The financial limit of an organization’s ability to absorb losses with its own funds or borrowed funds without major disruption. This value often comes into play when a risk manager attempts to find the appropriate retention amount. Any planned retention figures should fall below the financial capacity point.
Insurance Encyclopedia
Financial class
Individual’s income or ability to pay a debt.
Financial Condition Report (FCR) for Non-Life Insurance Companies in India
The non-life insurance companies have been mandated to submit the Financial Condition Report annually, effective 31st March, 2010 for the said financial year in the prescribed format. The objective of the FCR is to facilitate analysis of the current block of business as on the valuation date to bring out clearly the challenges the insurers face in terms of meeting the solvency requirements, their profitability and other risks viz. morbidity, liquidity, credit and expense, investment return, asset-liability mismatch, etc. This experience will also indicate the insurer’s position on these parameters for the next one year.
Financial data
Information about the financial status of managed care entities (e.g., medical loss ratio).
Financial derivatives
See: Derivatives.
Financial Guarantee / Credit Enhancement Insurance
A form of coverage in which the insurer guarantees the payment of interest and/or principal of the insured in connection with debt instruments issued by the insured.
Financial Guarantee Bond
A guarantee that others will pay sums of money due. A Sales Tax Bond, for instance guarantees the state that the merchant will pay his sales taxes on time and in full.
Financial guarantee insurance
Covers loss from specific financial transactions and guarantees that investors in debt portfolios receive timely payment of principal and interest or guarantees in the event of default by the debtor or obligor. Financial guarantee insurances include: mortgage indemnity insurances; performance bonds; residual value insurance. Financial guarantee cover originated in suretyship.
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A surety bond, insurance policy or, when issued by an insurer, an indemnity contract and any guaranty similar to the foregoing types, under which loss is payable upon proof of occurrence of financial loss to an insured claimant, obligee, or indemnitee.
FINANCIAL GUARANTEE INSURANCE
In its simplest form, financial guarantee insurance pays for losses because of the failure of an obligor to pay principal or interest when due. It may also pay as a result of default or insolvency, changes in currency exchange rates, a change in interest rates, or a change in the value of specific assets such as commodities. A common form of financial guarantee insurance is municipal bond insurance, which guarantees that bondholders will receive their principal regardless of the municipality’s ability to pay.Financial guarantee insurance can be very complex and is usually purchased by sophisticated buyers.
Financial guaranty
Insurance that indemnifies an insured claimant, obligee, or indemnitee for financial loss resulting from 1. default or insolvency 2. changes in interest rate levels 3. changes in currency exchange rates, 4. restrictions imposed by foreign governments or, 5. changes in the value of specific assets or commodities.