainty?
Underwriters and brokers
