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CII LM1 > Chapter 3 - Main classes of business written in the London Market > Flashcards

Chapter 3 - Main classes of business written in the London Market Flashcards

1
Q

Marine insurance - what are Honour policies?

A

Writing insurance where the purchasers insurable interest is not entirely clear.
Policy Proof of Interest

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2
Q

What does Yacht insurance cover?

A

The following types of vessels
Sailing
Motor
Inland

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3
Q

What does Commercial Vessel Insurance cover?

A

These type of vessels
Cargo
Cruise/passenger
Specialist

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4
Q

What is the key common element covered by any type of marine hull insurance?

A

First party insurance
(Damage to the insured ship - physical loss or damage)

Physical damage caused to property is known as ‘Particular Average’ in Marine.

Most policy wording also provide cover for liabilities arising under maritime law (vessel collided with another vessel)

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5
Q

How is Builders Risk insurance used in Marine?

A

Construction of vessel - expensive & lengthy.

Combined physical damage & liability cover

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6
Q

When might Loss of earnings insurance be used in Marine?

A

If shipowner can’t use ship because it is damaged and can’t earn money from it carrying passengers, cargo, or hiring it out.

I’m non-marine normally referred to as BI.

Waiting period of days before they can claim. Policy limit expressed as a period of days.

Financial provisions calculated using insurers business info such as wages bill or rent

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7
Q

Difference between cargo and goods in transit

A

Cargo = physical damage for goods being moved around

Goods in transit = liability for the entity moving items around, invade they damage goods in their care

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8
Q

What does Cargo insurance not cover that hull insurance for ships would?

A

Liabilities for cargo damaging persons on their property

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9
Q

Cargo insurers do not anticipate insuring storage as this would be static - what insurance would be used for this?

A

Stock throughput insurance

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10
Q

Stock throughput insurance

A

End-to-end
Combines transit and storage policies
Removes danger of gaps in cover

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11
Q

Jewellers block insurance

A

Covers jewellery trade
Introduced into Lloyd’s by Cuthbert Heath 19th century
Package policy covering property and liability risks
Physical loss or damage
Excluded - mysterious disappearance, inventory losses

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12
Q

Specie insurance

A

Loose gemstones
Precious metals
Valuable documents

Physical loss or damage

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13
Q

Fine art insurance

A

Paintings
Sculptures
Installations

Physical loss or damage

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14
Q

Satellite pre launch insurance

A

Moving satellite to launch pad
Cargo covers for physical loss or damage until launch insurer takes over when engines are ignited.
Aggregation is an issue where several satellites launched at once

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15
Q

Cash in Transit insurance

A 
Movement of money between locations
Head office to local branch
Bank to ATM
Company premises to bank
Risk prevention includes:
- varying routes
- mixing up truck crews 
- armed truck crews
- paper money soaked in dyes
- GPS
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16
Q

Goods in transit insurance

A

Covers liability of the carrier
Does not cover sea carriers
Covers loss or damage to goods, releasing cargo to wrong party

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17
Q

Parties in insurance
First party
Second party
Third party

A

First party = insured
Second party = insurer
Third party = anyone else

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18
Q

War and strikes insurance

A

Covers war and civil war risks
Captures and seizures
Damage caused by abandoned mines
Piracy not covered - covered in hull and also cargo

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19
Q

Why is War and Strikes insurance freely available?

A

Marine risks expected to be mobile and able to move out of danger should it arise

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20
Q

Strikes insurance covers…

A

Strikes and damage caused by terrorists or political/religious motives

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21
Q

Types of marine related liability

A
  • injury/death of crew
  • injury/death of visitors
  • pollution caused by escape of cargo etc
  • damage to cargo
  • damage to other people’s property
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22
Q

Parties who should consider liability insurance

A
  • port authorities
  • shipbuilders/ ship repairers
  • marina owners

Liability for land-based employees covered by non-marine employers liability

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23
Q

Political risks insurance (PRI)

A

Allows investors and businesses to mitigate risk arising from restriction imposed by government actions

Offers trade finance banks realistic alternative to syndicating exposure to direct competitors

Alternative for exporters to using state-funded Export Credit Schemes

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24
Q

Subclasses of PRI offered

A

Asset risks such as CEND, CCP.

Contract frustration risks such as non-payment, non-delivery, exchange transfer, non honouring of documentary letters of credit, wrong calling of bonds.

War in land
Political violence

25
Q

Offshore energy insurance

A

Location and extraction of oil and gas under seabed. Upstream.

Exploration phase
Construction phase
Operational phase

26
Q

Non-marine: Property insurance

A

Physical damage for buildings
Machinery fittings and fixtures
Raw materials
Reinstatement of building

27
Q

Types of insurance that fall within property but should be reviewed separately

A
  • stock insurance
  • theft insurance
  • glass insurance
  • goods in transit
28
Q

Pecuniary insurance

A

Cover monetary loss:
Money insurance (money and docs)
Fidelity guarantee insurance
(Fraudulent acts)

29
Q

Construction insurance

A

Each party should get their own insurance but makes sense to have central policy to prevent gaps in cover.

