Fabozzi金融市场与金融机构基础课后答案.docx
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Fabozzi金融市场与金融机构基础课后答案
Fabozzi金融市场与金融机构基础课后答案(总12页)
CHAPTER6
INSURANCECOMPANIES
TYPEOFINSURANCECOMPANIES
Insurancecompaniessellinsurancepoliciesforapremium.Theyhavetwosourcesofincome:
underwritingincome,andinvestmentincome.
LifeInsurance
Thelifeinsurancecompanypaysthebeneficiaryofthelifeinsurancepolicyintheeventofthedeathoftheinsured.
HealthInsurance
Thehealthinsurancecompanypaystheinsuredalloraportionofthemedicaltreatmentoftheinsured.Untilthelastdecade,themajortypeofhealthinsuranceavailablewasindemnityinsurance.Duetothelackofconstraintsandincentivesforcostsavings,themedicalserviceinsuredbyindemnityinsurancebecameveryexpensive.Inresponse,variousformsofmanagedhealthcarehavebeendeveloped.Ingeneral,theseformsofmanagedhealthcareputconstraintsonthechoiceoftheproviderbytheinsuredandonthetypesofserviceprovidedbytheprovider.
PropertyandCasualtyInsurance
Propertyandcasualty(P&C)insurancecompaniesinsuretheriskofdamagetovarioustypesofproperty.
LiabilityInsurance
Theriskinsuredagainstislitigation,ortheriskoflawsuitsagainsttheinsuredduetoactionsbytheinsuredorothers.Thisistypicallyathird-partyclaim.
DisabilityInsurance
Disabilityinsuranceinsuresagainsttheinabilityofemployedpersonstoearnanincome.Typically,“ownocc”disabilityinsuranceiswrittenforprofessionalsinwhite-collaroccupations,and“anyocc”forblue-collarworkers.Therearetwotypesofpoliciesregardingthesustainabilityofthepolicy.First,guaranteedrenewableisatermwheretheissuerhastosustainthepolicyforaspecifiedperiodoftime,butcanchangethepremiumratesfortheentireclass.Theothertypeisnoncancellableandguaranteedrenewablewherebytheissuerhasnorighttomakeanychangesinanypolicyduringthespecifiedperiod.
Long-TermCareInsurance
Long-termcareinsuranceprovidescoverageforcustodialcarefortheagedwhoarenolongerabletocareforthemselves.
StructuredSettlements
Structuredsettlementsarefixed,guaranteedperiodicpaymentsoveralongperiodoftime,typicallyresultingfromasettlementonadisabilitypolicyorothertypeofpolicy.
InvestmentOrientedProducts
Aguaranteedinvestmentcontractorguaranteedincomecontract(orsimplyGIC),isapureinvestmentproduct.InaGIC,alifeinsurancecompanyagrees,forasinglepremium,topaytheprincipalamountandapredeterminedannualcreditingrateoverthelifeoftheinvestment,allofwhichispaidatthematuritydate.Alifeinsurancecompanyagreesinreturnforapremiumtopaytheprincipalamountandapredeterminedannualcreditingrateoverthelifeoftheinvestment.Effectively,aGICisazerocouponbondissuedbyalifeinsurancecompanyandassuchexposestheinvestortothesamecreditrisk.SomeGICsrequireasinglepremiumpayment(bullet),othersprovidewindowswhereindepositsareacceptedovertimeatthesameinterestrate.GICsarepopularcontractsforpensionfunds,sinceinterestrateriskassumedbyinsurancecompany.Butinvestorsstillhavetoworryaboutthecreditriskoftheinsurancecompany.
Annuity
Anannuityisoftendescribedasamutualfundinaninsurancewrapper.Theincomeandrealizedgainsarenottaxableifnotwithdrawnfromtheannuityproduct.Thus,the“insidebuildup”ofreturnsreceivesafavorabletaxtreatment.Annuitiescanbeeitherfixed,orvariable.Forasinglepaymentorpremiumtheinsurancecompanywillprovidefixedpaymentsforthelifeofthepolicyholder.Itcanalsoprovidea“lumpsum”paymenttotheretireeafteranumberofyearsofaccumulatingandinvestingpremiumpayments.
MonolineInsuranceCompanies
Monolineinsurersguaranteethetimelyrepaymentofthebondprincipalandinterestwhenabondinsurerdefaultsonthesepayments.Theinsuredsecuritieshavetraditionallybeenmunicipalbonds,buttheynowincludestructuredfinancebonds,CDOs,CLOs,andasset-backedbonds.MonolineinsurershavebeenratedAAAandmusthavethishighratingtobeeffectivesincetheytransfertheirratingtothebondissuebeinginsured.
INSURANCECOMPANIESVERSUSTYPESOFPRODUCTS
Traditionally,lifeandhealthproductswerecoupledbyaninsurancecompanybecauseofsomeofthesimilaritiesoftheproducts.PropertyandcasualtyproductswerealsoprovidedbyP&Ccompanies.Companiesthatprovidebothtypesofinsurances(life,health,property,casualty)arecalledmultilineinsurancecompanies.Investmentproductstendtobesoldbylifeinsurancecompanies.
Recently,healthinsurancecompanieshaveseparatedfromlifeinsurance.Thischangehasbeenduetomainlyfederalregulationofthehealthindustry.Lifeinsurancecompanieshavefocusedoninvestmentproducts.Also,disabilityinsuranceisnowsoldprimarilybypuredisabilitycompanies.
