Life and Health Insurance

Certificate of Authority:

A Certificate of Authority is a license issued to an insurer by a department of insurance (or equivalent state agency), which authorizes that company to conduct insurance business in that particular state.

Domestic Insurer:

A Domestic Insurer is an insurer with its principal or home office in a state where it is authorized.

Foreign Insurer:

A Foreign Insurer is an insurer with its principal office or domicile location in a state different from the state it is transacting insurance business.

Reciprocal Insurer:

A Reciprocal Insurer is an unincorporated organization in which all members insure one another.

Risk Retention Group:

A Risk Retention Group is a group-owned liability insurer which assumes and spread product liability and other forms of commercial liability risks among its members.

Fraternal Benefit Society:

Fraternal Benefit Societies are nonprofit benevolent organizations that provide insurance to its members.

FRATERNAL BENEFIT SOCIETIES

Fraternal societies are noted primarily for their social, charitable, and benevolent activities. They have memberships based on religion, nationality, or ethnicity. They also issue insurance covering their members.

Surplus Lines Insurance:

Surplus Lines Insurance is nontraditional insurance only available from a surplus lines insurer. They offer coverage for substandard or unusual risks not available through private or commercial carriers.

Actuarial department

The actuarial department calculates policy rates, reserves, and dividends.

Claims Department:

The claims department is responsible for processing, investigating, and paying claims.

reinsurer (assuming company)

The company assuming the risk.

Insured:

The insured is the customer receiving insurance protection under an insurance policy.

Insurer:

The insurer is the insurance company.

net retention (or net line)

The portion of the risk that the ceding insurer retains.

The concept of insurance

transfer of risk from one party to another through a legal contract

Captive Insurer:

A Captive Insurer is an issuer established and owned by a parent firm for the purpose of insuring the parent firm's loss exposure.

Broker:

A Broker represents themselves and the insured (i.e., the client or customer).

Multi-line Insurer:

A multi-line insurer is an insurance company or independent agent that provides a one-stop-shop for businesses or individuals seeking coverage for all their insurance needs. For example, many large insurers offer individual policies for automobile, homeowner, long-term care, life, and health insurance needs.

Non-admitted Insurer:

A non-admitted or unauthorized insurer is an insurer who has not received a certificate of authority from a state's department of insurance authorizing them to conduct insurance business in that state.

Nonparticipating policy:

A nonparticipating insurance policy, typically issued by stock companies, do not allow policyowners to participate in dividends or electing the board of directors.

Participating Plan:

A participating plan is an insurance policy under which the policyowners share in the company's earnings through receipt of dividends and also elect the company's board of directors.

RECIPROCAL INSURERS

A reciprocal insurer in an unincorporated organization overseen by a board of governors or directors in which individual members (also called subscribers) agree to insure each other

Reinsurer:

A reinsurer is a company that provides financial protection to insurance companies. Reinsurers handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to.

RISK PURCHASING GROUPS (RPGS)

A risk purchasing group (RPG) shares some common characteristics with an RRG. Both operate under the auspices of the Federal Liability Risk Retention Act (LRRA) of 1986. Also, both types of organizations provide liability insurance for individuals and entities with a common bond.

Self-Insurers:

A self-insurer establishes a self-funded plan to cover potential losses instead of transferring the risk to an insurance company.

Stock Insurance Company:

A stock company is an insurance company owned and controlled by a group of stockholders (or shareholders) whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fixed premium, nonparticipating policies.

Treaty reinsurance

A typical reinsurance contract between two insurance companies.

Alien Insurer:

An Alien Insurer in the United States is an insurer whose principal office and domiciled location is outside the country.

Admitted Insurer:

An admitted or authorized insurer is an insurer who has received a certificate of authority from a state's department of insurance authorizing them to conduct insurance business in that state.

CAPTIVE INSURER

An insurer established and owned by a parent firm or group of firms to insure the parent's loss exposure.

ASSESSMENT MUTUAL INSURERS

Assessment mutual companies are classified by the way they charge premiums

Divisible Surplus:

Divisible surplus is the amount of earnings paid to policyowners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes.

primary insurer (ceding company)

In a reinsurance agreement, the insurance company that transfers some or all of its loss exposure (risk) to another insurer

Industrial Insurer:

Industrial Insurers make up a specialized branch of the industry, primarily providing policies with small face amounts with weekly premiums. Other names for industrial insurers include home service or debit insurers.

Lloyds of London:

Lloyds of London is NOT an insurer, but a group of individuals and companies that underwrite unusual insurance.

Mutual Insurance Company:

Mutual Insurance Companies are insurance companies characterized by having no capital stock, being owned by its policy owners, and usually issue participating insurance.

nonparticipating insurance policies

Nonparticipating insurance policies do not pay policy dividends because policyowners do not own the insurance company. Neither does the purchase of nonparticipating insurance policies confer any other ownership prerogatives, such as electing the company's board of directors.

Private (Commercial) Insurer:

Private or commercial insurance companies are companies owned by private citizens or groups that offer one or more insurance lines. Commercial insurers are NOT government-owned.

Reinsurance:

Reinsurance is the acceptance by one or more insurers, called reinsurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage.

REINSURERS

Reinsurers are a specialized branch of the insurance industry because they insure other insurers. Reinsurance is an arrangement by which an insurance company transfers a portion of an assumed risk to another insurer.

Insurance:

The transfer of risk through the pooling or accumulation of funds.

Underwriting Department:

The underwriting department is the department within an insurance company responsible for reviewing applications, approving or declining applications, and assigning risk classifications.

divisible surplus

the amount of earnings paid to policyowners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes.

facultative reinsurance

a primary insurer will seek reinsurance tailored to cover a specific risk or exposure without an ongoing agreement. (In some situation)

RISK RETENTION GROUPS (RRGS)

a specialized insurance company created under the terms of the Federal Liability Risk Retention Act (LRRA) of 1986 to provide liability insurance for individuals and entities with a common bond. The primary purpose of an RRG is to retain or pool risks. These group-owned liability insurers assume and spread liability risks among their members. In doing so, they defend claims and pay awards.

Participating policies

allow policyholders to participate in the company by electing the board of directors and receiving dividends from the divisible surplus.

Treaty reinsurance involves

an automatic sharing of the risks assumed based on previously established criteria

stock insurance company

an insurance company owned by private investors. such companies are publicly traded commercial entities organized and incorporated under state laws to make a profit for their stockholders (shareholders).

risk retention group

can be established as a type of captive insurance company.

Surplus Carriers Provide

coverage for unusual risks or unique situations. Surplus lines insurance is available to those who need protection that is not available through the commercial insurance carriers authorized to do business in the applicant's state.

Nonparticipating policies

do not allow policyholders to participate in elections or receive dividends.

Qualifications for Surplus Line Coverage

insured must demonstrate that he has made an unsuccessful effort to secure coverage in the authorized market.

Mutual insurance companies

organized and incorporated under state laws, but they have no stockholders. Instead, the owners are the policyholders. Anyone purchasing insurance from a mutual insurer is both a customer and an owner. They have the right to vote for members of the board of directors. Mutual companies are referred to as participating companies because the policyowners participate in the distribution of dividends.

SURPLUS LINES INSURANCE

refers to the nontraditional insurance market

indemnify policyholders

the policies restore insureds to the financial position they enjoyed before the insured loss.