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Table of Contents
PREFACE
CHAPTER 1
OVERVIEW OF INSURANCE
1.1 Risks and insurance
1.1.1 Concept of risk
1.1.2 Concept of Risk Management
1.1.3 Concept of Insurance
1.1.4 Insurance Contracts
1.2 Principles of insurance
1.2.1 Insurable interest
1.2.2 Utmost Good Faith
1.2.3 Principle of Indemnity
1.2.4 Subrogation
1.2.5 Contribution / Double insurance
1.2.6 Proximate cause
Foreseeability: It determines if the harm resulting from an action was reasonably able to be predicted.
Direct Causation: The main thrust of direct causation is that there are no intervening causes between an act and the resulting harm. An intervening cause has several requirements - it must:
○ be independent of the original act,
○ be a voluntary human act or an abnormal natural event, and
○ occur at some time between the original act and the harm
1.3 Insurance market
1.3.1 The buyers of insurance
1.3.2 The intermediaries
1.3.3 The sellers
1.3.4 Other insurance related professions and bodies
Actuaries are essential to the insurance and reinsurance industry, either as staff employees or as consultants. Insurance actuaries can be defined as qualified professionals concerned with the application of probability and statistical theory to problems of insurance, investment, financial management and demography.
CHAPTER 2
GENERAL INSURANCE
2.1 Overview of general insurance
2.2 Commercial general insurance
2.2.1 Marine Insurance and Oil & Gas Insurance
2.2.2 Non - marine General Insurance
There is a wide range of non – marine general insurance. This section takes a brief look at some the most common types.
2.2.2.1 Property Insurance/fire insurance
Reduction in turnover
Increased cost of working
2.2.2.3 Motor Vehicle Insurance
- Insurable risks
Commonly, insurable risks in the construction and erection insurances include:
Many exclusions exist under the construction/ erection insurance policies, commonly such as:
- Overview
- Types of liability insurance
As we have seen, the concept of liability insurance concerns a wide range of various types of liability. However, in this section we focus on the types of policies that not yet discussed.
Professional liability insurance protects professionals such as architectural corporation and medical practice against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For instance, professional liability insurance in reference to the medical profession may be called malpractice insurance. Notaries public may take out errors and omissions insurance (E&O). Other potential E&O policyholders include, for example, real estate brokers, Insurance agents, home inspectors, appraisers, lawyers and website developers.
▪ Public liability insurance
▪ Product liability insurance
- Hull "All Risks"
- Spares insurance
- Hull War Risks
- Hull Total Loss Only Cover
This is similar to Hull All Risks cover given above but will respond only to total losses of aircraft, whether actual, constructive or arranged. This is particularly given for old aircraft since the old aircraft are heavily depreciated and insured for low sums and premium on such low sums would result in low premium, which would be inadequate for the partial losses. The ratio of partial losses to total losses in such old aircraft is distorted.
- Liability Insurance
2.3 Personal general insurance
2.3.1 Personal accident insurance
2.3.2 Medical and health insurance
2.3.3 Worker compensation insurance
2.3.4 Consumer credit insurance
CHAPTER 3
LIFE INSURANCE
3.1 Overview
3.2. Term/Temporary Term Insurance
3.2.1 Concept
3.2.2 Annual renewable term
3.2.3 Level Term Life Insurance
3.3 Permanent life insurance
3.3.1 Concept
3.3.2 Whole life insurance
- Participating policy
- Indeterminate Premium
- Economic
3.3.2 Universal life insurance
Types of universal life insurance:
- Single Premium
- Flexible Premium
3.3.4 Variable universal life insurance
- Characteristics of variable life insurance
Premium Flexibility
Investment choices/ Investment options
- Risks of Variable Universal Life
3.4 Endowment Insurance and Pure endowment
3.4.1 Endowment Insurance
- Traditional With Profits Endowments
- Unit-linked endowment
- Full endowments
- Low cost endowment
- Traded endowments
3.4.2 Pure endowment
3.5 Income stream products
Annuities can be clarified also into follows:
Fixed and variable annuities
Guaranteed annuities
Joint annuities
Impaired life annuities
3.6 Group life insurance policies