FUNDAMENTALSOFINSURANCEINDUSTRY
Afundamentalaspectoftheinsuranceindustryresultsfromtherelationshipbetweentherevenuesandcosts.Acompanycollectsitspremiumincomeinitiallyandinveststhesereceiptsinitsportfolio.Thepaymentsontheinsurancepolicyoccurlaterand,dependingonthetypeofinsurance,inaperhapsveryunpredictablemanner.Thepaymentsarecontingentonpotentialfutureevents.
Aninsurancepolicyisabindingcontractforwhichthepolicyholderpayspremiuminexchangefortheinsurancecompany’spromisetopayspecifiedamountscontingentonfutureevents.Theacceptedpolicyisanassetfortheownerandaliabilityfortheinsurancecompany.
Lifeinsuranceandpropertyandcasualtyinsurancecompaniesarefinancialintermediariesthat,foraprice,willmakeapaymentifacertaineventoccurs.Theyfunctionasriskbearers.Theprincipaleventthatthelifeinsurancecompanyinsuresagainstisdeath:
alifeinsurancecompanyagreestomakeeitheralumpsumpaymenttothebeneficiaryofthepolicyormakeaseriesofpayments.However,lifeinsuranceprotectionisnottheonlyfinancialproductsoldbythesecompanies.Amajorportionofthebusinessoflifeinsurancecompaniesisnowintheareaofprovidingretirementbenefits.Thekeydistinctionbetweenlifeinsuranceandpropertyandcasualtyinsurance(P&C)companiesisthedifficultyofprojectingwhetherapolicyholderwillbepaidoffandhowmuchthepaymentwillbe.
REGULATIONSOFINSURANCEINDUSTRY
Regulationisprimarilyatthestatelevelasaresultof1945federalstatute(McCarran-FergusonAct).ModellawsandregulationsaredevelopedbyNationalAssociationofInsuranceCommissioners(NAIC).Insurancecompaniesarealsoratedbytheratingagencies.
Toassurefinancialstability,insurancecompaniesmustmaintainreservesorsurplus,whicharetheexcessofassetsoverliabilities.Statestatutorysurplusrequirementsarecalledstatutorysurplus,whichisdistinguishedfromgenerallyacceptedaccountingprinciples(GAAP)surplus.
STRUCTUREOFINSURANCECOMPANIES
Insurancecompaniesarereallyacompositeofthreecompanies.Firstthereisthe“homeoffice”oractualinsurancecompany.Second,thereistheinvestmentcomponent,whichinveststhepremiumcollectedintheinvestmentportfolio.Thisistheinvestmentcompany.Thethirdisthedistributioncomponentofthesalesforce.Therearedifferenttypedofdistributionforces.Finallytherearealsobrokerswhosellinsuranceproductsofmanycompanies.
Insurancecompaniesareattractedbycommercialbankcustomercontacts.Asaresult,commercialbankdistributionofinsurancecompanyproductshasgrown.Thisrelationshipiscalledbankassurance.
FORMSOFINSURANCECOMPANIES
Therearetwoformsofinsurancecompanies:
stockandmutual.Astockinsurancecompanyissimilarinstructuretoanycorporationorpubliccompany.Shares(ofownership)areownedbyindependentshareholdersandaretradedpublicly.Theshareholderscareonlyabouttheperformanceoftheirsharesthatisthestockappreciationandthedividends.Theinsurancepoliciesaresimplytheproductsorbusinessofthecompany.Incontrast,mutualinsurancecompanieshavenostockandnoexternalowners.Theirpolicyholdersarealsotheirowners.Theowners,thatisthepolicyholders,careprimarilyorevensolelyabouttheperformanceontheirinsurancepolicies,notablythecompany’sabilitytopayonthepolicy.Sincethesespaymentsmayoccurconsiderablyintothefuture,thepolicyholdersviewmaybelongterm.
Finallyanewformofinsurancecompany,whichisahybridbetweenapuremutualandapurestockcompanyhasbeenapprovedbysomestatesandimplementedbysomeinsurancecompaniesinthesestatessincetheirintroductionin1996.Thisformiscalledamutualholdingcompany(MHC).
INDIVIDUALVERSUSGROUPINSURANCE
Insuranceproductscanbesoldonindividualandgroupbases.Also,intheP&Cbusiness,insurerscansellpersonallinesandcommerciallinesofinsuranceproducts.
TYPESOFLIFEINSURANCE
Therearetwofundamentallydifferenttypesoflifeinsurance:
term(life)insuranceandcashvaluelifeinsurance.
TermInsurance
Termpoliciespayoffonlyondeath.Threearenoinvestmentbenefitsandsothepremiumsaresubstantiallylowerthanthoseonwholelifepolicies.Mostgrouppoliciesaretermpolicies.“Term”impliesthatcoverageisavailableonlyduringthepremium-payingtermofthecontract.
CashValueorPermanentLifeInsurance
Thereisabroadclassificationoflifeinsurance,whichiscashvalue,orpermanentorinvestmenttypelifeinsurance.Acommontypeofcashvaluelifeinsuranceiswholelifeinsurance.Thiscashvaluecanbewithdrawnandcanalsobeborrowedagainstbytheownerofthepolicy.Iftheownerwishestoletthepolicylapse,heorshecanwithdrawthecash