III IC-47 / A-1 cheat sheet

Indemnity: recovery is capped at the financial loss measured at the date of loss; valued policies (life, personal accident, agreed-value fine art) pay a stated sum and are the recognised exception to indemnity.

Insurable interest must exist when the contract is formed and, for property, at the time of loss; ownership, leasehold, custody, mortgage and contingent liability can each create a recognised interest.

Utmost good faith: material facts must be disclosed. Under China's Insurance Law art. 16 the insurer may rescind within 30 days of learning of the breach and in any event within two years of contract formation; wilful non-disclosure also permits refusal of the claim without refunding premium.

Proximate cause: identify the dominant, effective cause. If an excluded peril sets a covered peril in motion, the excluded peril is proximate and the loss is not payable.

Subrogation arises only after the insurer has paid, is limited to the amount paid, runs only against third parties legally liable, and the insured retains priority over any uninsured balance of the loss.

Contribution requires the same interest, the same peril and the same period covered by two or more policies; where sums insured differ, the independent liability method is used and escape clauses are resolved in equity.

Pooling: relative variability of average loss falls roughly with the square root of the number of independent units, so homogeneity, independence and volume of exposures are prerequisites for credible pricing.

Moral hazard is a behavioural change after inception (carelessness, exaggeration); adverse selection is a pre-contract information asymmetry. Deductibles and claims controls address the first; evidence-based underwriting addresses the second.

Reinsurance structures: quota share cedes a fixed percentage of every risk; surplus cedes amounts above a retention; excess of loss protects a layer above an attachment point; stop loss caps a loss ratio.

Licensing is a condition precedent to lawful trading: insurers, brokers, agents and loss adjusters must hold the relevant licence, and unlicensed activity is an offence subject to administrative penalties and possible contract unenforceability.

C-ROSS II solvency: comprehensive solvency ratio = actual capital / minimum capital with a supervisory floor of 100%; core solvency ratio floor is 50%; a risk rating of B or above is also required for a clean solvency assessment.

Product supervision: most products are filed (备案) before sale, while prescribed lines such as compulsory motor third-party liability and agricultural insurance require prior approval (审批); unfiled or unapproved products must not be sold.

Policyholder protection: a statutory fund, financed by levies on insurers, pays policyholders or transfers portfolios when an insurer is revoked, dissolved or insolvent; life contracts are transferred to another insurer.

Claims timetables under China's Insurance Law: assess within 30 days of receiving complete claim materials, notify a refusal within 3 days, pay within 10 days of agreement, and make a provisional payment where the amount remains undetermined after 60 days.

Free-look (cooling-off): life policies with a term exceeding one year give the policyholder at least 15 days from receipt to cancel, with premium refunded after deduction of reasonable costs.

AML/CFT: risk-based customer due diligence, identification of beneficial owners at the 25% threshold, politically exposed person screening, record retention of at least five years, and suspicious transaction reports to the financial intelligence unit without tipping off.

Conduct metrics used in supervision include complaint ratio, 13-month and 25-month persistency, claim settlement ratio, average settlement time and mis-selling findings; persistent outliers attract on-site inspection and remediation orders.

Combined ratio = (incurred losses + loss adjustment expenses + underwriting expenses) / earned premium. Below 100% is an underwriting profit before investment income; above 100% is an underwriting loss.

Loss ratio = incurred losses and loss adjustment expenses / earned premium; compare it with the loss ratio embedded in the rate to test pricing adequacy by class and by year of account.

Exposure bases: property - values at risk or reinstatement value; liability - sales, payroll, headcount or units; motor - vehicle-years; marine cargo - declared value per shipment; personal accident - number of insured persons.

PML assumes protective systems function as designed and is the largest loss reasonably expected from one event; EML assumes protection fails. Single-event reinsurance retention is normally set at or below PML.

Rating hierarchy: manual rate, then schedule rating for individual risk features, then experience modification, then retrospective or audit adjustment; each layer moves the price from class average toward the specific risk.

Underwriting decision set: accept at manual rate; accept with rate-up, exclusion, higher deductible or warranty; decline; or refer upward. Every decision must sit within the underwriter's binding authority by premium, sum insured and class.

Treaty reinsurance gives automatic capacity for defined classes within stated limits; facultative reinsurance is placed risk by risk and is used for sums insured or hazards outside treaty terms.

Underwriting cycle: a hard market follows capital erosion from large losses, raising rates and tightening terms and conditions; a soft market follows surplus capital, widening cover and cutting rates.

Claim workflow: first notice of loss, coverage verification and reservation of rights, reserving, investigation and loss assessment, negotiation, settlement or reasoned repudiation, recovery (salvage, subrogation), then closure.

Ultimate loss = paid to date + case reserves + IBNR + unallocated loss adjustment expenses; adequacy is tested by development methods such as chain-ladder or Bornhuetter-Ferguson.

Indemnity measures: reinstatement (new for old within the sum insured), repair, replacement, actual cash value (replacement cost less depreciation) and market value; the policy wording determines which measure applies.

Average clause: recovery = loss × (sum insured / value at risk at the time of loss). A waiver of average, an agreed-value clause or a first-loss limit removes or modifies the reduction.

Deductibles apply per occurrence and per policy as worded; a franchise differs from a deductible because no payment at all is made if the loss falls below the threshold.

Total loss: actual total loss where the subject matter is destroyed or irrecoverable; constructive total loss where recovery or repair cost would exceed the insured value, and in marine cover a notice of abandonment may be required.

Fraud indicators include late notification, inconsistent statements, pre-existing damage, financial pressure, staged theft and inflated inventories; suspected cases are referred to a special investigation unit before any repudiation decision.

Limitation periods under China's Insurance Law: two years for non-life claims and five years for life claims, running from the date the insured or beneficiary knew or ought to have known of the event.