Chapter 3 - main classes of business written in the London Market

Question 1

What are the vessels covered under Hull and yacht/recreational vessel insurance?

Answer 1

Sailing vessels
Motor vessels
Inland vessels - e.g. canal boats
Commercial vessel insurance also covers:
Cargo vessels
Cruise/passenger vessels
Specialist vessels - e.g. survey ships, drilling ships

Question 2

What is first party insurance/ short-tail insurance?

Answer 2

physical loss or damage type of insurance, common element covered by marine hull insurance is damage to the insured ship.

Question 3

What is the special marine term for physical damage to insured property?

Answer 3

Particular average

Question 4

What does maritime law state about collisions between vessels?

Answer 4

Each side has to pay damages to the other ship that relate to the share of the blame, being able to make a claim for this price with their hull insurers, in addition to any damages to their own vessel

Question 5

What is Builder’s risk insurance?

Answer 5

Provides combined physical damage and liability cover where the insureds can be just the purchaser or a combination of the purchaser and the build yard.

Question 6

What does loss of earnings insurance cover?

Answer 6

When vessels can’t be used for some reason (such as physical damage) insurers pay out to cover any potential loss of earnings that the vessel would have earned if it is covered.

Question 7

What is cargo insurance (marine)?

Answer 7

insurance that covers physical damage to the goods in transit but not liabilities for damage to persons or property from the cargo

Question 8

What does stock throughput insurance cover?

Answer 8

end-to-end product, combining a transit policy with storage policies removing any danger of gaps in coverage

Question 9

What is Jeweller’s block insurance?

Answer 9

Covers the jewellery trade, often set up as a package covering many different property and liability type risks and cover all aspects of the business. Can also be written in non-marine markets.

Question 10

What does Specie insurance cover?

Answer 10

loose gemstones
precious metals
valuable documents

Question 11

What does satellite pre-launch insurance cover?

Answer 11

satellites moving from the manufacturing facility to the launch pad

Question 12

Where can cash in transit be written and what can it cover?

Answer 12

in the non-marine and cargo market
covers movement between banks and premises, with UW creating strict policies such as varying routes and armed truck crews to minimise potential theft

Question 13

What policies are excluded from the main hull, cargo and marine liability policies but marine versions are commonly available in london markets?

Answer 13

War insurance - in marine covers war and civil war type risks, together with captures and seizures, but piracy is specifically not included
Strikes insurance - covers both strikes and damage caused by terrorists or those acting from a political or religious motive

Question 14

What is marine liabilities?

Answer 14

insurance that covers any legal liabilities incurred by injuring someone else, or their property. This is third party insurance and long-tail

Question 15

Who are the parties who should consider purchasing marine liability?

Answer 15

Vessel owners/operators
Port authorities
Shipbuilders/ship repairers
Marina Owners

Question 16

What is political risks insurance (PRI)?

Answer 16

Protection against inherent or highly unpredictable political perils which can have a significant impact on a given corporation’s assets, investments and trades in second and third-world countries

it helps to foster trade and stability within emerging economies and markets

Question 17

What are the 3 phases that offshore energy insurance can be split into?

Answer 17

Exploration - oil and gas is searched for using mobile drilling rigs, covers physical and liability
Construction - constructing a more permanent rig to remain on site. Covers the same as exploration, throughout the whole time of construction
Operational - additional risks such as war and terrorism as well as physical and liability are considered.

Question 18

What are the features of property insurance?

Answer 18

Industrial buildings - can also cover machinery, fixtures and fittings as well as raw materials
Indemnification also includes the option for reinstatement

Question 19

What other types of insurance fall under the category of property but should be reviewed seperately?

Answer 19

Stock insurance
Theft insurance
Glass insurance
Goods in transit insurance

Question 20

What do Pecuniary insurances cover?

Answer 20

Covering monetary loss rather than physical loss or damage
Examples: Money insurance - includes valuable documents such as tickets and vouchers
Fidelity guarantee insurance - responds to fraud

Question 21

What are Contractors all risks (CAR) and Erection all risks (EAR) policies in construction insurance?

Answer 21

Both a combination of physical damage and liability cover. CAR policies usually purchased by the main contractor on behalf of sub-contractors. EAR policies are purchased by the contractor responsible for putting up or installing machinery, or steel structures of any type

Question 22

What does onshore energy insurance cover?

Answer 22

Midstream insurance - covers pipelines
Downstream insurance - covers the refining ad petrochemical processing elements of the business. The insurance can also cover any other energy generation form

Question 23

What can Cyber include?

Answer 23

E&O/PI
Network security failures
Privacy breaches

Policies can cover:
Business interruption
Reputation protection
Payment of ransoms
D&O liability
Contingent business interruption - business stops due to supplier being hacked
Physical system damage
Regulatory investigations
Practical support

Question 24

What does business interruption insurance cover?

Answer 24

Serves to replace lost income after a waiting period, basic cover requiring physical loss or damage to the insured property.
However a policy extension known as a contingent business interruption has been developed to insure situations such as :
- Supplier fails to provide supplies so work can’t carry on
- Power supplies become damaged

Question 25

Where is Advanced loss of profits and delay in start-up insurance cover found?

Answer 25

Marine - found in a type of cargo called project cargo Non-marine - often purchased as an additional cover by companies purchasing CAR/EAR cover.

Question 26

What are the available types of non-marine liability insurance in LM?

