Asigurari Internationale

ACADEMY OF ECONOMIC STUDIES OF MOLDOVA
Doctor of Economic Sciences, professor L. Cobzari, T.Vsokaia,

A.Goncearenco, E.Drobshev, A.Pociumban, A.Romanova
International insurance
Lecture course
Chiinu 2003
Contents
Theme 1. Economic Essence, Functions and Classification of Insurance.
1.1. Economic essence and functions of insurance..
1.2. Classification of insurance
1.3. Types of insurance funds...
Theme 2. Juridical Aspects of Insurance Activity.
2.1. Forms of insurance activity...
2.2. State control over the insurance activity...
2.3. Forms of control over insurance companies activities.
2.4. The core and main elements of the contract of insurance.
Theme 3. Insurance Marketing..
3.1. The essence of the insurance marketing
3.2. Methods of promotion of insurance services.
3.3. Insurance middlemen.
3.4. The essence of the insurance market.
Theme 4. Insurance Market in Foreign Countries.
4.1. Insurance development tendencies on the international level...
4.2. The Insurance Market of the USA.
4.3. The Insurance Market of Great Britain.
4.4. The Insurance Market of Germany
4.5. The Insurance Market of Switzerland...
4.6. The Insurance Market of Russia
4.7. The Insurance Market of Moldova
Theme 5. Property Insurance.
5.1. Physical persons property insurance
5.2. Juridical persons property insurance
5.3. The conclusion of insurance contract
5.4. The measuring of damage and compensation...
Theme 6. International Practice of Transport Insurance...
6.1. Motor-vehicle insurance
6.2. Vessel insurance
6.3. Marine freight insurance
6.4. Containers insurance.
6.5. Aircraft insurance..
Theme 7. The Insurance of Responsibility on the International Level.
7.1. The insurance of the civil responsibility of car-owners
7.2. The insurance of the civil responsibility of carriers to passengers
7.3. The insurance of the civil responsibility of the enterprises of the sources of high danger
7.4. The insurance of professional responsibility.
Theme 8. Economic and Political Risks Insurance...
8.1. Commercial risks insurance..
8.2. Insurance against losses due to production interruptions..
8.3. The insurance of new technique and technology risks..
8.4. Political risks insurance.
8.5. Export credits insurance
Theme 9. Personal Insurance.
9.1. Life insurance
9.2. Additional pension insurance
9.3. Accident insurance
9.4. Compulsory insurance of passengers
9.5. Voluntary medical insurance.
9.6. Medical insurance of persons going abroad..
Theme 10. Reinsurance...
10.1. The essence and the meaning of reinsurance
10.2. Types of reinsurance contracts..
10.3. Proportional reinsurance
10.4. Disproportional reinsurance..
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Theme 1. Economic Essence, Functions and Classification of Insurance.

1.1.
Economic essence and functions of insurance.
1.2.
Classification of insurance.
1.3.
Types of insurance funds.

1.1. Economic essence and functions of insurance.
Insurance is a complex of economic relations associated with forming the

insurance fund at the expense of the insurers with the purpose of covering the loses
caused by some unfavourable events, stipulated in the contract.
Characteristic features of insurance:
1) Premiums are paid by policyholders up to the definite rates and the funds
are formed for the account of premiums.
2) The funds are accumulated in special organisations insurance
companies.
3) The funds are only distributed to the fund investors.
4) The funds are used only for particular purposes.
5) The funds are used according to the rates, stipulated beforehand, that is,
when joining the insurance relations the insurer knows what compensation he
might get for an incident.
6) The funds are distributed only within stated periods of time.
7) Insurance is necessary only when somebody is interested in it, i.e., when
some unforeseen circumstances can really occur.
8) The events must have features of probability or fortuity, when the
occurrence of the event is not obvious or doesnt depend on the will of the insurer.
9) Insurance is based on mutual and solidary distribution of losses among
all participants of insurance.
Functions of insurance:
1) The core of risk and redistributing function is that the insurance funds are
redistributed among the participants due to concluding the insurance agreement
and consequence of insurance events.
2) The core of preventive function is that insurance companies carry out
financing of unfavourable events. For this the insurance company forms a set of
preventive actions for the account of allocations.
3) The core of saving function is that a sum of money is saved by means of
life insurance and is connected with the defence of the achieved income.
4) The core of controlling function is that the insurance companies control
the activities of their clients concerning their observing of safety measures.
1.2. Classification of insurance.
A classification of insurance is the distribution of insurance services
according to the groups defined by some common signs. There exist classifications
based on forms and on branches of insurance.
Classification based on forms of insurance.
Insurance is carried out in two forms: obligatory and voluntary.
Obligatory forms are defined by the following principles:
1) The obligatory insurance is defined by the law, according to which the
underwriter must insure the corresponding objects, and the insurer must take
necessary insurance payments. The law usually stipulates all necessary terms and
the order of carrying out the given kind of insurance.
2) For the overall obligatory insurance indicated by the law, the insurance
agencies carry out annual registration of the insured objects, make payments and
charge premiums in the stipulated terms.
3) Automatic insurance covering of the objects is indicated by the law. The
insurer mustnt announce the appearance of the insured objects to the insurance
company. The given property is automatically included in the field of insurance. It

