OTHER TYPES OF INSURANCE

 

Reinsurance

Reinsurance is critical to the insurance process; it brings capacity, stability, and financial strength to insurers. The purpose of reinsurance is to spread large risks and catastrophes over as large a base as possible. It is the assumption by one insurance company (the reinsurer) of all or part of a risk undertaken by another insurance company (the cedent). It enables an insured with a sizable risk exposure to deal with and receive coverage from one insurer, rather than dealing with a number of insurers. The portion of the risk that exceeds the primary insurer's retention level is layed-off (ceded) to a reinsurer. The reinsurer can further reinsure a part of the risk assumed; this is called retroceding. If the reinsurer agrees to share losses arising from only one risk, the agreement is known as facultative reinsurance; if the reinsurer agrees to share losses arising from more than one risk, usually a whole line or book of business, the agreement is known as treaty reinsurance. Western Europe is the largest provider of worldwide reinsurance. The Caribbean, including Bermuda, is the largest foreign supplier of reinsurance to the United States. The financial strength of the reinsurer is most important, since the direct writer is always primarily responsible for payment of losses.

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Aviation Insurance

Aviation insurance covers the hull and liability hazards of both commercial airlines and private aircraft; it does not include accidental injury or death coverage, which companies issue separately. During the 1960s and 1970s, many new companies entered this field, primarily as reinsurers. These companies compete among themselves and with foreign insurance carriers (mainly Lloyd's of London) for both U.S. and foreign aviation business.

One problem associated with aviation insurance is the constant exposure to catastrophic loss. As speed, size of equipment, fuel load, and passenger capacity continue to increase, the catastrophe hazard grows in direct proportion. There are too few commercial aircraft at risk to allow successful operation of the "law of large numbers," upon which underwriters rely to predict losses. Therefore, aviation underwriters must rely on their own judgments in determining rates.

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Business Insurance

Business Insurance can be any kind of insurance that protects businesses against risks. Some principal subtypes of business insurance are (a) the various kinds of professional liability insurance, also called professional indemnity insurance, which are discussed below under that name; and (b) the business owners policy (BOP), which bundles into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners insurance bundles the coverages that a homeowner needs.

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Catastrophe Insurance

Reinsurance for catastrophic losses. The insurance industry is able to absorb the multi-billion dollar losses caused by natural man-made disasters such as hurricanes, earthquakes and terrorist attacks because losses are spread among thousands of companies including catastrophe reinsurers who operate on a global basis. Insurer’s ability and willingness to sell insurance fluctuates with the availability and cost of catastrophe reinsurance. After major disasters, such as Hurricane Andrew and the World Trade Center terrorist attack, the availability of catastrophe reinsurance becomes extremely limited. Claims deplete reinsurers’ capital and, as a result, companies are more selective in the type and amount of risks they assume. In addition, with available supply limited, prices for reinsurance rise. This contributes to an overall increase in prices for property insurance.

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Liability Insurance

Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.

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Glass Insurance

Coverage for glass breakage caused by all risks; fire and war are sometimes excluded. Insurance can be bought for windows, structural glass, leaded glass and mirrors. Available with or without a deductible.

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Kidnap/Ransom Insurance

Coverage up to specific limits for the cost of ransom or extortion payments and related expenses. Often bought by international corporations to cover employees. Most policies have large deductibles and may exclude certain geographic areas. Some policies require that the policyholder not reveal the existence of the coverage.

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Travel Insurance

Insurance to cover problems associated with traveling, generally including trip cancellation due to illness, lost luggage and other incidents

All You Need To Know About Travel Insurance FAQs Guide

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Regulatory Framework for Accident & Health Insurance Business

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