Financial Insurance
Definition of "Financial insurance"
Structured product designed to meet specific needs of the insured that may involve any of the following funding arrangements:
- loss portfolio transfers in which the self-insurer transfers the reserves that it had established for its known losses to the insurance company; by concluding such a transfer, the self-insurer can use the capital it had previously set aside for loss reserves;
- retrospective transfers in which a self-insurer has losses for which inadequate insurance coverage exists and now these companies require additional insurance coverages so that the limits can be raised to an adequate amount;
- prospective loss transfers in which a self-insurer has a requirement to fund in advance its future losses, thereby removing its liability for loss reserves from its balance sheet. The premium paid by the self-insurer to the insurance company reflects the self-insurer's expectation of loss.
This specifically designed structured product enables the self-insurer to eliminate its liability for maintaining loss reserves. Also, this product enables the self-insurer to protect itself against adverse future loss experience resulting in earnings per share not being affected by unexpected losses.
Popular Insurance Terms
Enacted on April 1, 1997; provides protection against creditors for irrevocable trusts provided that the trust has a grantor who is a discretionary beneficiary. In order for the statute of ...
Requirement of the Internal Revenue Service that any dividend payments received are subject to a 20% withholding if the investor fails to furnish the dividend payer with the investor's ...
Concealment of the actual fact. For example, an insurance agent tells a prospective insured that a policy provides a particular benefit when in actual fact this benefit is not in the ...
Early type of no-fault automobile insurance developed by two law professors, Robert Keeton and Jeffrey O'Connell. Its basic premise is that for many accidents it is impossible to place the ...
Statistical procedure used to calculate a premium rate based on the loss experience of an insured group. Applied in group insurance, it is the opposite of manual rates. Here the premiums ...
Ruling that, under current tax law, an insurance company that has incurred a net income loss in a given year may charge that loss against its taxable income in a subsequent year. This ...
Form of insurance that insurance companies buy for their own protection, "a sharing of insurance." An insurer (the reinsured) reduces its possible maximum loss on either an individual risk ...
End of a defined time period that dividends become payable to the policyholder. ...
Financial technique for providing term death coverage for an entity. With this procedure: (1) an individual purchases an ordinary life insurance policy and completes an agreement with the ...
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