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
Life insurance policy provision under which the policyholder may apply the accumulated cash value, in the form of a single premium payment, to pay up the policy or to mature the policy as ...
In many property insurance policies, a requirement that the insured carry insurance as a percentage of the total monetary value of the insured property. If this percentage is not carried, ...
Deleveraging of the insurance company's balance sheet. ...
Woman executor. ...
Policy that combines life insurance coverage on two lives and pays policy proceeds on the second person's death with the accumulation potential of an underlying variable investment ...
Method of funding a pension plan under which a single premium payment is made to fund a single unit of benefit for one year of recognized service with the employer. For example, if the ...
Real property (structure (s) attached to the land) that is occupied and/or is under the care, custody, or control of an individual, individuals, or an organization for which an insurance ...
Provision in many business and personal policies that loss or damage to one of a pair or set of individual items does not represent the loss of the pair or set. For example, the loss of one ...
Decrease in value of property as the result of technological advancement and/or changing social mores. This factor is used to measure the amount of depreciation in determining the actual ...
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