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
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Payment by the insurance company to the insured for the actual expenses incurred by the insured, such as medical expenses. ...
Life insurance that stays in effect for only a specified, limited period. If an insured dies within that period, the beneficiary receives the death payments. If the insured survives, the ...
Broad excess protection for liability over the level of primary coverage or self insurance. Umbrella policies are written for both business and personal liability. For example, a personal ...
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Actual price paid for property when it was acquired. The original cost might apply to a piece of jewelry, to a piece of equipment, or to a building. For insurance purposes, original cost is ...
Ratio of the insurance company's investment in common stocks dividend to its adjusted surplus account. This ratio shows how vulnerable the company's surplus is to the stock market ...
1957 federal law setting a limit on the liability of operators of nuclear facilities. The law, an amendment to the Atomic Energy Act of 1954, authorized establishment of private insurance ...
Professional designation earned after the successful completion of four national examinations given by the insurance institute of America (IIA). Covers such areas of expertise as insurance ...
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