Insurance Futures
Futures contracts (legally binding contract that stipulates that delivery of an asset will be taken or delivery of an asset will be made at a future time at an agreed upon price at the current moment) on insurance lines to include catastrophic insurance futures, automobile insurance futures, homeowners insurance futures, and so forth, traded on the Chicago Board of Trade (CBOT). Traditionally, precious metals such as gold and silver; agriculture commodities such as cattle, corn, and soy beans; and United States Treasury issues such as bonds and bills, have all been traded on the CBOT. The aim of the transaction with these futures is to cancel the contract with a gain before the delivery of the commodity. (Who would want cattle delivered to their house?) On the other hand, the insurance futures contract concerns itself with the dollar value the market attaches to an index. In turn, this index is an expectation of how much of the premium income generated by a particular line of insurance will have to be allocated to pay off incurred losses. For example, if the automobile insurance line generates an income of $5,000,000 and the market has an expectation that 90% of that income will have to be allocated to paying off incurred losses, the market will value that futures contract at a price somewhat less than $450,000. This is because of such factors that have to be accounted for as incurred but not reported losses (IBNR).
Popular Insurance Terms
Provision in an insurance policy that indicates what is denied coverage. For example, common exclusions are: hazards deemed so catastrophic in nature that they are uninsurable, such as war; ...
Factors on the application that must be evaluated in order to complete the underwriting process: age; sex; physical condition; personal health history; family health history; financial ...
form of BOILER AND MACHINERY INSURANCE that covers power generating plants. form of BUSINESS INCOME COVERAGE FORM that covers a utility customer's losses resulting from interruption of ...
Liability insurance coverage for claims arising from acts that occurred before the beginning of the policy period. Policies written on a claims made basis, such as malpractice liability ...
Coverage for bodily injury and property damage liability resulting from the nuclear energy material (whether or not radioactive) on the insured business's premises or in transit. This ...
Property coverage for a builder of ships until possession passes to the owners. Protects against pre-launch and post-launch perils. Coverage can be purchased on an all risks basis subject ...
Total estimated cost incurred by a person or persons, a family, or a business resulting from the death or disability of a wage earner (key employee), damage or destruction of property, ...
Fidelity bond provided under a blanket position bond (in which each position is covered on an individual basis) or a commercial blanket bond (in which a loss is covered on a blanket basis ...
State laws based on a model law of the National Association of Insurance Commissioners (NAIC) that allow insurers to set rates independently; or adopt those rates developed by a rating ...
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