| finally, you're going to get all the information about | | | | -In short, it is an in-house self-insurance vehicle. |
| insurance companies.that article will help you to | | | | Captives may take the form of a "pure" entity |
| understand every thing about insurance | | | | (which is a 100% subsidiary of the self-insured |
| companies and the types of insurance companies. | | | | parent company); of a "mutual" captive (which |
| Types of insurance companies-Insurance | | | | insures the collective risks of members of an |
| companies may be classified as | | | | industry); and of an "association" captive (which |
| 1-Life insurance companies, which sell life | | | | self-insures individual risks of the members of a |
| insurance, annuities and pensions products. | | | | professional, commercial or industrial association). |
| 2-Non-life or general insurance companies, which | | | | -Captives represent commercial, economic and |
| sell other types of insurance.insurance | | | | tax advantages to their sponsors because of the |
| companies-In most countries | | | | reductions in costs they help create and for the |
| -In most countries life and non-life insurers are | | | | ease of insurance risk management and the |
| subject to different regulatory regimes and | | | | flexibility for cash flows they generate. |
| different tax and accounting rules. | | | | Additionally, they may provide coverage of risks |
| -The main reason for the distinction between the | | | | which is neither available nor offered in the |
| two types of company is that life, annuity, and | | | | traditional insurance market at reasonable prices. |
| pension business is very long-term in nature - | | | | -The types of risk that a captive can underwrite |
| coverage for life assurance or a pension can | | | | for their parents include property damage, public |
| cover risks over many decades. | | | | and products liability, professional indemnity, |
| -By contrast, non-life insurance cover usually | | | | employee benefits, employers liability, motor and |
| covers a shorter period, such as one year. | | | | medical aid expenses. |
| Insurance companies are generally classified as | | | | -The captive's exposure to such risks may be |
| either mutual or stock companies. | | | | limited by the use of reinsurance. |
| -This is more of a traditional distinction as true | | | | -Captives are becoming an increasingly important |
| mutual companies are becoming rare. | | | | component of the risk management and risk |
| -Mutual companies are owned by the | | | | financing strategy of their parent. |
| policyholders, while stockholders (who may or | | | | -This can be understood against the following |
| may not own policies) own stock insurance | | | | background: |
| companies. | | | | 1-heavy and increasing premium costs in almost |
| Other possible forms for an insurance company | | | | every line of coverage |
| include reciprocals, in which policyholders | | | | 2-difficulties in insuring certain types of fortuitous |
| 'reciprocate' in sharing risks, and lloyds | | | | risk |
| organizations. | | | | 3-differential coverage standards in various parts |
| Insurance companies rated | | | | of the world |
| -rated by various agencies The ratings include the | | | | 4-rating structures which reflect market trends |
| company's financial strength, which measures its | | | | rather than individual loss experience |
| ability to pay claims. | | | | -insufficient credit for deductibles and/or loss |
| -It also rates financial instruments issued by the | | | | control efforts. |
| insurance company, such as bonds, notes, and | | | | -There are also companies known as 'insurance |
| securitization products. | | | | consultants'. |
| TO GET THE FULL DETAILS FOR EVERY TYPE | | | | Like a mortgage broker, these companies are |
| OF INSURANCE TRY TO VISIT | | | | paid a fee by the customer to shop around for |
| All Insurance Types | | | | the best insurance policy amongst many |
| Reinsurance companies | | | | companies . |
| -Reinsurance companies are insurance companies | | | | -Similar to an insurance consultant, an 'insurance |
| that sell policies to other insurance companies, | | | | broker' also shops around for the best insurance |
| allowing them to reduce their risks and protect | | | | policy amongst many companies. |
| themselves from very large losses. | | | | However, with insurance brokers, the fee is |
| -The reinsurance market is dominated by a few | | | | usually paid in the form of commission from the |
| very large companies, with huge reserves. | | | | insurer that is selected rather than directly from |
| -A rein surer may also be a direct writer of | | | | the client. |
| insurance risks as well. | | | | -Neither insurance consultants nor insurance |
| Captive insurance companies | | | | brokers are insurance companies and no risks are |
| -Captive insurance companies may be defined as | | | | transferred to them in insurance transactions. |
| limited-purpose insurance companies established | | | | -Third party administrators are companies that |
| with the specific objective of financing risks | | | | perform underwriting and sometimes claims |
| emanating from their parent group or groups. | | | | handling services for insurance companies. |
| -This definition can sometimes be extended to | | | | These companies often have special expertise |
| include some of the risks of the parent | | | | that the insurance companies do not have. |
| company's customers. | | | | |