will be automatically registered and the insurer will be charged to pay the fee.
4) The effect of the obligatory insurance does not depend on the premiums.
In cases when the insurer didnt pay the insurance premiums, they are charged by
the order of the court. In case of loss of or damage to the insured property not
covered by insurance premiums the insurance compensation is due to payment out
of the insurance debts. The undue premiums are imposed with a fine.
5) Permanent obligatory insurance. It works during the whole period, within
which the insurer uses the insured property. Only unpractical and dilapidated
property doesnt fall under insurance coverage. The effect of the insurance doesnt
stop when the property is passed on from one insurer to another. It loses its effects
only in case of loss of the property. In case of personal insurance an overall
automation comes into effect. But it has a strictly stipulated period of time and is
completely dependent on insurance premiums (for example, obligatory insurance
of passengers).
Kinds of obligatory insurance in Moldova:
- insurance of passengers against accidents;
- insurance of military men;
- obligatory medical insurance;
- car owners responsibility insurance;
- carriers responsibility insurance.
Voluntary insurance is based on observing the following principles:
1) Voluntary insurance is effective under the law about insurance and under
voluntary authority. The law defines the objects that fall under insurance and
stipulates the general conditions of insurance. The specific terms are regulated by
the insurance rules.
2) Voluntary participation in insurance is characteristic only for the insurers.
The underwriter is not authorised to refuse to insure the object if the wishes of the
insurer do not contradict the conditions of insurance. The given principle

guarantees concluding the contract on the demand of the insurer.
3) Selective voluntary insurance is due to the fact that not all insurers wish
to participate in it. Besides, there exist some restrictions for making contracts.
4) Voluntary insurance always has some time limits. For this end, the
beginning and the end of the period of insurance are specially stipulated in the
contract. Voluntary insurance may become permanent only by making the second
contract for a new period.
5) Voluntary insurance is effective only after paying the insurance premium.
The contract comes into effect after paying a single or the first insurance premium.
Non-payment of the next premium of long-term insurance brings to the cessation
of the contract.
The voluntary insurance coverage depends on the wishes of the insurer.
Under the property insurance the insurer may define the size of the insurance sum
within the limits of the property evaluation. Under the personal insurance the
insurance sum is defined by the contract of the parties.
Classification according to the branches.
Insurance is carried out in the next branches:
- property insurance;
- personal insurance;
- responsibility insurance in the face of the third person;
- insurance of economic risks.
Property insurance is the branch of insurance, where the object of insurance
is the property that can be damaged. Depending on the forms of property and the
categories of insurance there exists: the property of juridical persons, physical
persons and agricultural enterprises.
Personal insurance is the branch of insurance in which the objects of
insurance are life, health and ability of a person to work. There are life insurance,
insurance against accident and medical insurance.
Liability insurance is the branch of insurance the object of which is the

responsibility in the face of the third person, which may suffer from the actions of
the insurer. There are insurance of responsibility of car owners, insurance of
professional responsibility, etc.
Insurance of economic risks is the branch of insurance, the objects of which
are the results of entrepreneurs activity. There may be defined the insurance of the
risks against direct and indirect losses.
1.3. Types of insurance funds.
Insurance funds are a fair necessity, they perform the functions of safe
keeping and continuity of production of material goods for people.
Functions of insurance funds:
1) Preventing the insurance cases.
2) Suppression and liquidation of the event covering losses.
Depending on the degree there are three means of forming the insurance
funds:
1) centralised;
2) decentralised (self-insurance);
3) insurance.
Under centralised form the insurance fund is formed by the state. Its core is
that the state allocates a certain portion of its resources and keeps it for
extraordinary cases of destructive consequences. This fund may be created both in
material and monetary forms.
Negative moment: sufficient material and financial resources are drawn
from inventory reserves. It is impossible to provide big reserves.
Positive moment: it doesnt depend on wishes and potentials of final users of
funds. It is concentrated in one owners hands and prevents its using for other
purposes.
Under self-insurance a reserve fund is formed by any juridical or physical

