Derivatives
Definition of "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
Subtraction of a number of years from a standard table of life insurance rates under the assumption that a particular group-women-outlive men and presumably will be paying premiums for a ...
In ocean marine insurance, provision stipulating that upon the collision of two or more ships, when all ships are at fault, all owners and shippers having monetary interests in the voyage ...
Insurance company that does not utilize the rates and policies of a rating bureau. ...
Branch of knowledge dealing with the mathematics of insurance, including probabilities. It is used in ensuring that risks are carefully evaluated, that adequate premiums are charged for ...
Summary certificate of benefits issued to an employee in lieu of a policy. The master contract remains with the employer. For example, in group life insurance, an employee receives only a ...
Presence of other contract (s) covering the same conditions. When more than one policy covers the exposure, each policy will pay an equal share of the loss. ...
Recording and presentation of financial statements, such as the annual statement, by the insurance company. Financial reporting statements are used by the State Insurance Commissioner in ...
Payment of that portion of the annual premium by the employee necessary to cover the PS-58 cost for that given year. Any unpaid premium balance for that particular year is paid by the ...
Specific powers that a prospective insured believes the insurance company has granted to its agent. For example, if the insurance company has furnished the agent a rate book, application ...
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