A) sale of catastrophe bonds. Insurance for insurers, often known as reinsurance, or stop-loss insurance, is a type of reinsurance. Side-car deals are much smaller and less complex than catastrophe bonds and are usually privately placed rather than tradable securities. Additionally, companies that have a head office or are domiciled in Reciprocal Jurisdictions can become Reciprocal Jurisdiction Reinsurers if they meet the standards in the Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786), and this status will allow these companies to not post collateral. information you need to make the best insurance decisions for you, your family and your business. Mark hired an outside firm to investigate the applicant and to prepare a report about the applicant. Primary insurance kicks in first with its coverage even if there are other insurance policies. A) I only The coverage is typically of the form of a 90% or 95% share of one or more layers (separate treaties) in excess of the maximum retention within which the cedant can comfortably absorb a loss, or for which the cedant can afford the reinsurance prices. B) The reinsurer is the first insurer that provides claims services to the insured after a loss occurs. Reinsurance, howeve,r is not a guaranteed solution for an insurance company looking to protect itself. D) pool reinsurance. requirements on group self-insurers which are not applicable to individual self-insured Gwen's comment most likely refers to her company Cession refers to the portions of obligations in an insurance company's policy portfolio that are transferred to a reinsurer. An insurer can also use reinsurance to control the amount of capital it is required to hold as collateral. Adresse : 94 Rue Lon Marlot 59100 ROUBAIX - Tlphone : 03.20.02.79.68. (C) Discuss methods for using lines like those in parts (A) and (B) to find the largest possible daily profit. Common sources of underwriting information for life and health insurance include all of the following EXCEPT, If an underwriter suspects moral hazard, the underwriter may ask an outside firm to investigate the applicant and make a detailed report to the insurer. Insurance Bureau questioned whether "The Company" could write the coverage as C) calculating premiums to be charged for the insurer's products signed the legislation into law before the memorandum could be sent) specifically raised A) facultative reinsurance II. Catastrophe bonds are made available to institutional investors in the capital markets through an entity that is specially created for that purpose. Stop.Call.Confirm is a registered service markof the National Association of Insurance Commissioners. Circular Letter 1994-13 concerned policies Which of the following is a function of the marketing department of an insurance company? In the context of insurance, vacancy can be highly relevant for property insurance coverage. In the reinsurance agreement, the reinsurer's obligation arises only when the company's liability under its original insurance policy or reinsurance agreement has been incurred. Treaty and facultative reinsurance agreements can be structured on a pro rata (proportional) or excess-of-loss (non-proportional) basis, depending on the arrangement by which losses are apportioned between the two insurers. issue the coverage to the Pool as a reinsurance policy. B) II only A critical tool for evaluating solvency is the annual "convention" statement, the detailed financial statement submitted by all insurance companies to the NAIC. Consider an insurance firm that is looking for a new . "The Company" believes that These are relatively simple agreements that allow a reinsurer to transfer to another reinsurer or group of investors, such as hedge funds, a limited and specific risk, such as the risk of an earthquake or hurricane in a given geographic area over a specific period of time. Lobbying for legislation favorable to the insurance industry. Reinsurance companies themselves also purchase reinsurance and this is typically known as retrocessional coverage. Which of the following statements is true regarding the information systems functional area of an insurance company? B) Moral hazard should be avoided. C) A public adjustor is a salaried employee who works for one insurer. employees. "Pools") as permitted by the Volunteer Firefighters Benefit Law (the The office of General Counsel issued the following informal opinion on Company". However, if the insurer can reduce its responsibility, or liability, for these claims by transferring a part of the liability to another insurer, it can lower the amount of capital it must maintain to satisfy regulators that it is in good financial health and will be able to pay the claims of its policyholders. ABC Insurance Company is using reinsurance to I. This would let the primary insurance company minimise its risk by passing on the policy that it has underwritten to another insurance provider. C) purchase of excess-of-loss reinsurance. It states as follows: "Although the Regulation refers to Which of the following statements about the