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
Combination of contributions of many investors whose money is used to buy stocks, bonds, commodities, options, and/or money market funds, or precious metals such as gold, or foreign ...
Choice of beneficiary in which the death benefit of a life insurance policy is retained by the company to be paid as a series of installments of fixed dollar amounts per installment until ...
Type of insurance providing all risks coverage for personal property of the crew and passengers aboard a ship. Marine cargo insurance does not cover personal property of the crew and ...
Model act written and published by the national association of insurance commissioners (naic) whose purpose it is to regulate brokers who control insurance companies. The act permits the ...
Same as term Contingency reserve: percentage of total surplus retained, in insurance company operations, that serves as a reserve to cover unexpected losses as well as to cover the ...
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. ...
Method of classifying risks to establish equitable rates. In many property and liability insurance lines, the location of an insured has a significant impact on the loss experience. For ...
Losses representing claims paid. ...
Agreement concerning an insured individual, not the insured's property. A property and casualty insurance contract cannot be assigned, since it follows the insured, not the property. For ...
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