Exam (elaborations)
C16 - The Business of Insurance.
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C16 - The Business of Insurance.
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C16 - The Business of InsuranceSubscribed capital - CORRECT ANSWER-The amount of stock sold by a
corporation
Paid-up capital - CORRECT ANSWER-Represents that part of the subscribed
capital that has been paid in full by shareholders
Mutual insurer - CORRECT ANSWER-A form of cooperative enterprise owned by
its policyholders also known as members. The association is formed for the
purpose of insuring one another against the possibility of certain types of loss. It
operated on a premium assessment plan.
Corporate governance - CORRECT ANSWER-How a corporation directs itself
and how control of this process is managed. Encompasses process, structure,
and information used to manage
Span-of-control - CORRECT ANSWER-A managerial principal asserts that
limiting the number of employees who report to the same manager or supervisor
improves organization performance.
Internal controls - CORRECT ANSWER-A process put into effect by a company's
board of directors, management, and other personnel that is designed to
reasonably assure stakeholders that corporate objectives are being met.
Self-dealing - CORRECT ANSWER-The conduct of a board member or other
persons of power who take advantage of their position to use their influence or
knowledge illegally to gain a personal advantage
Fiduciary - CORRECT ANSWER-A person who is entrusted with managing
something for the good of another
Pricing actuaries - CORRECT ANSWER-Responsible for analyzing data and
performing calculations to determine pricing for insurance policies
, Reserve actuaries - CORRECT ANSWER-Determine the amount of money to be
held in bulk claims reserves. The bulked reserves include provisions for claims
that have been incurred but not yet reported to the company (IBNR) and adverse
claims reserve development - the amount by which the ultimate cost of claims
may exceed the reserve. Thy are responsible for monitoring an insurer's overall
financial situation and alerting management if financial regulatory requirements
are not met.
Board of directors - CORRECT ANSWER-A group of individuals chosen by the
stockholders of a company to direct that company
Capacity - CORRECT ANSWER-The amount of capital that individual insurers or
entire markets make available for insuring risks.
Theory of supply and demand - CORRECT ANSWER-The way pricing is
regulated by balancing the amount of a product made available for purchase with
the quantity required by consumers
Bull market - CORRECT ANSWER-A market that is on the rise. Strong demand
for security but weak supply so share prices increase. A period marked by high
employment rate
Bear market - CORRECT ANSWER-A market in decline. Share prices drop and
investors believe the trend will continue. Economy is sluggish and unemployment
rate rises
Economic inflation - CORRECT ANSWER-A general increase in the prices of all
consumer goods and services
Run-off - CORRECT ANSWER-A company that ceases to write new business
and only services existing polices
Market dislocation - CORRECT ANSWER-Occurs when consumers are forced to
find a new insurer when their current insurers decides to withdraw from the
market after such consumers have come to rely on the insurer for that product
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