Chapter 3 - Main Classes of Business Written in the London Market

Question 1

What are honour policies?

Answer 1

Policy is enough for proof of insurable interest

Question 2

What is hull and yacht insurance

Answer 2

First party damage / physical loss insurance - each ship has to pay losses to the other according to their part of the blame

Policyholders make claim for their proportion of the blame in addition to any damage suffered by their own vessell

Question 3

What is builder’s risk insurance?

Answer 3

Damage and liability insurance due to lengthy time to build - takes into account increasing values as building of ship progresses

Question 4

What is loss of earnings insurance?

Answer 4

Marine version of business interruption, typically requires damage to vessel

Question 5

What is cargo and goods in transit insurance?

Answer 5

Insurance for the person/organisation moving goods - damage to their own property or liability in case they damage goods in their care

Question 6

What is cargo insurance?

Answer 6

Covers physical damage to goods whilst on a journey

Question 7

What is stock throughput insurance?

Answer 7

Combines transit and storage policy for cargo, so covered if layover at a port during transit

Question 8

What is jeweller’s block insurance?

Answer 8

Package policy covering property and liability from manufacture through trade shows and exhibitions and retail.

Physical damage / loss insurance not including mysterious disappearance due to nature of jewellery

Question 9

What does specie insurance cover?

Answer 9

Physical loss or damage to:

• loose gemstones
• precious metals
• valuable documents

Question 10

What is satellite launch insurance?

Answer 10

Essentially cargo moving between manufacturers and launch pad (marine market)

Question 11

What is cash in transit insurance?

Answer 11

Covers movement of money between locations, underwriters often put risk prevention measures into the policy terms

Question 12

What is goods in transit insurance?

Answer 12

Covers liability of carriers in respect to good being carried

Question 13

What is fine art insurance?

Answer 13

Physical loss or damage covering static in museum and in transit

Question 14

What is war insurance?

Answer 14

Covers war type risks as well as damage caused by abandoned mines etc

Specifically does not cover piracy, piracy covered in hull

Question 15

What is strike insurance?

Answer 15

Covers damaged caused by terrorists or those acting from political or religious motive

Question 16

What kind of things should vessel owners and operators insure against?

Answer 16

• injury or death of crew / visitors
• pollution by escape of cargo
• damage to cargo being carried
• damage to others property
• removal of wreck after incident
• damage to vessel if hired from owner

Question 17

Who else should consider buying marine insurance?-

Answer 17

• port authorities
• shipbuilders / repairers
• marina owners

Question 18

What is political risks insurance?

Answer 18

Offers means for investors and businesses to mitigate and manage risks arising from actions of or restrictions imposed by hostile or unconstitutional governmental actions

Creates more stable environment for trade

Question 19

What is offshore energy insurance and what are the key stages of it?

Answer 19

Location and extraction of oil and gas from under the seabed

1. exploration phase
2. construction phase
3. operational phase

Question 20

What is property insurance?

Answer 20

Physical damage to buildings, can also cover contents - indemnified by reinstatement generally

Question 21

What is stock insurance in property?

Answer 21

Physical damage to stock at insured’s premises, regular declarations of stock required

Question 22

What is theft insurance in property?

Answer 22

Covers forcible entry to a property, does not pay out for not forced entry

Question 23

What is pecuniary insurance?

Answer 23

Covers monetary loss rather than damage

Money insurance covers money and valuable documents which are responsibility of insured

Fidelity guarantee insurance respond to fraudulent acts committed during policy period

Question 24

What are CAR and EAR policies?

Answer 24

Contractors all risks
Erection all risks

Combined physical damage and liability cover for construction workers

Question 25

Important note about onshore insurance?

Answer 25

Doesn't just relate to oil and gas, incorporates mining etc renewable energy sources

Question 26

What exposures can cyber policies cover?

Answer 26

- BI - reputation - ransoms - physical damage to systems - d&o - contingent BI

Question 27

What do basic BI policies need to respond?

Answer 27

Physical loss or damage to insured property which triggers loss of income

Question 28

What are advanced loss of profits and delay in start-up insurance?

