Derivatives
Securities that derive their value from other financial instruments that are used by the insurance company to hedge its bets on which direction the market is moving. For example, cattle futures are a simple derivative in that the cattle futures contract increases or decreases in value as future prices change for cows on the hoof. When insurance companies use derivatives, they are more likely to use them in association with currency and interest rate transactions as a means of protecting themselves against adverse moves in interest rates or foreign currency exchanges. This instrument provides a mechanism for hedging against the interest rate risks that are inherent within insurance products by pricing in that risk in advance and protecting against future negative occurrences.
Popular Insurance Terms
Homeowners policy to cover the owner of a townhouse. ...
State law that stipulates the establishment of required reserves for claims made basis liability coverage contracts, removes the excess statutory reserves, and directs that all amounts that ...
Document used to sign up employees for plans such as salary savings, life insurance, or other employee benefits. ...
Measurement of the response of the cash flow of an insurance company to various interest rate scenarios; for example, how rising interest rates will affect the number of life insurance ...
Method whereby an insurer pays the amount of each claim for each risk up to a limit determined in advance and the reinsurer pays the amount of the claim above that limit up to a specific ...
Coverage against a loss resulting from the forcible entry of a safe. In order for this coverage to be applicable, there must be signs of forcible entry into the premises in which the safe ...
Written notice, to be submitted by the claimant, required by the insurance company in the event of an insured peril. This notice is part of the standard property and casualty insurance ...
Amount of the insurance company's liabilities for claims that have not been settled. If this reserve increases significantly in relation to the company's surplus, the risk is greater for ...
Policy in which an insurer agrees to pay property or liability losses in excess of a specific amount per occurrence. For example, this type of coverage typically is used by an employer that ...
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