IF1 - CII

IF1 - CII

Class of Insurance

Chap 1 : Risk & Insurance

Property : Fire, theft, special perils, Glass, livestock, money, engineering. breakdown

Pecuniary : Fidelity, BI, Polictical risk, legal expense, credit

Motor, Liability, Marine + Aviation

Health Insurance : PA, Critical illness, Sickness. Payment protection, private medical

Package : Travel, Household, Comercial

Risk sharing

Dual-Insurance

Self Insurance

Risk Perception

All our decisions are based on risk

assessment

Risk management : measure risk

and attempt to deal with risk

the need for insurance : provide financial security and peace of mind

Pooling of risk : each person wanting to join the pool must make a fair (equitable) contribution premium

Benefit of insurance :

+ release capital within companies

+ Encourage entreprenieur

+ kept employees in work

+ losses are reduced in size and number

+ investment of reserve money

Definition of Risk

-Uncertainty, unpredictability, danger

-Insurance is a mean of transfer risk : insurer accept future potential risk for an agreed premium

Components of risk

- Bring peace of mind

- People are risk- averse or risk-seeking

uncertainty

Peril & Hazard

the very core of the concept of risk

peril : which give rise to a loss

ex : lighting, overflow of water tanks, rain, fire,..

hazard : which influences the effect of the peril

ex : high value sport cars (influence off theft)

safari holidy ( influence of disease, animal,..)

*physical hazard : measurable dimension of the risk

* moral hazard : altitude and behaviour

level of risk

Risk Management

Frequency

Severity

+insurer don't want great peaks and troughs of claim payments

Category of Risk + Type of risk that can be insured

Homogenous exposures

historical data + number of similar risk + trends + large number of homogenous exposures

Financial & Non-financial

Capable of measurement in the financial terms

*Benefit policies : lump-sum

• Financial
• Particular
• Pure
• Fortuitous ( not inevitable)
• Not against public policy
• Homogenous exposures
• Insurable Interest

+'high net worth' individuals type : special products, very very rich people

+ definition : the identification, analysis, economic control of risk which can threaten the assets or earning

risk identification -> risk analysis -> risk control

risk identification :

+ Discovering the threat that already exist and the potential threats

+ Insurer play a role through risk survey reports

risk analysis :

+ Examine past data for analysis and evaluation

+ Insurer will look at many aspect when rating risk

risk control :

+ control, reduce or even eliminate

+different aspects :

*Physical control measures

*Financial control measures : take out insurance or other means

*Developing a good risk culture : educate staff and client

+ Intenal controls :

Detective controls, Corrective controls,

Preventative controls

Public Policy

Not against moral things

+ law

Pure & Speculative risks

Speculative risk : you can gain from it

Insurable Interest

the legally recognised financial relationship between [..] ...

Particular and fundamental risks

Fortutios Event

fundamental risks : vast scale, too large

particular risks : localised, related to individual

Accidental, unexpected and not

inevitable

Cont :

+Insurer assist in the area of loss prevention and control -> by the survey report, premium reduction, training,

guidance, researching,...

Chap 2 : the insurance market

Structure of the insurance market

five groups : insurers, re-insurers, intermediaries, buyers, aggregators

Buyers : 5 main types

• Private Individual : normal people
• Partnerships : medical, law, veterinary partner..
• Companies : everyday people
• Public bodies : police forces, school, local council
• Association & clubs : football club, bands, stamp collecting clubs

Insurers

THE STATES

Defined by Ownership

- acts as insurer : welfare, pension

- acts as guarantor ( reinsurer) : terrorism risks

Proprietary companies :

• limited liability companies
• buying shares..
• publicly quoted or private limited

Societas Europaeas :

• can register in any state of EU and transfer to other state without the need of liquidate

Mutual companies :

• own by policyholder, share by lower premium
• limited by guarantee -> usually to the premium
• theory :liable to any loss make by the company

Mutual Indemnity Association :

• own by policyholder
• origin : self-managed pools
• P& I Clubs

Defined by functions

... by ownership (cont.)

Composite : several types of business

Specialist : only one class of business

Captive Insurance :

• tax-efficient method
• insure for the mother company
• premium maybe tax deductible, territory with favorable tax rate
• lower premium, paying premium by it owns experiences, lower cost

Protected cell companies :

• a cost effective platform for conventional products and others
• consist of : a core and an unlimited number of cells

Lloyd's

- an institute

- Syndicate : provide the financial backing

- Managing Agent : manage the underwriting

, also dual-regulated by FCA & PRA

- Underwriter : accept the risk on behalf of the Syndicate

-only Lloyds Insurance can place insurance at Lloyd

- "scratching a slip" : the underwriter signing for the share they accept

- "writting a line" : Syndicate accept the share of the same risk