A method of transferring capacity from one Lloyd’s member to another. Syndicate participants in one year have the right to remain in that syndicate in the following year or transfer their capacity to other members by auction. The auctions have particularly helped integrated Lloyd’s vehicles to increase their capacity. Sellers of capacity are called tenderers, buyers are called subscribers. The auctions are governed by Auction Byelaw (14/97). See CAPACITY TRANSFER MARKET.
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Capacity boosting
Primary insurers boost their ability to accept larger or more risks, by availing themselves of reinsurance facilities.
Capacity of parties
Legal competency of each party to enter in a contract.
Capacity of the Parties to the Contract
The Indian Contract Act provides that every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law of which he is subject.
Capacity to contract
Legal condition for both parties (insurance company and insured) to understand the insurance policy terms for a drawn-up agreement to be considered a valid contract.
Capacity transfer market
Market for the transfer of syndicate capacity at Lloyd’s. The transfer is usually from names to aligned corporate members through capacity auctions or bilateral agreements (byelaw 8/98). See MANDATORY OFFERS.
Capacity Transfer Panel (CTP)
The part of Lloyd’s created by the Franchise Board that administers the capacity transfer market. It is concerned with capacity auctions and, in particular, mandatory offers and minority buyouts. CTP has three independent members – a nominated member of the Council as chairman, a lawyer and a financial expert. They also have a Lloyd’s Members’ Association nominee and one nominee from the third party capital providers; both can be changed on a case-by-case basis.
Capital
Equity of shareholders of a stock insurance company. The company’s capital and surplus are measured by the difference between its assets minus its liabilities. This value protects the interests of the company’s policyholders in the event it develops financial problems, the policy owners benefits are thus protected by the insurance company’s capital. Shareholders’ interest is second to that of policy owners.
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US: In captive insurance, an all-purpose term having one of three different meanings
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In captive insurance, an all-purpose term having one of three different meanings the amount initially needed to set up a captive, or the initial amount paid in the total of this paid-in capital plus other forms of capital, like letters of credit or the sum of these two plus accumulated surplus. The difference between capital in a captive and other forms of insurance capital is that the owners usually consider it risk capital, ready to be used up by adverse results of the business. This is why one seldom hears about “impairment of capital” in captive financial discussions. Instead, one hears about “reduction in capital.”
Capital additions clause
A property insurance clause providing automatic cover for buildings and contents acquired during the period of insurance up to the lesser of 10 per cent of the sum insured or £500,000 provided they are not otherwise insured. The insured is required to give particulars of additions and to arrange specific insurance retrospectively.
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A provision in a Standard Fire and Allied Perils Policy to cover new buildings or machinery added by the insured during the period of insurance.
Capital and surplus
The sum of paid up capital, gross paid in and contributed surplus, and unassigned surplus.