person. Self-insurance may be carried out both in material and monetary forms.
Negative moment: the volume of possible losses is unknown, neither is the
needed size of the fund.
Positive moment: a quick method of using, as it is at the disposal of the
owner.
Insurance as a means of forming an insurance fund assumes:
- Merging of different producers, when they are not able to cover the losses
for their own account. Then the redistribution of losses from one suffered to other
insurers takes place.
- Existence of the majority interested in forming the insurance fund,
existence of insurance companies dealing with the redistribution of resources and
possible losses. The fund is used only to cover the losses of certain participants of
the fund, stipulated beforehand.
The questions for the control:
1. Give the definition of insurance as an economic category.
2. Enumerate the characteristics of insurance.
3. Characterise the functions of insurance.
4. Classify insurance according to its forms.
5. Classify insurance according to its branches.
6. Enumerate and characterise types of insurance funds.
The literature:
1. Law of RM of 15 July 1993 The Official Monitor of
the RM 12, December 1993.
2. , a book under edition of professor Reitman L.I., The
bank and exchange scientific consultative center, M., 1992.
3. Basacov I.I. , Rostov-on-theDon, , 1999.

4. Serbinovski B.U., Garikusha V.N. , Rostov-on-theDon, , 2000.
Theme 2. Juridical Aspects of Insurance Activity.

2.1.
Forms of insurance activity.
2.2.
State control over the insurance activity.
2.3.
Forms of control over insurance companies activities.
2.4.
The core and main elements of the contract of insurance.

2.1. Forms of insurance activity.
Nowadays there are the insurance companies of the following legal forms:
1) Joint-stock insurance companies are companies that are formed to carry
out insurance operations, which nominal capital is formed by issuing or selling
shares. They usually function on the same legal basis as other joint-stock
companies and can carry out any kinds of insurance on license basis.
2) State insurance organisations are juridically independent organisations,
the capital of which is partially or totally formed from the state funds.
3) Mutual insurance communities form a system of contractual relations
between the insurers, usually between construction, transportation, industrial and
financial corporations where they join their capital with one reason to cover their
possible losses. Every participant of such a community becomes both an
underwriter and an insurer.
4) Private insurance companies belong to one owner or his family. English
corporation Lloyds is a unique form of such a corporation of private
underwriters. All members of Lloyds join in syndicates to increase their capital
when assuming the insurance risks. Insurance premiums and losses are
proportionally distributed among the members of the syndicate according to their
financial interests.
5) Non-governmental retiring fund is a special form of personal insurance
which guarantees rental payments to insurer on achieving by them a particular age.
6) Captive insurance company is a joint-stock insurance company
protecting generally insurance interests of the founders.
2.2. State control over the insurance activity.
The activities of the underwriters radically differ from other enterprises
activities as they are aimed towards uninterrupted process of compensation of
losses caused by different circumstances. A big portion of responsibility of the
underwriter for his activities requires a State insurance control. In general this
control means the study of financial situation of the underwriter and his financial
solvency.
The aim of the state control is to provide and develop the market of
insurance services, ensuring necessary conditions for the underwriters activities as
well as defence of his interests.
State control must help to establish insurance companies that have strong
financial ground; avoid forming speculative and forged companies. These
functions are performed by State Insurance Supervision at the Ministry of Finance.
Obligations of the State Insurance Supervision:
1) introducing the unique State Insurance Registry;
2) auditing in insurance companies;
3) control over the insurance rates;
4) control over the payability of underwriters;
5) setting the rules about forming and placing insurance reserve funds;
6) ensuring the publicity of insurance activities;
7) checking the authenticity of the presented reports;
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8) providing official information about underwriters registration.