investments of property and liability insurers is (are) true? In the mid-1980s, some reinsurance companies that had entered the reinsurance business during the period of high interest rates in the early 1980s left the market, due to insolvency or other problems. A guide to the concepts of reinsurance and its contributions to the economy and society. Reinsurance ceded is a portion of risk which a reinsurer would receive from the previous insurer of the insured. issued to its insureds. For many years, few people outside the insurance industry were aware that such a mechanism as reinsurance existed. Job in Lausanne - Canton de Vaud - Switzerland , 1001. N.Y Workers Compensation Law 50(5)(d) If insurable, Jan assigns the applicant to a rating category based on the applicant's degree of risk. Listed on 2023-02-27. Objectives of Reinsurance Distribution of risk to ensure the coverage of a claim. Insurance companies purchase reinsurance protection for many reasons. A reinsurer that is licensed to accept reinsurance in a state or territory is an Authorized Reinsurer. 0000005789 00000 n B) proof of loss. Lexasure Financial Group is a leading Southeast and South Asia fintech, insurance, and financial services holding company and entities in our group provide insurance and reinsurance for all lines . Following the June 1982 annual meeting of the National Association of Insurance Commissioners (NAIC) in Philadelphia, an advisory committee was formed to review the regulation of reinsurance transactions and parties to those transactions. Reinsurance, Reinsurance Explained: What It Is, How It Works, Types, Indexed Universal Life Insurance (IUL) Meaning and Pros and Cons, Pros and Cons of Indexed Universal Life Insurance, Types of Reinsurance Available to Ceding Companies, Treaty Reinsurance: Definition, How It Works and 2 Contract Types, Reinsurance Definition, Types, and How It Works, Excess of Loss Reinsurance Definition and How It Works. Insurers obtain data that can be used to determine rates from. ) D) The insurer transferring business to a reinsurer is called the ceding company. amended the Workers Compensation Law to authorize employers with related activities It may be noted that, under Section 7(1) of the CGST Act, GST is levied on the provision of goods or services. Primary companies are said to cede business to a reinsurer. self-insured employers and a single self-insured employer is a valid one, and is supported Which of the following statements about treaty reinsurance is true? Refer to Problem 44. Ceding is helpful to insurance companies since the ceding company that passes the risk can hedge against undesired exposure to losses. Capital freed up in this way can support more or larger insurance policies. A) Agents are never authorized to settle claims. %%EOF Mark has been an underwriter for 20 years. One should be aware that the Workers All insurers submit financial statements to regulators who monitor their financial health. B) determine premium rates. Phone: 816.783.8481, NAIC Center for Insurance Policy and Research (CIPR). Beverly lives in a sparsely populated area in northern Idaho. D) neither I nor II, Functions of an insurance company's legal department include which of the following? B) The reinsurer must accept all business that falls within the scope of the treaty. self-insurers". This reinsurance arrangement is a(n) Which of the following statements about claim settlement is (are) true? endstream endobj startxref D) It protects the reinsurer by requiring the ceding insurer to charge adequate premiums. He conducts inspections and makes recommendations about alarm systems, sprinkler systems, and building construction. qualifying condition for approval to act as a self-insurer, the employers were required to Access forms and tools to file expense reports, review grant and zone scholarship balances, and travel guidelines. In addition, since a hurricane or earthquake only affects one to three countries in the Caribbean on average in any given year, each country contributes less to the reserve pool than would be required if each had its own reserves. B) whole life insurance B) reviewing language and policy provisions in insurance contracts B) Independent adjustors may be used in a geographic area where the volume of business is too low for an insurer to have its own adjustors. She reviews applications to determine whether her company should insure the applicant. ?tv WJ Both facultative and treaty insurance can be written based on pro rata or an excess of loss underwriting. A) catastrophe futures contracts. In addition, there were equity puts, through which an insurer would receive a sum of money in the event of a catastrophic loss in exchange for stock or other options. Discover tools and resources to help you understand different types of insurance, claims processes, and practical tips to help support you through every stage of your life. bP5r34 CtoWDJl~4GHLw*s\];|: 7e%aHJqh!xp ~UNUaFLv)Pf}4EvkhN@m The insurers financial statement recognizes as assets on the balance sheet any payments that are due from the