FIN 3610 Assignment 4

FIN 3610 Assignment 4                                 Name_______________________

Chapters 6 and 8

Please remember that you must do your own work. Any plagiarism will result in a grade of zero for all students involved. Please use your own words even if you are using the textbook for answers. Always provide a citation when a reference is used.

  1. Answer the following:
  2. What is an actuary?
  3. How does rate making, or the pricing of insurance, differ from the pricing of other products?
  1. The following concern underwriting:
  2. Explain the function of underwriting.
  3. Briefly explain the basic principles of underwriting.
  4. Identify the major sources of information available to underwriters.
  1. Briefly describe the following types of claims adjustors:
  2. Agents:
  3. Staff claims representatives:
  4. Independent adjustors:
  5. Public adjustors;
  1. Answer the following:
  2. What is the meaning of reinsurance?
  3. Briefly explain the reasons for reinsurance.
  4. Explain the meaning of “securitization of risk.”
  1. Liability Insurance Company writes a substantial amount of commercial liability insurance. A large construction company requests $100 million of liability coverage to cover its business operations. Liability Insurance has a reinsurance contract with Bermuda Re that enables the coverage to be written immediately. Under the terms of the contract, Liability Insurance pays 25% of the losses and retains 25% of the premium. Bermuda Re pays 75% of the losses and receives 75% of the premium, less a ceding commission that is paid to Liability insurance. Based on the preceding facts, answer the following questions:
  2. What type of reinsurance contract best describes the reinsurance arrangement that Liability Insurance has with Bermuda Re?
  3. If a $50 million covered loss occurs, how much will Bermuda Re have to pay? Show your work and explain your answer.
  4. Why does Bermuda Re pay a ceding commission to Liability Insurance?
  1. What is the primary purpose of insurance regulation? Explain.
  1. Briefly explain the significance of the following legal cases and legislative acts with respect to insurance regulation:
  2. Paul Virginia:
  3. South-Eastern Underwriters Association Case:
  4. McCarran-Ferguson Act:
  5. Financial Modernization Act of 1999:
  1. Explain the principal activities used in regulating insurance companies.
  1. Explain the following actions by agents that are prohibited by state law:
  2. Twisting:
  3. Rebating:
  1. Explain the major arguments for repeal of the McCarran-Ferguson Act.

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