Maintenance periods can be built into policy for 12 months

30
Q

CAR and EAR policies

A

Contractors all risks
Erection all risks

Physical damage and liability cover

CAR - on behalf of sub contractors
EAR - contractor responsible for putting up machinery or steel structures

31
Q

Onshore energy insurance

A

Oil and gas industry after it has been located and recovered (downstream)

Midstream: pipelines
Downstream: refining and petrochemical processing elements

32
Q

Business interruption

A

Vessel damaged and insured cannot generate income.
Replace lost income after waiting period

Separate policy or extension (contingent BI)

  • Supplier fails to provide supplies to factory
  • Power suppliers premises is damaged and cuts of power supply to insureds factory
33
Q

Advance loss of profits (ALOP)

Delay in start up (DSU)

A

Penalty clauses invoked if project overruns and risks of loss of profit if not completed on time.
This can be insured on marine or non marine.
Marine - cargo
Non marine - additional cover to CAR/EAR

34
Q

Casualty (non marine liabilities)

A

EL - maritime EL for covering ships crew

PL - any party liable for loss or damage to visiting members of the public

Professional liability- lawyers doctors etc for claims made against them for incorrect advice or negligent activity.

Motor liability- not written in LM

General liability- purchased as freestanding policy or addition to physical damage or construction

Product liability- product causing damage to someone.

35
Q

Bloodstock/livestock insurance

A

Bloodstock = horses
Main risk is death/illness
Also infertility

36
Q

Contingency insurance

A

Underlying concept that insurance requires fortuity

  • Event cancellation
  • Weather-related insurances
  • Prize indemnity
  • Death and disgrace
  • Over redemption
37
Q

Personal accident insurance

A

PA- permenant disablement weekly or monthly benefits or lump sum. Death lump sum

Personal illness/sickness

Death in service

38
Q

Kidnap and ransom

A
  • payment for medical expenses once released
  • payment of ransom
  • provision of specialist negotiation team to assist the insured/family during the incident

Existence of insurance must remain secret

39
Q

Malicious product tamper/extortion/product recall

A

Tampering:

  • remove stock
  • replace stock
  • maintain brand loyalty

Extortion:
Money in exchange for
- revealing information
- keeping quiet

40
Q

Intellectual property insurance

A

Rights to inventions
Trademarks and logos
Inventors patent their inventions legally to protect rights and make money

Insurance covers legal costs of defending an action against your intellectual property

41
Q

Aviation: physical damage

A
  • Private pleasure fixed wing insurance
  • Commercial fixed wing aircraft
  • Rotary aircraft
  • Gliders
  • Microlights
  • Hot air balloons
  • Unmanned aerial vehicles/drones
42
Q

Aviation liabilities

A

Passengers - injury ocurred while boarding disembarking or on plane

3rd parties (other than passengers) - baggage handlers and ground staff

Products related- illness resulting from food, contaminated fuel, repairs with substandard parts

43
Q

Loss of licence/use

A

Loss of use - Provides a replacement income stream after a waiting period measured in days

Loss of licence - available in aviation market, for those who fail their medicals unable to
Operate in their role as aircrew

44
Q

Airport operators policies

A

Premises liability
Products liability
Hangar keeper liability

45
Q

Reinsurance

A

Insurer buying reinsurance for itself to transfer some of the risk to other insurers

Reinsurers can be organisations operating as insurers

Viewed as good business practice

Inward premium > claims + reinsurance cost + operating cost

46
Q

Benefits of reinsurance - increasing capacity

A
  • Increasing financial capacity
    Gross capacity = amount of business written.

Net position = one after you have made room for more

Prudent purchasing of insurance of reinsurance allows insurers to accept more risk.

47
Q

Benefits of reinsurance - smoothing peaks and troughs

A
  • Smoothing peaks and troughs
    Gradual trends favoured. Spreads cost of large losses over several years smoothing our highs and lows

Allows insurer to diversify into new classes of businesss
Protect portfolio

48
Q

Benefits of writing reinsurance

A

Accessing other geographical areas

Accessing other classes of business

49
Q

Sellers of reinsurance

A 
Limited liability companies with Large amounts of paid up capital from shareholders
- Specialist companies, don’t write direct
- Lloyd’s syndicates
- Write reinsurance and direct
Provide insurance for:
- insurance companies
- captive insurers
- other reinsurers
50
Q

Buyers on insurance

A

Based on supply and demand
Captive insurers - company part of larger commercial organisation, takes risk only from parent company who is not impacted by general premium increase across market. Claims paid with funds from within captive.

Mutuals - like minded organisations grouping together and forming insurance pool. Run by professional managers. Lawyers, architects, marine insurers

51
Q

What does it mean to cede?

A

Pass risk to reinsurer

52
Q

What is facultative reinsurance?

A

Reinsurance purchased for individual risk which would not fit with any other part of reinsurance

53
Q

What is non proportional reinsurance?

A

Premium and claims don’t have direct correlation

54
Q

What is Proportional reinsurance

A

Premium and claims shared between insurer and reinsurer in pre agreed proportions

55
Q

Retrocession

A

Cession where entity ceding is already a reinsurer

56
Q

Retrocedant

A

Reinsurer obtaining reinsurance for itself

57
Q

Treaty reinsurance

A

Reinsurance purchased to cover a wider portfolio of risks/ class of business / whole book of business

58
Q

Retrocessionaire

A

Reinsurer accepting reinsurance from an entity that is itself a reinsurer

59
Q

Cession

A

Share of risk passes to reinsurers

CII LM1 (9 decks)

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