reinsurer for coverage paid for by the ceding company. A) I only 316.6 (1989) states that the above Here's What to Do. Explore recent publications, the latest news articles, new federal and legislative news, and model laws to help inform your approach. The unearned premium reserve of an insurer is B) loss control PDF | On Aug 31, 2017, Sunday Adekunle Aduloju and others published Economics and Business REINSURANCE AND PERFORMANCE OF THE CEDING COMPANIES: THE NIGERIAN INSURANCE INDUSTRY EXPERIENCE | Find . Computers and information systems are able to perform some tasks that previously were performed directly by employees. The memorandum went on to express concern that many safeguards which B) surplus share reinsurance Access expert content, industry term definitions and answers to your questions from knowledgeable insurance insiders. The publicity surrounding the investigations and the poor financial condition of several major life insurance companies prompted proposals for some federal oversight of the insurance industry, particularly insurers and reinsurers based outside the United States. While a large portion of the insurance industry opposes federal regulatory oversight, many U.S. reinsurers and large commercial insurers view compliance with a single federal law as preferable to compliance with the laws of 51 state jurisdictions. A) general agent. One method through which reinsurance is provided is through an organization of insurers that underwrites insurance on a joint basis. As "The In 1984, for the first time, the annual statement required insurers ceding liability to unauthorized reinsurers (those not licensed or approved in a designated jurisdiction) to include the amount of incurred but not reported (IBNR) losses in addition to known and reported losses. After graduation, she was hired by Econodeath Insurance Company. A) $600,000 C) quota share reinsurance trailer If the reinsurer fails to pay the claims passed on by the ceding company, the ceding company is once again responsible for settling them. Another alternative is the exchange of risk where individual companies in different parts of the world swap a certain amount of losses. Sr. Accounting and Reinsurance Policy Advisor Think about: New France, French and Indian War. I. It would include layers of proportional and excess of loss treaties and possibly a facultative excess of loss layer at the top. The extent of that obligation is defined by the terms and conditions of the applicable reinsurance agreement. For example, if a company only takes a single insurance policy with a single type of cover, they pay the same price for different risks. Any and all agreements contracts and other XYZ Re agreed to pay all losses in excess of the 85 percent loss ratio. 0000002652 00000 n financial statement of the groups assets and liabilities; satisfactory proof of financial C) preparing one set of books using dishonest values and another set using current market values. fire districts that are members of the Pool. We provide tools and resources to help regulators set standards and best practices, provide regulatory support functions, and educate on U.S. state-based insurance regulation. requirement shall "be equally applicable in all respects to group Reinsurance can be written by a specialist reinsurance company, such as Lloyds of London or Swiss Re, by another insurance company, or by an in-house reinsurance department. U.S. reliance on foreign reinsurance has grown rapidly, from $78 billion in 1999 to $296 billion in 2017. A) to increase the unearned premium reserve. The transfer of part of the insurance companys business to the reinsurer reduces its liability for future claims and for return of the unexpired portion of the policy. Codes R. & Regs. A) term life insurance A cedent is a party in an insurance contract who passes the financial obligation for certain potential losses to the insurer. Beverly is a(n) Instead, the reinsurer gets paid the premiums from the policyholders. The reinsurer agrees to indemnify the cedent against complete or a part of a loss which the primary insurance company may bear under certain insurance policies that it has sold. Hazard Insurance: Is Your Home Protected. individual employer/member shifts its risk to the Pool, and the Pool spreads the risks of workers compensation insurance under the VFBL on a cost-effective basis, desires to Reinsurers subsequently reassessed their position, which in turn caused primary companies to reconsider their catastrophe reinsurance needs. Etsy for Sellers: What Insurance Do You Need? 0 A) to stabilize profitability The Company taking such insurance is called "ceding company" & the company which provides assurance is called "reinsurer". 0000002410 00000 n (See Chapter 22 - Reinsurance.) D) invest insurance company assets. B) binder. 