Chapter 6 Risk and Insurance Flashcards

This refers to the pricing of insurance

This refers to the process of selecting, classifying, and pricing applicants for insurance. The underwriter is the person who decides to accept or reject an application.

These are person who make daily decisions concerning the acceptance or rejection of business- are expected to follow official company policy.

The primary insurer that initially writes the business

· The insurer that accepts part or all of the insurance from the ceding company.

The amount of insurance retained by the ceding company for its own account.

This is the amount of the insurance ceded to the reinsurer.

· This is when the reinsurer in turn may reinsure part or all of the risk with another insurer.

· The second reinsurer.

This is a liability item on the insurer’s balance sheet that represents the unearned portion of gross premiums on all outstanding policies at the time of valuation.

· This is an optional, case by case method that is used when the ceding company receives an application for insurance that exceeds its retention limit. Before the policy is issued, the primary insurer shops around for reinsurance and contacts several reinsurers.

· This means the primary insurer has agreed to cede insurance to the reinsurer, and the reinsurer has agreed to accept the business. All business that falls within the scope of the agreement is automatically reinsured according to the terms of the treaty.

· under this, the ceding insurer and reinsurers agree to share premiums and losses based on some proportion. The ceding insurer’s retention limit is stated as a percentage rather than as a dollar amount.

· Insurer that writes the policy initially and later shifts part of all of the coverage to a reinsurer.

· This is when the reinsurer agrees to accept insurance in excess of the ceding insurer’s retention limit, up to some maximum amount. The retention limit is referred to as a line and is stated as a dollar amount. If the amount of insurance on a given policy exceeds the retention limit, the excess insurance is ceded to the reinsurer up to some maximum limit.