IF1 - The Insurance Market

What 5 participants is the insurance market made up of?

Buyers (policyholders/insureds)

Insurers (sellers)

Intermediaries ( those who bring buyers and sellers together)

Aggregators (price comparison sites)

Reinsurers

Types of buyers

Private individuals

Companies

Partnerships

Public bodies

Charities, associations and clubs

Types of Insurers

Proprietary companies

Mutual companies

Mutual indemnity associations

Captive insurers

Protected cell companies (PCCs)

Proprietary companies

Companies owned by shareholders who share company profits - registered under the Companies Act 1985

Mutual companies

Companies owned by policyholders who benefit from profits through lower premiums. While they’re technically responsible for losses, in practice their liability is very limited

Mutual indemnity associations

Self managed pools of insurers policyholder-owned, mainly for marine risks. P&I (protection and indemnity associations) clubs cover ship liability. Members pay an initial fee (call), and extra payments may be required if costs rise.

Captive insurers

A company established by its parent company or group (usually a large corporation) that provides insurance coverage primarily to that parent company - tax efficient.

Protected cell companies (PCCs)

A special type of captive insurer with a core and separate “cells,” each acting as its own insurance unit with assets kept apart.

Types of insurer as defined by function

Composite companies

Specialist insurers

Composite companies

These accept several types of business and represent the major part of the company market

Specialist Insurers

These tend to issue policies for only one class of business

What are Takaful insurance companies?

Type of insurance that has its roots in the islamic financial services industry - based on the rulings of Sharia law. The principle that in any transaction risk and profit should be shared between the participants.

What islamic principles do Takaful insurances embrace?

Mutuality and cooperation

Shared responsibility

Joint indemnity

Common interest

Solidarity

Who do Takaful insurance products need to be approved by to ensure compliancy ?

Islamic scholars

What does the State do?

Acts as an insurer in the areas of welfare benefits and pension provision and as a guarantor to the insurance sector for terrorism and flood risks

What is LLoyds

Lloyd’s is a global insurance marketplace, not an insurer, operating under the Lloyd’s Act 1982 with the Council overseeing the market, and regulated by the FCA and PRA

What are syndicates?

Groups of private individuals or corporate investors who carry the risks (eg provide financial backing). Known as underwriting members or Names

What do Managing agents do?

Employing the underwriters and claims adjusters, and liaison with Lloyd's as well as other regulators on behalf of syndicates.

What does a members agent do

Advises potential corporate and individual members/Names on the advantages and disadvantages of investing in the Lloyd's market.

What is the document where the broker fills in  the suggested risks and suggested terms and conditions called?

Market Reform Contract (MRC)

What is the Market Reform Contract known as?

The slip

What does contract certainty mean?

Ensuring all parties are fully aware of the coverage and terms of the policy before a risk starts to be covered