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
Liquor liability legislation in 20 states under which a dispenser of alcoholic beverages is held responsible for bodily injury and/or property damage caused by its customers to a third ...
Accrediting body for the CPCU (Chartered Property and Casualty Underwriter) designation. The institute provides undergraduate and continuing education in property and casualty insurance ...
Record of losses and premiums received for accident coverage within a 12-month period. These statistics show the percentage of each premium received that is being paid out in claims and ...
Situation involving a chance of a loss or no loss, but no chance of gain. For example, either one's home burns or it does not; this risk is insurable. ...
Insured's income prior to the disability minus the insured's income after the disability. ...
Period, set by law, after which a damage claim cannot be made. Limits are set by individual states and usually range from one to seven years. ...
Health insurance that is not subject to alteration, termination, or increase in premium upon renewal. ...
Covers property damage and theft coverage in two areas not subject to a coinsurance requirement or a deductible. Coverage A. If the bank becomes liable for loss to a customer's property ...
In property and casualty insurance, contract section containing such information as name, description, and location of insured property; name and address of the insured; period a policy is ...
Have a question or comment?
We're here to help.