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
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
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.
- Fall '16
- taher refaat
- Accounting, Accounting For Financial Insti