Lecture 2-Accounting for financial institutions (Insurance).pdf - Accounting for Insurance institutions Insurance Lecture 2 Fundamentals of Insurance Dr

Lecture 2-Accounting for financial institutions (Insurance).pdf

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1 Accounting for Insurance institutions- Insurance Lecture 2 Fundamentals of Insurance 1 Dr. Mohamed Elmaghrabi Topics to be covered by this module Fundamentals of Insurance (Lectures 1 and 2). The accounting system of insurance companies. Accounting for life insurance transactions. Accounting for general insurance transactions. Reinsurance transactions. 2 Dr. Mohamed Elmaghrabi Insurance? Insurance is: A promise of compensation for specific potential future losses in exchange for a periodic payment 3 Dr. Mohamed Elmaghrabi
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2 Benefits of Insurance Insurance is designed to protect the financial well-being of an entity in the case of unexpected loss. Insurance can reduce risk by combining a sufficient number of exposure units to make their individual losses collectively predictable. 4 Dr. Mohamed Elmaghrabi Parties of Insurance 5 Insured Insurer The party who undertakes the risk The party protected from perils Dr. Mohamed Elmaghrabi Parties of Insurance, Cont’d The party which promises to pay a certain sum, or to indemnify, the other party, called the insurer . The party to whom this protection is given in exchange of premium, called insured . The document containing the terms and conditions of contract is called a policy. 6 Dr. Mohamed Elmaghrabi
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3 Parties of Insurance, Cont’d The amount for which a policy is issued is known as the Insured amount or policy amount . The consideration which the insured has to pay to the insurer for the protection given to him is called premium . 7 Dr. Mohamed Elmaghrabi Basic Definitions ( 1. Chance of loss) 1. Chance of loss It indicates the probable number and severity of losses out of a given number of exposures. Best expressed as a fraction or percentage.
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  • Fall '16
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  • Accounting, Accounting For Financial Insti

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