Insurance Futures
Futures contracts (legally binding contract that stipulates that delivery of an asset will be taken or delivery of an asset will be made at a future time at an agreed upon price at the current moment) on insurance lines to include catastrophic insurance futures, automobile insurance futures, homeowners insurance futures, and so forth, traded on the Chicago Board of Trade (CBOT). Traditionally, precious metals such as gold and silver; agriculture commodities such as cattle, corn, and soy beans; and United States Treasury issues such as bonds and bills, have all been traded on the CBOT. The aim of the transaction with these futures is to cancel the contract with a gain before the delivery of the commodity. (Who would want cattle delivered to their house?) On the other hand, the insurance futures contract concerns itself with the dollar value the market attaches to an index. In turn, this index is an expectation of how much of the premium income generated by a particular line of insurance will have to be allocated to pay off incurred losses. For example, if the automobile insurance line generates an income of $5,000,000 and the market has an expectation that 90% of that income will have to be allocated to paying off incurred losses, the market will value that futures contract at a price somewhat less than $450,000. This is because of such factors that have to be accounted for as incurred but not reported losses (IBNR).
Popular Insurance Terms
Information generated by the medical information bureau (MIB) and made available to member companies concerning medical information of applicants for life and health insurance. Member ...
Type of court bond filed on behalf of the defendant and used to release assets to him or her that have been attached pending a court decision. ...
Assets permitted by state law to be included in an insurance company's annual statement. These assets are an important factor when regulators measure insurance company solvency. They ...
Basic requirements of an employee benefit insurance plan such as minimum age and years of service with an employer. ...
Coverage in the event an employee is kidnapped from an insured business's premises and forced to return to aid a criminal in a theft. ...
Deductible eliminated through the payment of an additional premium, resulting in first-dollar coverage under the policy. ...
Coverage usually provided for large businesses in four areas: Section I (Property) The building (s) and contents are covered against either any peril (ALL RISKS basis) or only perils listed ...
Mathematical premise stating that the greater the number of exposures, (1) the more accurate the prediction; (2) the less the deviation of the actual losses from the expected losses (X - x ...
Fund that comes into existence because premiums for ordinary life insurance policies in their early years are higher than necessary for the pure cost of protection. These excess premiums, ...
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