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
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Derivative representing a legal obligation to carry out a transaction that has been prearranged according to a stipulated price and date in the future. There are numerous types of financial ...
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Consideration should be given to a company's capacity to underwrite a particular risk, as indicated by its financial standing, claims philosophy, price structure, agent representation, loss ...
Annuity contract. If the annuitant dies before receiving income at least equal to the premiums paid, a beneficiary receives the difference in installments. If the annuitant lives after the ...
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