06/03/2017 UnderwritingEssentialsC120Flashcards|Quizlet

Underwriting Essentials C120 54 terms amylongobardi

Underwriter:1 An insurance professional employed to accept or

reject risk on behalf of an insurer

Underwriter:2 An investor of shareholders capital

Underwriter:3 An insurance professional employed to implement

an insurer's strategic plan

Underwriter An insurance professional who invests the capital

of an insurer's shareholders by accepting or
rejecting risk to implement an insurer's strategic
plan

Insurance The undertaking by one person to indemnify

another person against loss or liability for loss in
respect of a certain risk or peril to which the object
of the insurance may be exposed, or to pay a sum
of money or other thing of value upon the
happening of a certain event

Facultative Reinsurance Negotiated between an insurer and a reinsurer on

an individual risk or policy

Treaty Reinsurance Is an agreement between insurer and reinsurer to

reinsure a block or portfolio of business without
the insurer's having to submit each risk to the
insurer

Speculative Risk Where there is a change of either gain or loss.

Classic example includes gambling

Pure Risk Where there is only a chance of loss

Pure Premium The premium required to pay for insured losses -

claims

Development Factors Adjustments to current reserves for claims that

have yet to be settled to reflect the estimated final
cost of those claims
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Trend Factor Adjustments applied to all losses to reflect what

they would probably cost if they were to occur
next year rather than having occurred at some time
in the past

Acquisition Costs Costs incurred by the insurer to conclude a

contract of insurance with a policyholder. May also
include commission to the broker, advertising,
promotional, inspections, or appraisal fees

Administrative Expenses General expenses the insurer incurs to operate

business. Includes rent, explore salaries etc.

Profit The amount of money left to the insurer after it has

paid all its expenses

Underwriting Profit (or losses) Arises out of insurance operations. It is the amount
by which earned premiums exceed(or fall short of)
the cost of incurred claims and expenses.

Investment Income Income the insurer earns from investing money that
the insurer has received as premium but not yet
earned, as well as money it has set aside as a
reserve to pay claims

Actuary A professional skilled in the application of

mathematics of financial problems. They apply
specialized knowledge of the mathematics of
finance, statistics, and risk theory faced by
insurance companies, pension plans, government
regulators, social programs and individuals.

Rate The price of a unit of insurance for the policy

period

Premium The total cost of insurance, derived by multiplying

the rate of insurance by the amount of insurance.

Exposure Base The denomination in which the unit of exposure is

expressed (ex gross sales for liability insurance )

Exposure Unit Expressed as a specified amount of the exposure

base. (Ex gross sale are often expressed in units of

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$1,000.)

Theory of Large Numbers The principle that a given probability becomes

more reliable the larger the number of trials or
cases in the sample.

Theory of Probability The likelihood of an occurrence, expressed by the

ratio of the number of actual occurrences to the
number of possible occurrences.

Long-tail problem Losses incurred during the policy period but not
discovered and reported until later

Rating The process by which underwriters apply the rates

developed by actuaries to the information that
underwriters have gathered to determine the
premium for individual risks

Insurable Interest When the insurance buyer stands in such a legal

relationship to the object of insurance as to be
financially benefited by its continued existence or
financially prejudiced by its loss or damage.

Frequency of Loss The ratio of the number of losses to the number of

exposure units

Severity of Loss The average size of losses

Additional Insured Any party not automatically included as an insured

but entitled to a certain degree of protection
under the policy

Additional Named Insured Any party, other than the original named insured,
identified as an insured in the policy declarations.
Has more rights under the policy and also more
responsibility

Mortgage A loan agreement where the security is real

property (land or buildings)

Chattle Mortgage A loan agreement where the security is personal

property(anything other than land or buildings)

Blocking the Market

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