Heath insurance life insurance assets and liabilities

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Heath Insurance- Life Insurance Assets and Liabilities- Property-Liability Insurance The evolution of Property-liability insurance Origins of Marine and Fire Insurance- Property-Liability Insurance in the US- o Local merchants would share the risks of a voyage The Property-liability business The Nature of the Product- o Usually for homeowner, car owner, or business o Different risks- property damage, casualty loss, and liability The Nature of the Business- o Investments are less important than life insurance (policies have longer life) o Risks involved in writing insurance are greater, pricing premiums are difficult and pooling is less effective- there can be a significant correlation among risks- hurricane for ex. Underwriting Cycles- o Underwriting cycle- cycle in market conditions and profitability in the property-liability business
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The Alternative Market- o Captive insurers- insurance subsidiary created to provide insurance services to the parent company own assets and reserves to provide them with coverage o Alternative market- coverage of property-liability risk through private arrangements with no insurance companies Property-liability today- No regulatory obstacles, these companies hold more stocks Reinsurance The Function of Reinsurance- Insurance company’s protection to bearing residual risk- Insurance for insurance companies is called reinsurance- covers exposure on policies it has written. The Reinsurance Treaty- In exchange for premium the reinsurer shares the loss with the primary insurer The Reinsurance Industry- Standard commodity because no specific information or monitory necessary Highly competitive because anyone can enter business Lloyd’s of London Exchange company, not an insurance company The History of Lloyd’s How Lloyd’s works- Risks are brought to floor of the exchange by independent brokers- risks are then accepted by one or more underwriters Lloyd’s Current Problems- Underwriters are paid commission on the premiums they write, but don’t bear the risks- so incentive to set premiums low and sign a lot of business The Insurance Industry- The Economics of the Insurance Business Economies of Scale- o In PL and reinsurance- the pooling of risk and the better diversified pool the better it works- diversified geographically o Life insurance- scale comes from asset side, larger portfolio of assets, the better diversified o Reputational scale is particularly important Barrier to entry- o Apart from reputational other barriers include: information (need to price premiums correctly), aging effect (new policyholders are worse risks than long standing ones because worst risks are weeded out over time), Marketing Economies of Scope- o Life insurance and PL- obvious scope between two types of insurance o Insurance and other financial services- life insurance and- investment banking, investment management, pension plan management, mortgage
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  • Fall '19
  • catastrophe insurance

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