Derivatives
Definition of "Derivatives"
Securities that derive their value from other financial instruments that are used by the insurance company to hedge its bets on which direction the market is moving. For example, cattle futures are a simple derivative in that the cattle futures contract increases or decreases in value as future prices change for cows on the hoof. When insurance companies use derivatives, they are more likely to use them in association with currency and interest rate transactions as a means of protecting themselves against adverse moves in interest rates or foreign currency exchanges. This instrument provides a mechanism for hedging against the interest rate risks that are inherent within insurance products by pricing in that risk in advance and protecting against future negative occurrences.
Popular Insurance Terms
Exchange, in insurance, of an adequate consideration (premium paid by an insured) for the promise of an insurance company to pay benefits in the event the insured incurs a loss. ...
Reduction in the amount that the insured receives from the insurer, after having incurred a property loss, because the insurer failed to carry the amount of coverage required by the ...
Life insurance payment issued after the insured has been disabled for at least six months. One percent of the face value of the policy is paid the insured as a monthly income benefit and ...
Difference in the amount of losses between the beginning and end of a time period. ...
Inquiry conducted by a committee of the legislature of the State of New York in 1905 that looked at abuses of life insurance companies operating in the state. This study led to stricter ...
Agreement under which an annuitant receives a predetermined monthly income benefit for life upon the death of the insured. Should the annuitant predecease the insured, the contract is ...
Rules stating that every administrator of a qualified pension plan, profit sharing plan, section 401 (K) plan salary reduction plan), section 403(b) plan, and stock bonus plan must provide ...
Degree of underwriting profit that an insurance company's book of business shows. ...
No limitation under a contributory pension plan of an employee's right to receive vested benefits, regardless of whether or not the employer withdraws contributions. ...
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