Structure of the Industry

Question 1

Composite company

Answer 1

Insurance company that transacts long-term (life) and general business

Question 2

Life company

Answer 2

Life insurance and pensions company - only transacts long-term business

Question 3

General insurance company

Answer 3

Insurance company that can only transact general insurance

Question 4

Tied agent

Answer 4

Sells the products of a single insurer only

Question 5

Dual regulators of insurance companies

Answer 5

FCA and PRA

Question 6

Reasons for reinsurance

Answer 6

Smooth underwriting account

Protect against catastrophe

Question 7

Mutual company

Answer 7

Organisation that supplies financial services and is owned by its customers

Pays through lower premiums / insurance bonuses as opposed to dividends

Question 8

Demutualisation

Answer 8

Registering of mutual companies as proprietary companies

Question 9

Captive insurer

Answer 9

Insurance company owned by a corporate parent to insure itself

Question 10

Advantages of captive insurance

Answer 10

• Obtain full benefits of risk control
• Avoid direct insurer overheads
• Lower risk premium by purchasing cheaper RI
• Achieves risk financing objectives

Question 11

Takaful insurers

Answer 11

Sharia compliant insurance that shares risk and profit between participants

Sharia Law forbids
- Uncertainty (Gharar) - risk to the buyer
- Gambling (Maisir)
- Interest (Riba) - making money from money

Question 12

Consumer principle

Answer 12

A firm must act to deliver good outcomes for retail clients

Question 13

Cross-cutting rules

Answer 13

• A firm must act in good faith towards retail customers.
• A firm must avoid foreseeable harm to retail customers.
• A firm must enable and support retail customers to pursue
  their financial objectives.

Question 14

Four areas of application for consumer principle

Answer 14

Products and services
Price and value
Consumer understanding
Consumer support

Question 15

ESG reporting company size

Answer 15

More than 500 employees or exceed £5m in turnover

Question 16

Organic growth

Answer 16

Company develops and expands by increasing its sales, revenue, and output

Alternative is M&A

Question 17

Horizontal integration

Answer 17

Two companies in the same market merge

Question 18

Vertical integration

Answer 18

Purchase of upstream or downstream company

Question 19

Market disruption

Answer 19

A profound change in the business landscape that forces significant transformation