Answer 28

Loss of profit and debt servicing for having to pay overtime can be insured against in all types of construction projects to protect against significant financial loss for missing deadlines

Question 29

What are bloodstock and livestock?

Answer 29

bloodstock is horses etc livestock is cows, sheep etc Insurance generally about death or illness but can extend to infertility etc

Question 30

What is contingency insurance?

Answer 30

Covers things like: - event cancellation - weather-related instances - prize indemnity - death and disgrace - over-redemption

Question 31

What insurances can be written under personal accident insurance?

Answer 31

- personal accident (benefit policy for things like sports people who lose income if they get injured) - personal illness, triggered by accident or injury - death in service, generally purchased by employers who would have to pay death in service to family

Question 32

What are the key parts of kidnap and ransom insurance?

Answer 32

- payment of ransom - provision of negotiation specialist team to assist insured family during incident - payment of medical expenses for captured person once released

Question 33

What is product tamper, extortion, and product recall insurance?

Answer 33

Insurance pays for helping to removed potentially affected items, replace stock, and maintain reputation Also helps pay if demands for money by extortion over incident

Question 34

What does intellectual property insurance cover primarily?

Answer 34

Covers legal costs of defending an action against your intellectual property

Question 35

What do insurers need to be wary of about physical damage in aviation policies?

Answer 35

Physical damage affects different aircraft differently, need to know use and area operating as well Do not respond to wear and tear damage

Question 36

What liabilities relate to aviation?

Answer 36

- injury to passengers whilst boarding, disembarking or on plane - third parties like baggage handlers - product related - El covered normally, not required to have separate aviation related policy

Question 37

What is loss of license / use insurance?

Answer 37

- loss of use is aviation version of BI | - loss of license occurs if pilot fails medical etc but has to prove it is not their fault

Question 38

What liabilities do airport operators face?

Answer 38

- premises liability (PL essentially) - products (if supplying fuel) - hangar-keepers, provides maintenance and storage services for clients

Question 39

What is reinsurance?

Answer 39

Insurance for insurers who want to transfer some of their own risk to other insurers

Question 40

What are different ways reinsurance can be written?

Answer 40

- single risk - certain class of business - insurer's portfolio - catastrophe losses

Question 41

What is the purpose of reinsurance?

Answer 41

Purely business decision but looked upon well by regulators Need to make sure inequality below satisfied: inward premium >= claims + reinsurance cost + operating costs

Question 42

What are the benefits of reinsurance?

Answer 42

- increases capacity by reducing gross direct exposure | - smooths out peaks and troughs

Question 43

What are the benefits of writing reinsurance?

Answer 43

- access different geographies | - access different classes of business

Question 44

Who generally sells reinsurance?

Answer 44

- specialist companies that write no direct insurance - Lloyd's syndicates - insurers who also write direct insurance

Question 45

Who generally buys reinsurance?

Answer 45

- insurers - reinsurers - captives - mutuals

Question 46

Define to cede

Answer 46

share risk with reinsurers

Question 47

Define cedant

Answer 47

original insurer passing risk to reinsurers

Question 48

Define cession

Answer 48

share of risk passed to reinsurers

Question 49

Define collecting note

Answer 49

Document to present claim to reinsurers

Question 50

Define facultative reinsurance

Answer 50

reinsurance purchased for single risk

Question 51

Define non-proportional reinsurance

Answer 51

Premium and claims do not have direct correlation, relates to direct insurance such as excess of loss Pays out over a certain threshold

Question 52

Proportional reinsurance

Answer 52

Proportion of premiums and claims split between insurer and reinsurer

Question 53

Define retrocedant

Answer 53

Reinsurer buying reinsurance for itself

Question 54

Define retrocession

Answer 54

Entity seeding is a reinsurer

Question 55

Define retrocessionaire

Answer 55

Reinsurer accepting reinsurance from an entity that is a reinsurer

Question 56

Define treaty reinsurance

Answer 56

Reinsurance for wide portfolio of risks, such as a companies whole portfolio or class of business