Financial Insurance
Definition of "Financial insurance"
Structured product designed to meet specific needs of the insured that may involve any of the following funding arrangements:
- loss portfolio transfers in which the self-insurer transfers the reserves that it had established for its known losses to the insurance company; by concluding such a transfer, the self-insurer can use the capital it had previously set aside for loss reserves;
- retrospective transfers in which a self-insurer has losses for which inadequate insurance coverage exists and now these companies require additional insurance coverages so that the limits can be raised to an adequate amount;
- prospective loss transfers in which a self-insurer has a requirement to fund in advance its future losses, thereby removing its liability for loss reserves from its balance sheet. The premium paid by the self-insurer to the insurance company reflects the self-insurer's expectation of loss.
This specifically designed structured product enables the self-insurer to eliminate its liability for maintaining loss reserves. Also, this product enables the self-insurer to protect itself against adverse future loss experience resulting in earnings per share not being affected by unexpected losses.
Popular Insurance Terms
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Process in which the policy-holder surrenders the policy when: cash proceeds can be invested elsewhere at a higher return than that being earned on the cash value within the policy; ...
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System of charges to an insured that fluctuates according to the loss experience of that insured. This is a form of experience rating. ...
Report developed by or supplied by a credit agency to an insurer dealing with the financial standing and character of an insurance applicant. These factors are carefully weighted by the ...
Standardized set of business laws that has been adopted by most states. The Uniform Commercial Code governs a wide range of transactions including borrowing, contracts, and many other ...
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