Risk Financing Chapt 9

Front 1

Finite Risk Financing Plan

Back 1

A risk financing plan that transfers a limited (finite) amount of risk to an insurer

Front 2

Commutation

Back 2

An agreement to extinguish all liabilities b/w the parties to an insurance or a reinsurance contract that usually involves a payment from the insurer tot he unsured (or reinsurer to reinsured)

Front 3

Margin

Back 3

An amount paid to the insurer under a finite risk insurance plan to compensate it for each type of risk it incurrs and for its administrative expenses.

Front 4

Experience fund

Back 4

a fund under a finite risk insurance plan that an insurer uses to share profit with the insured and whose amount is determined by adding the premium paid by the insured tothe investment income earned and then subtracting the insure's margin and paid losses.

Front 5

Underwriting risk

Back 5

The risk that an insurer's losses and expenses will be greaer than the premiums and the investment income it expects to earn under the insurance contract

Front 6

Investment risk

Back 6

The risk that an insurer's investment income will be lower than its expects and includes timing riskand interst rate risk

Front 7

Timing risk

Back 7

Therisk under an insureance contract that the insured's losses will be paid faster or more slowly than expected

Front 8

Interest rate risk

Back 8

The risk that interest rates will be below the expected rate during the term of the insurance contract

Front 9

Credit risk

Back 9

The risk that an insurer will not collect premiums owed by its insured

Front 10

Perspective plan

Back 10

A risk financing plan arranged to cover losses from events that have not yet occurred

Front 11

Retroactive plan

Back 11

A risk financing plan arranged to cover losses from events that have already occurred

Front 12

Loss portfolio transfer

Back 12

A type of retroactive plan that applies to an entire portfolio of losses

Front 13

Integrated risk insurance plan

Back 13

A risk financing plan that provides an insureed with a single block of risk transfer capacity over several tpes of risk exposures and that is usually written for multiple years.

Front 14

Basket aggregate retention

Back 14

A large aggregate retention spanning multiple types of risk exposure

Front 15

Dual trigger cover

Back 15

A type of integrated risk insurance plan in which the retention and limit are tied to two different types of risk and that requires the insured to incur a loss above a cetain theshold under each of the two types of risk during the same time period in order to trigger coverage under the policy.