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
Decision in the absence of a plaintiff or defendant at the specified court time. ...
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Disciplined approach to managing an insurance company's bond portfolio duration. When interest rates rise, the average maturity and duration of the bond portfolio is lengthened, resulting ...
Salaries plus commissions plus overhead expenses plus office rent plus fees charged for memberships in industry associations and bureaus plus guaranty association assessments plus taxes ...
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Authorization to borrow from the U.S. Treasury by the issuance of notes to the Treasury. The Secretary of the Treasury must approve the notes and their interest rates. The PBGC must be self ...
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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. ...
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