Answer 26

Employers' liability - compulsory, covers an employer should an employee become injured during employment and make a claim Public Liability - covers any party who is liable for loss or damage caused to the public visiting the premises. Typical insureds include nightclubs, restaurants, riding schools and shops Professional liability - covers professionals such as lawyers against the risk of a claim being made against them for incorrect advice or negligence. Motor liability - compulsory, covering third party loss General liability - general cover that will respond as long as the insured has a legal liability Products liability - relates to a product causing physical damage to something or injury to someone

Question 27

What is Bloodstock and Livestock insurance?

Answer 27

Insurance on animals used for business Bloodstock - horses Livestock - can cover many animals from llamas to fish farms

Question 28

What does contingency insurance cover?

Answer 28

Event cancellation Weather - related insurances: e.g. rain washing out Wimbledon Prize indemnity Death and disgrace - e.g. a company has to reshoot an advert as the person in the advert died or disgraced Over-redemption - too many people redeem offers, such as those on cereal boxes

Question 29

What insurances fall under the title of personal accident insurance?

Answer 29

Personal accident - not a policy of indemnity but a schedule of benefits paid out if policy triggered Personal illness/sickness insurance - Triggered by sickness as well as accident or injury Death in service - covers the situation where an employee dies whilst in their employment an the employer has to pay a death in service benefit to their beneficiary

Question 30

What can kidnap and ransom insurance cover?

Answer 30

Payment of ransom itself Payment for medical expenses of captured person once released Provision of a specialist negotiation team to assist the family/company during incident

Question 31

What does Malicious product tamper, extortion and product recall insurance cover?

Answer 31

Insurance that helps cover the costs of removal of tampered goods, paying extortion (blackmail) claims and recalling faulty goods

Question 32

What does intellectual property insurance cover?

Answer 32

primarily covers the legal costs of defending an action against your intellectual property, or if you are alleged to have interfered with someone else's IP

Question 33

What are the different types of objects covered under physical damage insurance in the Aviation industry?

Answer 33

Private pleasure fixed wing aircraft Commercial fixed wing aircraft Rotary aircraft Gliders Microlights Hot air balloons Unmanned aerial vehicles or drones

Question 34

What are the 3 categories of coverage given under standard aviation policies for airlines?

Answer 34

Passengers Third parties other than passengers - e.g. baggage handlers Products-related liabilities - e.g. illness from plane food

Question 35

What does loss of licence/loss of use insurance cover?

Answer 35

Loss of licence - deals with an individual who has failed their medical, as long as it wasn't their fault the insurance provides them with personal income Loss of use - provides replacement income stream if an aircraft is damaged and cannot be used

Question 36

What 3 categories do Airport operators' policies coverage tend to fall in to?

Answer 36

Premises liability - e.g. someone falling over in the terminal Products liability - e.g. if airport provides aircraft fuel Hangar-keepers' liability - if airport provides maintenance or storage services for clients

Question 37

What is reinsurance and how can it be described for what it can cover?

Answer 37

When insurers want to transfer some of their risk (policies) to other insurers - known as reinsurers Covering - a single risk - a certain class of business - insurer's whole portfolio of business - cat losses

Question 38

What are the benefits of purchasing reinsurance?

Answer 38

Increasing capacity Smoothing peaks and troughs When purchasing reinsurance the insurer should consider peaks and troughs to enable them to: Diversify into new classes of business Protecting the portfolio

Question 39

What are the benefits of writing/selling reinsurance?

Answer 39

Accessing other geographical areas Accessing other classes of business

Question 40

What are the main types of reinsurer?

Answer 40

Specialist companies that do not write direct insurance at all Lloyd's syndicates Insurers who write direct as well Reinsurers tend to have large amounts of SHF, due to high risk of the business

Question 41

Who do reinsurers provide reinsurance for?

Answer 41

Insurance companies Captive insurers other reinsurers

Question 42

Who are the main buyers of reinsurance?

Answer 42

Captive insurers - an insurance company set up as part of a larger commercial organisation and only takes risk from its parent company or group Mutuals

Question 43

What does Bordereau(x) mean?

Answer 43

Formatted spreadsheet on which risk and claim information can be presented to reinsurers

Question 44

What does to cede, cedant and cession mean?

Answer 44

To cede - act of sharing risk with reinsurers Cedant - original insurer who is passing on the risk Cession - the share of risk passed to reinsurers

Question 45

What is collecting note?

Answer 45

Document used to present the claim to reinsurers under an excess of loss contract

Question 46

What are the different types of reinsurance?

Answer 46

Facultative - Reinsurance purchased for an individual risk Non proportional reinsurance - where the premium and claims do not have a direct correlation. Claims paid out in excess of a pre-agreed amount and the coverage works in layers stacked on top of each other, known as vertical protection. Proportional - where the premium and claims are shared between the insurer and reinsurer in pre-agreed proportions Treaty - can be purchased to cover a wide portfolio of risks, either a line of business or whole book of business

Question 47

What is reinstatement and reinstatement premium?

Answer 47

Reinstatement - the cedant has protection if they have more than one large loss within a single year. Reinstatement premium - the price that the cedant has to pay to reinstate or bring the layer back to life

Question 48

What is Retrocedant, Retrocession and Retrocessionaire?

Answer 48

Retrocedant - a reinsurer obtaining reinsurance for itself Retrocession - a cession where the entity is already a reinsurer Retrocessionaire - A reinsurer accepting reinsurance from an entity which itself is another reinsurer.