Beside the basic covers that are listed above, life insurance companies always offer many Riders or Optional Benefits or Supplementary benefits to insurance buyers. These are modifications to the insurance policy and change the basic policy to provide features desired by the policy owner. Depending on the types of life insurance, the riders/optional/ supplementary benefits are diverse. The following brings out the main point of some these benefits:
CHAPTER 4
REINSURANCE
4.1 Overview
4.1.1 The Concept
4.1.2 Functions of Reinsurance
- Risk transfer
- Income smoothing
- Reinsurer expertise
- Creating a manageable and profitable portfolio of insured risks
- Surplus relief and Managing cost of capital for an insurance company
4.2 Methods of reinsurance
4.2.1 Facultative Reinsurance
4.2.2 Treaty Reinsurance
4.2.3 Facultative/ Obligatory Treaty
4.3 Types of Reinsurance
4.3.1 Proportional Reinsurance
4.3.2 Non – Proportional Reinsurance
4.3.2.1 Excess of Loss reinsurance
Risk-attaching Basis
Loss-occurring Basis
Claims-made Basis
▪ Paid Basis, such as: 15/12: Incurred in 15 month period / paid in 12 month contract period. For example, Policy Period: 1/1/07 - 12/31/07; Incurred Dates: 10/1/06 to 12/31/07 -> Paid Dates: 1/1/07 to 12/31/07.
4.4 Non - Traditional Reinsurance
4.4.1 The Concept
4.4.2 Types of Financial Reinsurance Contract
CHAPTER 5
FINANCE AND ACCOUNTING IN INSURANCE
Finance and accounting in the insurance field is a very complex issue since there are numerous complex variables with respect to the values and timing of claims and other liabilities. This introductory course will provide an overview of the subject such general accounting principles including the typical financial statements of the insurance companies and assessing the financial strength of an insurance companies. In other words, the detail issues in accounting such as: accounting Processes (premium accounting; commissions and expenses accounting; claim accounting, technical reserves accounting; investment accounting, etc, are not be examined in this chapter.
5.1 Implementing the IASs/IFRS in the insurance industry
5.1.1 Overview
5.1.2 Financial statements of insurance companies in accordance with IAS/IFRS
5.1.2.2 Financial statements in accordance with the IAS / IFRS
▪ Objective of financial statements
▪ Underlying assumptions
▪ Qualitative characteristics of financial statements
▪ Elements of financial statements
▪ Recognition of elements of financial statements
▪ Measurement of the Elements of Financial Statements
▪ Concepts of Capital and Capital Maintenance
▪ Content of financial statements
5.2 Assessing Financial Strength of insurance companies
5.2.1 Financial strength ratings methodologies of rating agencies
5.2.2 Capital adequacy and solvency of insurance companies
5.2.3 Ratios used in assessing insurance company’s financial condition
5.2.4 Roles of Actuaries, independent Auditors, internal audit and internal control in the financial management
CHAPTER 6
LEGAL ASPECTS OF INSURANCE
6.1 Overview
6.2 Legal aspects of insurance contract
6.2.1 Concept of insurance contract
Generally, in comparison with others contracts, the insurance contracts have following characteristics :
6.2.2 Essentials of a Valid Insurance Contract
6.2.3 Content of an insurance contract
Generally, an insurance contract consists of:
6.2.4 Entering into contracts of insurance
Industry association rules and “best practice” codes
Law - Either common law, statutory law, or both
- Insurer’s legal obligations
An insurer will normally have obligations to provide the applicant with a copy of the proposed contract terms as well as a document which includes the following information if relevant:
Depending on local law and custom, an insurer may have additional obligations as follows:
Provide required disclosures and notices
Avoid misleading or deceptive conduct
Express documentation in plain language
Ensure that products sold are suitable for the applicant’s circumstances
Post-inception obligation
An insurer will normally have obligations to:
Interpret its contract terms with utmost good faith
Comply with the terms of its own contract
6.2.5 Cancellation of insurance contract
6.3 Insurance Regulation and supervision
6.3.1 Objectives of Insurance Regulation and supervision
It is important to recognise that any participant in the insurance market has taken the necessary actions to meet regulatory requirements.
6.2.2 Prudent supervision of insurance company solvency