0000001951 00000 n D) reviewing applications to determine if the company should insure the risk. purchase reinsurance from "The Company" (fictitious name), as the as participants in a group self-insurance pool? means a contract under which one party, the reinsurer, in consideration of a premium, promises another party, the reinsured, cover against the risk of exposure to insurance or reinsurance claims. Media queries should be directed to the NAIC Communications Division at 816-783-8909 or news@naic.org. with respect to their operations. This prompted Caribbean governments to request the help of the World Bank in facilitating access to catastrophe insurance. To prevent lawsuits, an insurer should provide no personal assistance to a claimant other than that which is required by contractual obligations. The rule helps regulators identify problem reinsurers for regulatory actions and encourages insurers to purchase reinsurance from companies that are willing and able to pay reinsured losses promptly. Exclusive, industry-focused manuals, data, and more. C) Insureds should be selected according to underwriting standards. The company makes a profit of $50\$ 50$50 on each table and a profit of $15\$ 15$15 on each chair. A) I only The contract warrants that the reinsurer will pay up to $100 million toward the buyers losses if the industry suffers a predetermined loss amount, say $5 billion or more. Commercial banks and other lenders have been securitizing mortgages for years, freeing up capital to expand their mortgage business. file with the chair of the Workers Compensation Board a "certification of an 3.8.2 Assuming reinsurer accounting of DAC. Ceding also helps the ceding company to free up capital to use in writing new insurance contracts. When a fraternal insurer began operations, it asked each member, regardless of age, to pay $20 per month to the fraternal's group life insurance plan. Keep in mind, the one-time training course is required per WAC 284-17-265 (leg.wa.gov). Insurance Information Institute, Inc. - ALL RIGHTS RESERVED. This protection can best be obtained using a(n) Governor on the two bills (which was never actually transmitted because the Governor retaining the risk of compensable injuries to its employees for which it is responsible reserves, its source and assurance of continuance. Thus, "The The company that transfers the risk is called the ceding company and the accepting company is called reinsurer. A reinsurer may also purchase reinsurance. Integrity is a publicly-traded insurer. B) agent's report. Marketing Essentials: The Deca Connection, Carl A. Woloszyk, Grady Kimbrell, Lois Schneider Farese, Fundamentals of Financial Management, Concise Edition. 0000002900 00000 n By contrast, the Consequently, the U.S. has developed a system of reinsurance regulation that has led to the development of an open, but secure, reinsurance market where most of the reinsurance premiums are reinsured outside the country. When reinsurance prices were high and capacity scarce because of the high risk of natural disasters, some primary companies turned to the capital markets for innovative financing arrangements. reciprocal insurer. Several common reasons for reinsurance include: 1) expanding the insurance company's capacity; 2) stabilizing underwriting results; 3) financing; 4) providing catastrophe protection; 5) withdrawing from a line or class of business; 6) spreading risk; and 7) acquiring expertise. The bureau D) to withdraw from a line of business or territory. However, risks of various kinds, particularly of natural disasters, are now being sold by insurers and reinsurers to institutional investors in the form of catastrophe bonds and other alternative risk-spreading mechanisms. By statute or administrative practice, all states (but with considerable variation) recognize and grant credit on the financial statement for the reduced financial responsibility that reinsurance transactions provide. Morgan is a(n) Which of the following statements about underwriting standards is (are) true? a. "VFBL") and the New York Workers Compensation Law (the "WCL"). under the New York Insurance Law. (1989). C) inspection report. Finance. D) special purpose reinsurance vehicle. The building value in the application seemed far too high, and Mark suspected the applicant might be planning to destroy the property after it is insured. 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Percent loss ratio reinsurance agreement at 816-783-8909 or news @ naic.org the applicable reinsurance agreement this typically... The above Here 's What to Do Marlot 59100 ROUBAIX - Tlphone: 03.20.02.79.68 ( the WCL... Is not a guaranteed solution for an insurance company minimise its risk by passing on the policy it! Is defined by the terms and conditions of the following statements is true regarding the information systems able... Markof the National Association of insurance, is a registered service markof the National Association insurance! To determine if the company should insure the risk can hedge against undesired exposure to losses 284-17-265 ( )... Personal assistance to a reinsurer would receive from the policyholders based on pro rata or an excess of loss at. To withdraw from a line of business or territory institutional investors in the capital markets through an organization insurers!