Professional Documents
Culture Documents
CONNECTION
Health and
•Liabilities, & accident insurance •Term life
•properties inssurance •Permanent products
•Accident insurance •Endowment products
products
•Annuitties
•Health care pruducts
•Retirement plan
Non – life
Life insurance
insurance
CO N N E C T I O N
Employer
Private/Personal Provided
Insurance Insurance/
Employee
Benefits
Social Insurance
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Health Homeowner,
Ins., Auto, Fire,
Busi.GL Ins.
4
Business
Property Ins.
CONTENT
1. Introduction
2. Principles are applied in general insurance
3. General Insurance products
4. General insurance market
1. INTRODUCTION
1.1. Features of general insurance
Short-term insurance: the duration is
maximized one year
protects for property and liability losses
Gives a protection only
Is called damage insurance
Can determine the insured value
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Subrogation
Contribution
2. PR I N C I P L E S A R E A P P L I E D
IN GENERAL INSURANCE
2.1. Indemnity
Benefit policies: in cases of personal
accident and sickness, or life insurance
Ex-gratia payments: for the sake of
goodwill, insurers make a payment even if
on the basis of strict liability they need
not.
How indemnity is provided: cash
payment, replacement or repair. In fact,
indemnity is provided by cash. 9
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2. PR I N C I P L E S A R E A P P L I E D
IN GENERAL INSURANCE
2.1. Indemnity
Excess: Is a amount of each and every claim which
is not covered by the policy. The amount of the
excess is deducted from each and every claim.
Franchise: Is designed to cater for certain small
losses. Once the franchise has been exceeded, the
claim is payable in full.
Deductible: Is the name given to a very large excess
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2. PR I N C I P L E S ARE
APPLIED IN GENERAL
INSURANCE
2.3. Contribution
Is the right of an insurer to call upon others
similarly, but not necessarily equally liable to the
same insured, to share the cost of an indemnity
payment
There are five requirements before contribution
will arise:
Two or more policies of indemnity must exist;
The policies must cover a common interest;
The policies must cover a common peril which gives
rise to the loss
The policies must cover a common subject matter;
Each policy must be liable for the loss. 13
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3. GE N E R A L I N S U R A N C E P R O D U C T S
3.1. Property insurance products (pp.251-259;
271-276):
car policy;
fire policy;
Construction policy;
Erection policy;
Electronic policy;
Marine policy: Hull policy, cargo policy, P&I
Home care policy;
Etc.
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3. GE N E R A L I N S U R A N C E P R O D U C T S
Coverage: property damage (damage of car):
Insured risks:
Natural hazards
Accidents
Fire and explosion
Premium:
P=f+d P: premium
f: net premium
d: operation and other expenses (sub premium)
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3. GE N E R A L I N S U R A N C E P R O D U C T S
Coverage: Personal accident
The insurer pays for personal injury or dead which
caused by accident when they in the insured car.
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3. GE N E R A L I N S U R A N C E P R O D U C T S
Indemnity:
Property damage: based on the principle of indemnity
Liability damage: indemnify the insured’s liability
but is not over the liability limit.
Personal damage: based on the table of payment for
personal accident.
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3. GE N E R A L I N S U R A N C E P R O D U C T S
Example 2: In an accident:
Car A: property damage: damage of the car: 32 mil. VND,
business damage: 6 mil. VND. Driver is injury: Medicare
cost: 15 mil. VND and income lost: 8 mil. VND.
Car B: property damage: damage of the car: 28 mil. VND,
business damage: 15 mil. VND.
Mistake of parties: A: 50%; B: 50%
Both cars are insured (property and third party liability
insurances); at time of accident: the insurance policies are
in force. (liability limit: 70 mil./risk/property and 70
mil./risk/person)
Two cars bought insurance from different insurers.
Requirement: calculate the indemnity of the
insurers to the insureds. 23
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3. GE N E R A L I N S U R A N C E P R O D U C T S
Example 4: In an accident:
The insured car is fired and totally damaged
Car is insured (property and third party liability
insurances: (liability limitations: 50 mil./risk/property
and 50 mil./risk/person); at time of accident: the
insurance policy is in force for 8 months.
Depreciation of the car is 5%/year
Insured valued: 800 mil. VND;
25
Etc.
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Damage to reputation
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31
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3. GE N E R A L I N S U R A N C E
PRODUCTS
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3. GE N E R A L I N S U R A N C E
PRODUCTS
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4. GE N E R A L I N S U R A N C E M A R K E T :
U N D E RW R IT IN G C Y C L E
P. Rates rise
Terms and conditions
tighten
upswing
Lower limits
Hard
insurers reinsurers
Agents/underwriting
brokers
agencies
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Brokers
Agent/underwriting agencies
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ES OF REINSURANCERANCTE
REINSURANCE
NON NON
PROPORTIONAL PROPORTIONAL
PRPORTIONA PROPORTIONA
L L
SURPLUS EVENT XL
STOP LOSS
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PROPORTIONAL REINSURANCE
Quota Share Treaty
Example : Q/S cession 75% with a 30% Commission
€150,000 Policy
€100,000 Policy
Split of a € 10m Loss
Net cost for the Insurer € 2,5m €50,000 Policy 25% 75%
Recovery from the Reinsurance € 7,5m 25% 75%
25% 75%
PROPORTIONAL REINSURANCE
Surplus Treaty
Example
Surplus 5 lines of €4 m
Used when the
5 Variable % of cession cedant want to
to reinsurers reduce Its
4 exposure to
83,33% the larger
3 risks
The level of
2 commission
66,67%
is a key
1 0% parameter
for this type
Retention of treaty
€4m 100,00% 33,33% 16,67%
EXAMPLES
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CHARACTERISTICS OF PROPORTIONAL
REINSURANCE
Reinsurance Commission
Contribution of the Reinsurer to cover part of the costs supported by the
Insurer (acquisition, administration)
Fix or sliding scale between a max and a min depending of the final loss
ratio
10 layer 10xs5
Part of losses
retained by
cedant
0
Losses
NO N PR O P O R T I O N A L R E I N S U R A N C E
XL P E R E V E N T T R E A T Y
40
Example 35
Cat XL 20 XS 20 Reinsurance
30 contribution
€19m
Overall claim
amount for the 25
Event €39m
4+8+2+12+7+6 =39 20
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Amount of Loss
10
10
Retention
€20m
5
5
0 0
1 2 3 4 5 6
Losses
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Example
Per risk XL 10xs5
35
inuring to the
benefit of Per event
XL 20xs20 20xs20 30
€ 6m
Overall claim amount for the event = € 25
recovery
39m Overall recovery from reinsurance = from per
€19m event
€ 13m from per risk + € 6m from per event 20
reinsurance
cover
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Amount of Loss
€13m recovery
10
from per risk 10
Retention
Retention
reinsurance € 20m
5 cover 5
0
1 2 3 4 5 6 Cumulated €26m 0
Losses
4+8+2+12+7+6 =39
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Amount of Loss
10
10 Retention €20m
5
5
0
4 5 0
1 2 3 6
Losses
FACULTATIVE REINSURANCE
FACULTATIVE R E T E N
TION
TREATY
FAC
TREATY
RETENTION
XS FAC QS FAC
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