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
Liability insurance exception for pollution coverage that is not both sudden and accidental from the insured's standpoint. As a result of the damage suits from such incidents as the ...
Coverage when residential property does not qualify according to the minimum requirements of a homeowner's policy, or because of a requirement for the insured to select several different ...
Amount subtracted from an annuity or from mutual fund proceeds payable to an annuity owner or mutual fund owner to reflect expense fees described in the annuity contract or mutual fund ...
Annuity with no fixed schedule for payment of premiums. For example, premiums can be paid for 10 straight months, then not paid for the next 10 months, then paid every other month, or any ...
Insurance company that puts together a consortium of insurance and reinsurance companies to provide an adequate financial base with sufficient underwriting capacity to insure large risks. ...
Company formed and operated without the profit motive as its normal business objective; normally sells and services health insurance policies. ...
In reinsurance contracts, clause that requires the re-insurer to provide coverage if an underlying carrier is unable to fulfill its obligations under the policy ceded to the re-insurer. ...
Account that is similar in form to the health plan flexible spending account (FSA) with contributions to this account used to reimburse employees who are parents for expenses at a ...
Maritime acts resulting in a liability circumstance falling under common law and statutory law. ...
Have a question or comment?
We're here to help.