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
State law that stipulates that goodwill as an admitted asset cannot be greater than 10% of adjusted surplus. ...
Coverage for a shipper (owner/sender) for property damage or loss of goods in transit through the post office. A trip transit insurance policy specifically excludes coverages on property ...
Professional management designation earned by passing 10 national examinations on life and health insurance subjects including insurance, finance, marketing, law, information systems, ...
Limiting provision. Exclusions listed in group health plans include: benefits under Workers Compensation; certain dental procedures; convalescent or rest cures; medical expenses resulting ...
Feature in a life insurance policy allowing a policyowner to freely assign (give, sell) a policy to another or institution. For example, in order to secure a loan, a bank asks to be ...
Death caused by a person without legal justification. Wrongful death may be the result of negligence, such as when a drunken driver hits and kills someone; or it may be intentional, as when ...
Retention of all files of policies sold by the agent of record who, according to written agreement with the insurance company, has the exclusive rights to solicit renewals. ...
Types of reinsurance instruments under which the amount of risk transferred is more limited than under traditional risk reinsurance instruments. The limitations on risk transfer take the ...
Model law endorsed by the national association of insurance commissioners (naic) giving state regulators broad new powers to deal with financially troubled insurance companies. The act was ...
Have a question or comment?
We're here to help.