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
Policy under which the insurer will pay the actual cash value of the property at the time the property was damaged or destroyed provided the loss falls within the limitations of the policy. ...
Appreciation in the unsold assets' value. When assets are sold, their capital gain (loss) is shown on the insurance company's income statement; any unrealized gain or loss is not included ...
Limiting provision. Exclusions listed in group health plans include: benefits under Workers Compensation; certain dental procedures; convalescent or rest cures; medical expenses resulting ...
Market in which sellers dominate trading and force financial asset prices down. ...
Ratio of net income after taxes to total end of the year net worth. This ratio indicates the return on stockholder's total equity. ...
Maximum amount that an insurance company is obligated to pay all injured parties seeking recourse as the result of the occurrence of an event covered under a liability insurance pol ...
Health insurance contract that is renewable at the option of the insurer. On the anniversary date of the contract, the insurer has the right to decide whether or not to renew. ...
Same as term Bankers Blanket Bond: coverage for a bank in the event of loss due to dishonest acts of its employees or individuals external to the bank. For example, if a teller goes to ...
Rule concerning stock sold and then repurchased or a similar security repurchased (warrants or options) within 30 full days before or after the day of the sale. Losses established from such ...
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