III IC-102 cheat sheet

Insurable interest requires a legal right to insure that is recognised by law and would be affected by loss, destruction, or damage to the subject matter.

Utmost good faith (uberrimae fidei) obliges both parties to disclose all material facts; a material fact is one that would influence a prudent underwriter's decision on acceptance, rating, or terms.

Indemnity restores the insured to the same financial position as immediately before the loss, no better and no worse; it applies to property and liability but not to life or personal accident covers.

Proximate cause is the dominant, effective, and efficient cause of a loss; a remote cause does not trigger cover unless the policy expressly extends to it.

Subrogation transfers the insured's recovery rights against a negligent third party to the insurer after payment, limited to the amount paid and never producing profit for the insured.

Contribution applies when two or more policies cover the same interest, subject matter, and peril; each insurer pays rateably, commonly by independent liability or maximum liability method.

Average clause: claim paid = (sum insured / value at risk) x loss, applied where the sum insured is below the full value of the property at the time of loss.

Reinsurance transfers risk from a ceding insurer to a reinsurer; facultative covers a single risk individually, treaty obliges automatic cession of risks falling within its terms.

Policy structure: proposal and declaration, recital, operative clause, exclusions, conditions, schedule, and endorsements; the schedule holds risk-specific data such as sums insured and excesses.

A condition precedent to liability (for example, maintaining protective safeguards) must be satisfied before the insurer is liable; a condition subsequent allows the insurer to avoid liability from the date of breach.

Warranty is a promissory condition whose breach discharges the insurer from liability; a representation is a statement made before the contract and only allows avoidance if material and untrue.

Utmost good faith duty on the insured ends at inception or renewal and at variation, but the continuing duty of disclosure at renewal restarts the obligation.

Deductible (excess) is deducted from the loss before payment; a franchise is a threshold that, once exceeded, makes the whole loss payable without deduction.

Claims process: notification, loss adjustment, average or depreciation adjustment, salvage and subrogation recovery, then settlement; late notification is judged by prejudice to the insurer.

Co-insurance and layered programmes: primary layer responds first, excess layers attach above a stated attachment point and respond only once that point is exhausted.

Underwriting factors include occupancy, construction, protection, exposure, claims history, and moral hazard indicators such as poor maintenance or unusual sums insured.

Insurance is regulated to protect policyholders, maintain market confidence, and ensure solvency; supervision typically covers licensing, solvency, conduct of business, and market exit.

Licensing regimes distinguish insurers, brokers, agents, and loss adjusters; an entity conducting regulated activity without authorisation commits an offence.

Solvency capital requirement: available capital must exceed the required capital, calculated from risk modules (underwriting, market, credit, operational) with the minimum capital requirement as a lower floor.

Conduct rules require fair treatment of customers, clear disclosure of product features and costs, and management of conflicts of interest in distribution and claims handling.

Anti-money laundering obligations include customer due diligence, beneficial ownership identification, enhanced due diligence for politically exposed persons, and suspicious transaction reporting.

Complaints and dispute resolution: internal complaint handling with defined time limits, then referral to an independent ombudsman or regulator-approved dispute scheme.

Data protection principles require lawful, fair, and transparent processing, data minimisation, retention limits, and security safeguards; cross-border transfer needs a lawful basis.

Market conduct supervision covers product approval, advertising, remuneration structures, and mis-selling; sanctions include fines, licence restrictions, and public censure.

Gross written premium (GWP) is total premium before deductions; net written premium = GWP minus reinsurance premium ceded; net earned premium is the portion recognised over the policy period.

Unearned premium reserve (UPR) = written premium x unexpired fraction of the policy term; a 24/25ths method is used for annual policies written evenly through the year.

Incurred claims = paid claims + change in outstanding claims reserve + change in incurred but not reported (IBNR) reserve.

Loss ratio = incurred claims / net earned premium; expense ratio = underwriting expenses / net written premium; combined ratio = loss ratio + expense ratio, with under 100% indicating underwriting profit.

Technical provisions include unearned premium reserve, outstanding claims reserve, IBNR, and equalisation or catastrophe reserves where permitted by the regulator.

Reinsurance accounting: ceding commission reduces the ceded premium cost; deposits and funds withheld reflect cash retention by the ceding insurer.

Deferred acquisition costs (DAC) are capitalised and amortised in line with the earning of premium, matching commission and acquisition expense to the policy period.

Investment return and technical result together form the operating result; solvency reporting reconciles available capital to the regulatory capital requirement.