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
Ceiling on expense reimbursement allowance, as stated in New York insurance law, that an insurance company licensed in New York State can give its agents. This is one reason why a company ...
Inability to divide a cash value life insurance policy into a savings element and a protection element because, in theory, if the policyowner withdraws a portion or ail of the cash value, ...
Statements by an insurance applicant concerning personal health history, family health history, occupation, and hobbies. These statements are required to be substantially correct; that is, ...
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 ...
Coverage for bodily injury, property damage or destruction, for which the insured garage and/or its representatives become legally liable resulting from the operation of the garage. For ...
Payments made to the insured by the insurance company before the settlement date. For example, a claim is scheduled to be settled on June 1, 2000, but the insurance company pays the ...
Lower limit on the maximum possible interest rate an insurance company will pay. If the market interest rates are below that lower limit, the insurance company pays the lower limit rate. In ...
Highest price investor is willing to pay for a stock or mutual fund unit and lowest price a seller of a stock or mutual fund is willing to accept. ...
Addition to a personal automobile policy (pap) that covers an insured who is involved in a collision with a driver who does not have sufficient liability insurance to pay for the damages. ...
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