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
Policy that has an initial premium with flexible premiums thereafter. Within limits, a policy owner can select both the future amount and frequency of premiums, or can stop and start ...
Act that prohibits insurance companies, group health plans, and health maintenance organizations from establishing lifetime limits or annual limits on mental health coverage that are lower ...
Unallocated funding instrument for pension plans under which premiums are placed on deposit, and are not currently allocated to the purchase of benefits for the employee. At retirement, an ...
Statutory underwriting gain minus (or loss plus) policyholder's dividends. ...
Coverage if state or municipal law requires that a damaged or destroyed building must be rebuilt at an increased cost to comply with building code provisions that were not in effect when ...
Same as term Deposit Term Life Insurance: policy in which a premium (the deposit) is paid in the first policy year, in addition to the regular term insurance premiums required. The deposit ...
Particular type of inland marine insurance. ...
Determination that group plans offering legal services are limited to an annual tax-free benefit of $70 per employee; group plans may offer employer-provided educational assistance plans on ...
Federal law passed in 1920 that allows any seaman incurring bodily injury as the result of the performance of one or more functions of the job to bring a suit for damages against the ...
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