C16- The Business of Insurance -
Chapter 3- Dynamics of the
Insurance Market
What is capacity in an insurance context? - correct answer ✔✔The amount of capital that
individual insurers for entire markets make available for insuring risk
What does the theory of supply and demand do? - correct answer ✔✔analyze the way pricing is
regulated by balancing the amount of a product made available for purchase with the quantity
required by consumers.
what is a bull market? - correct answer ✔✔is a market on the rise. Strong demand for securities
but a weak supply. Rise of share prices, investors are optimistic, economy is strong and
employment rate is high.
what is a bear market? - correct answer ✔✔is a market in decline. prices are dropping, invest in
securities, economy is sluggish and unemployment rises.
what does the law of supply show? - correct answer ✔✔shows that the quantity of a product a
supplier will provide it relative to the amount of payment per unit they will receive
what does the law of demand state? - correct answer ✔✔if all other factors remain equal, fewer
people will demand the product as its prices rises.
what is the effect of mergers and acquisitions in the insurance marketplace? - correct answer
✔✔-demand for reinsurance lessens
-increased capacity
, -increased investors
-increased investment returns
when the investment market is performing badly what must insurers rely in order to earn a
profit? - correct answer ✔✔underwriting
Briefly discuss how consumer supply and demand affects the dynamics of the property and
casualty market place? - correct answer ✔✔Economic theory of supply and demand, proving
pricing regulated by balancing amount of product made available for purchase with quantity
required by consumers. Healthy economy leads to increased demands for insurance and
reinsurance more insurance on cars, cargo, construction projects, more manufacturing.
Contributes to organic growth. Cause bull equity markets and higher interest rates as banks
increase interest to temper a hot economy and cub inflation. Insurers investments returns
increase. Traditionally, when economy is faltering insurers have often done well and when the
economy has done less well people more cautious of their assets, tending to rely more on
insurance.
Briefly discuss how ease of entry into the insurance market place affects the dynamics of the
property and casualty market place? - correct answer ✔✔Licensing and capital requirements,
but abundance of companies has led to fragmented and competitive nature of market place.
Briefly discuss how government regulation affects the dynamics of the property and casualty
market place? - correct answer ✔✔High level makes market relatively conservative and stable.
Attractive to foreign-owned companies looking to expand. Market for possible effect on the
market capacity. Insurers have worked together to reduce legislative ultimatums. Created
residual market mechanisms to ensure available of mandatory auto insurance.. insurers created
PCOCC to protect policyholder and public against insurers bankruptcy.
Briefly discuss how international influences affects the dynamics of the property and casualty
market place? - correct answer ✔✔Government regulation in the US, Cat events and market
response led to creation of state insurers, regulatory action to discourage insures from leaving
the market place and not renewing policies. Ensure that insurance remain available in high risk
areas. Canadian insurers should consider what happens in the US, already governments have
Chapter 3- Dynamics of the
Insurance Market
What is capacity in an insurance context? - correct answer ✔✔The amount of capital that
individual insurers for entire markets make available for insuring risk
What does the theory of supply and demand do? - correct answer ✔✔analyze the way pricing is
regulated by balancing the amount of a product made available for purchase with the quantity
required by consumers.
what is a bull market? - correct answer ✔✔is a market on the rise. Strong demand for securities
but a weak supply. Rise of share prices, investors are optimistic, economy is strong and
employment rate is high.
what is a bear market? - correct answer ✔✔is a market in decline. prices are dropping, invest in
securities, economy is sluggish and unemployment rises.
what does the law of supply show? - correct answer ✔✔shows that the quantity of a product a
supplier will provide it relative to the amount of payment per unit they will receive
what does the law of demand state? - correct answer ✔✔if all other factors remain equal, fewer
people will demand the product as its prices rises.
what is the effect of mergers and acquisitions in the insurance marketplace? - correct answer
✔✔-demand for reinsurance lessens
-increased capacity
, -increased investors
-increased investment returns
when the investment market is performing badly what must insurers rely in order to earn a
profit? - correct answer ✔✔underwriting
Briefly discuss how consumer supply and demand affects the dynamics of the property and
casualty market place? - correct answer ✔✔Economic theory of supply and demand, proving
pricing regulated by balancing amount of product made available for purchase with quantity
required by consumers. Healthy economy leads to increased demands for insurance and
reinsurance more insurance on cars, cargo, construction projects, more manufacturing.
Contributes to organic growth. Cause bull equity markets and higher interest rates as banks
increase interest to temper a hot economy and cub inflation. Insurers investments returns
increase. Traditionally, when economy is faltering insurers have often done well and when the
economy has done less well people more cautious of their assets, tending to rely more on
insurance.
Briefly discuss how ease of entry into the insurance market place affects the dynamics of the
property and casualty market place? - correct answer ✔✔Licensing and capital requirements,
but abundance of companies has led to fragmented and competitive nature of market place.
Briefly discuss how government regulation affects the dynamics of the property and casualty
market place? - correct answer ✔✔High level makes market relatively conservative and stable.
Attractive to foreign-owned companies looking to expand. Market for possible effect on the
market capacity. Insurers have worked together to reduce legislative ultimatums. Created
residual market mechanisms to ensure available of mandatory auto insurance.. insurers created
PCOCC to protect policyholder and public against insurers bankruptcy.
Briefly discuss how international influences affects the dynamics of the property and casualty
market place? - correct answer ✔✔Government regulation in the US, Cat events and market
response led to creation of state insurers, regulatory action to discourage insures from leaving
the market place and not renewing policies. Ensure that insurance remain available in high risk
areas. Canadian insurers should consider what happens in the US, already governments have
