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
Offer and acceptance upon which an agreement is based. For a contract to be legal (and thus enforceable in a court of law), an offer must be made by one party to another party, who accepts ...
Property damage coverage for mobile agricultural equipment and machinery, including harness, saddles, blankets, and liveries. Perils insured are fire, lightning, vandalism, malicious ...
Value of a foregone opportunity, one rejected in favor of a presumably better opportunity. For example, investment of a sum into a mutual fund instead of a variable annuity with a ...
State-sponsored insurance fund that was intended to guarantee deposits at state-chartered savings institutions. A handful of these funds existed in the early 1980s, but after a string of ...
Payments from an employee's employee benefit insurance plan that can be rolled over to an individual retirement account (IRA) or to another plan maintained by the employer that accepts ...
Regulation named after a former Superintendent of Insurance of New York State, and instituted in the early 1900s. It requires every insurer admitted to New York to comply with the New York ...
Coverage for bodily injury and property damage liability excluded under standard ocean marine insurance. Coverage includes protection of wharfs, docks, and harbors; bodily injury; cost of ...
Court-appointed or commissioner of insurance-appointed custodian to manage the affairs of an insurance company whose management is deemed unable to manage that company in a proper fashion. ...
Low-cost life insurance sold by savings banks in the states of Connecticut, Massachusetts, and New York. SBLI is a popular source of life insurance in these states for two reasons: it is ...
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