CAIB 2 – Commercial Insurance – Chapter 1 Summary and Key Concepts Q&A
With the help of a qualified accountant, and especially useful when income is produced from a
dilapidated or run-down building, a capitalization factor is applied to the net annual rental
income. The Income Approach to determine the Actual Cash Value of a building.
When the insured says the other methods for determining ACV have failed, because the
building's value is actually higher to the insured, this method applies less depreciation. The
True Value to the Owner approach to determine the Actual Cash Value of a building.
Only used when the courts are asked to rule on ACV; it takes many factors into account,
including:
- Replacement value less depreciation;
- Market value;
- Rental value;
- Building use;
- Location;
- Obsolescence;
- Assessed value;
- Resale success. The Broad Evidence Rule to determine the Actual Cash Value of a building.
The costs to repair, replace or rebuild the lost or damaged property without deduction for
depreciation. "Replacement Value."
ACV takes depreciation into consideration, whereas Replacement Cost does not. The
difference between "Replacement Cost" and "Actual Cash Value" (ACV)
Book Value, because it's based on accounting functions only. The method used to value
property that's the least appropriate for insurance.
, Insurance of an insurer; where an insurer cedes part of the risk it has assumed to one or more
other insurers. "Reinsurance."
1) All insurers share in both the premiums collected and the losses incurred;
2) The contract is between the primary insurer and the reinsurer.
3) The policy is controlled by the primary insurer, and all claims are paid by the primary insurer.
The three rules that apply to reinsurance?
An insurance policy under which a group of insurers has agreed to participate together to
provide coverage. "Subscription Policy."
1) The line of business is so specialized that it isn't covered by reinsurance;
2) The type of risk is one that the insurer doesn't want to expose to its reinsurance;
3) The limits don't exceed the insurer's risk retention limits, but are above what it's prepared to
pay for a single claim;
4) The broker wants to spread a good, large line of business among his/her markets. The
four reasons a subscription policy may be the only insurance alternative.
1) Participating insurers share the premiums and the losses;
2) Each agreement is negotiated separately. The two common characteristics of subscription
policies.
The company that assumes the greatest portion of a subscription policy called. "Lead
company."
The premium amount kept by the insurer when the policy is terminated prior to its expiry date.
"Minimum retained premium".
With the help of a qualified accountant, and especially useful when income is produced from a
dilapidated or run-down building, a capitalization factor is applied to the net annual rental
income. The Income Approach to determine the Actual Cash Value of a building.
When the insured says the other methods for determining ACV have failed, because the
building's value is actually higher to the insured, this method applies less depreciation. The
True Value to the Owner approach to determine the Actual Cash Value of a building.
Only used when the courts are asked to rule on ACV; it takes many factors into account,
including:
- Replacement value less depreciation;
- Market value;
- Rental value;
- Building use;
- Location;
- Obsolescence;
- Assessed value;
- Resale success. The Broad Evidence Rule to determine the Actual Cash Value of a building.
The costs to repair, replace or rebuild the lost or damaged property without deduction for
depreciation. "Replacement Value."
ACV takes depreciation into consideration, whereas Replacement Cost does not. The
difference between "Replacement Cost" and "Actual Cash Value" (ACV)
Book Value, because it's based on accounting functions only. The method used to value
property that's the least appropriate for insurance.
, Insurance of an insurer; where an insurer cedes part of the risk it has assumed to one or more
other insurers. "Reinsurance."
1) All insurers share in both the premiums collected and the losses incurred;
2) The contract is between the primary insurer and the reinsurer.
3) The policy is controlled by the primary insurer, and all claims are paid by the primary insurer.
The three rules that apply to reinsurance?
An insurance policy under which a group of insurers has agreed to participate together to
provide coverage. "Subscription Policy."
1) The line of business is so specialized that it isn't covered by reinsurance;
2) The type of risk is one that the insurer doesn't want to expose to its reinsurance;
3) The limits don't exceed the insurer's risk retention limits, but are above what it's prepared to
pay for a single claim;
4) The broker wants to spread a good, large line of business among his/her markets. The
four reasons a subscription policy may be the only insurance alternative.
1) Participating insurers share the premiums and the losses;
2) Each agreement is negotiated separately. The two common characteristics of subscription
policies.
The company that assumes the greatest portion of a subscription policy called. "Lead
company."
The premium amount kept by the insurer when the policy is terminated prior to its expiry date.
"Minimum retained premium".
