FIM Chapter 15

State insurance commissions supervise and examine insurance companies using a coordinated examination system developed by the

National Association of Insurance Commissioners

An annuity liquidates a lump sum fund by making payments to the beneficiary

at regular intervals over time

Loss rates on all property insurance policies are adversely affected by unexpected increases in

inflation

Like life insurance companies, property-casualty insurers are regulated by the

state commisions

Life insurance policy holder' funds invested in their policies are guaranteed by

state-sponsored guarantee funds

The two major sources of expense risk to P&C insurers are

1. loss adjustment expenses 2. commissions and other expenses

In addition to selling life insurance, life insurance companies also

1. manage pension plans 2. sell annuity contracts 3. provide health and accident insurance

The four basic classes of life insurance are

1. ordinary life 2. group life 3. credit life 4. other activities

According to the text, life insurance can increase their profits in two ways

1. reduce the risk of their insured pool to reduce future payout 2. increase interest income earned on net policy reserves

Life insurance provides protection for three major event types, which are

1. retirement 2. death 3. illness

The loss reserves on the property-casualty insurers balance sheet are established to address the insurers underwriting risk, which may result from

1. unexpected increases in loss rates 2. unexpected increases in expenses 3. unexpected decreases in investment returns

In 2016 the US had approximately _____________ of life insurances companies in business that it had in 1988.

38 percent

The property-casualty insurance industry is highly concentrated, with the top ten firms having a _____________ share of the overall market measured by premiums written.

50 percent

The federal agency responsible for identifying any financial institution, including insurance companies, that presents a systematic risk to the economy and subjecting them to greater regulation is the

Financial Stability Oversight Council

P&C insurers and reinsurers may issue _____________, which pay high yields but may cause the investor to lose all or part of their _____________ if a specified event occurs.

catastrophe bonds; principal or interest

A common measure of overall underwriting profitability of a line is the

combined ratio

Life insurance which protects lenders against a borrowers death prior to the repayment of a debt contract is called a

credit life

The types of assets on life insurance company's balance sheet exposes it to _____________ risk and _____________ risk.

credit; interest rate

The type of ordinary life insurance that combines a term element with a savings element, paying out beneficiaries if the insured dies within the endowment period, and paying out the insured if they live to the endowment date, is

endowment life

In accident and health insurance, the major activity line is the _____________ insurance.

group

A type of insurance that covers a large number of insured persons under a single policy is called

group life

A type of pension plan offered by insurance companies in which the insurer guarantees not only the rate of interest credited to the plan over some period, but also the annuity rates on beneficiaries contract is

guaranteed investment contract

The period 1985-2016 was characterized by a number of catastrophes of historically

high severity

A liability insurance line is said to experience _____________ when the insured event occurs within a coverage period but a claim is not filed until many years later.

long-tail loss

Among the property-casualty insurance company's' liabilities, the expected administrative and related costs associated with sending an adjuster to settle a claim is called the

loss adjustment expense

The ratio of actual losses incurred on a specific policy line to premiums earned is called

loss ratio

Loss rates are more predictable on _____________ insurance lines than on _____________ insurance lines.

low-severity, high frequency lines; high severity, low frequency lines

A life insurance company's _____________ are based upon assumptions regarding expected future commitments to pay out on present contracts, including death benefits, maturing endowment policies and the cash surrender value of policies.

net policy reserves

Unlike the FDICs depositor insurance fund, the state-sponsored funds are _____________ and receive contributions into the the fund only when _____________.

not permanent; an insurance company has failed

The P&C insurers profitability measure that is calculated by subtracting the investment yield from the combined ratio after dividends is called

operating ratio

The maximum levels of losses are more predictable for _____________ insurance lines than for _____________ insurance lines.

property; liability

Property insurance covers the loss of _____________ and casualty insurance offers protection against _____________.

real and personal property; legal liability exposure

The life insurance underwriting process involves deciding _____________ and _____________.

should we insure the risk; how much should we charge for it

Of the top 10 insurance companies in the world by total revenue, _____________ are in the United States and_____________ are in China.

three; two

P&C insurers believe that the period 1985-2016 was a trough in

underwriting cycle