The State Inspection has the right to:
1) have a call report about insurance activities and financial situation;
2) carry out the control over the authenticity of the information provided
and over the observing the legislation;
3) instruct the underwriters about elimination the infringements and in case
of non-fulfilment of state orders to hold up the effect of the license;
4) to make a claim against the underwriter in case of multiple infringements
of law.
2.3. Forms of control over the insurance companies activities.
The system of state regulation of insurance activity includes registration of
insurance companies and issue of licenses for providing different kinds of
insurance.
To register an insurance company the founders make a written application to
the Registration Chamber, enclosing the necessary documents (the protocol of the
foundation meeting, the foundation contract and the charter).
When the organisation is registered it is introduced into the State Register of
Underwriters. The founder is given a State Registration Certificate.
State registration may be denied only if the foundation documents do not
meet the legislation requirements of RM.
The following information is included in the State Register of Underwriters:
1) the full and abbreviated name of organisation;
2) the juridical form of organisation;
3) the period of functioning of the organisation;
4) the location of the organisation and its branches;
5) the date of the organisations registration and its registration number;
6) the volume of the regulation fund;
7) the names of the persons entitled to represent the organisation.
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For the underwriters operating in Moldova to have a license is a must. To get

this license an insurance company must pay the regulation fund in full.
To get the license the underwriter must present the following documents:
1) an application form;
2) the charter;
3) a copy of the registration certificate;
4) the development program of insurance operations for the period of 3
years, including kinds of operations and their volume; maximum responsibility on
individual risk, conditions of insurance protection;
5) terms of insurance;
6) certificates from banks and other institutions that confirm the existence
of authorised and reserve funds;
7) economic grounds of activities including assessment of profits and
losses, expenses and costs;
8) statistical grounds of tariff systems, rates and reserves.
2.4. The essence of an insurance contract and its main elements.
To start an insurance activity it is necessary to develop individual contracts
with each underwriter. Economic insurance contracts must assume juridical forms,
that is the forms of contracts.
Juridical regulation of insurance relations covers the rights and obligations
of the parties. According to the insurance contract one of the parties the
underwriter undertakes the risks of another party insurer. Accordingly the
underwriter undertakes to cover all expenses for any losses or damages happened
under this contract. The insurer in his turn undertakes to pay the underwriter all
agreed feel and keep all his obligations.
When making the insurance contract the insurer gets acquainted with the
rules of the proper kind of insurance and the terms of the contract are specified at
that.
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There may be essential and nonessential terms of the contract.

Essential terms express the subject of the contract and the main interests of
the parties. The terms may be changed only if both parties agree to do it.
Essential terms are: the insured objects; the volume of the insurance
liabilities; insurance compensation; insurance sum; an insurance period; insurance
rate.
Non-essential terms are: the size of insurance premiums; the procedure of
making a contract; the procedure of paying the insurance fee; the procedure of
paying the insurance compensation, etc.
When making the contract the parties must specify the causes of its
termination. As a rule the insurance contract is terminated in the cases of:
- expiration of validity;
- carrying out of all taken obligations;
- non-payment of insurance fees in due time;
- liquidation of the underwriter;
- liquidation of the insurer or his death;
- arbitration award to invalidate the insurance contract.
1. Enumerate and characterise types of insurance companies existing
nowadays.
2. Specify purposes and targets of state regulation of insurance activities.
3. Enumerate the rights and obligations of the State Insurance Supervision
Office.
4. Speak on the regulation of State registration of insurance companies.
5. Speak on the regulation of licensing of insurance activities.
6. Characterise the essential and non-essential conditions and terms of
insurance contract.
7. Specify the cases of termination of an insurance contract.
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The literature:
5. under edition of L.I. Korchevskaia, ..
Turbina, ., , 96.
6. The decision of the Government of the RM 77 of 3 February 1996
.
Theme 3. Insurance Marketing.

3.1.
The essence of the insurance marketing.
3.2.
Methods of promotion of insurance services.
3.3.
Insurance middlemen.
3.4.
The essence of the insurance market.

3.1. The essence of the insurance marketing.
Marketing is a philosophy of the underwriter, determining the strategy and

tactics of his activities in the conditions terms of competition. Marketing
simultaneously combines market research, new product development, distribution,
advertising, promotion, product improvement and so on.
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The Insurance service is the specific goods the sale of which is quite
difficult. The central part of the underwriters marketing is sales activity, oriented
to the sale or the insurance services promotion from the underwriter to the insurer.
The sales activity is a range of the insurance companys action that may be
taken as two important tasks to form the demand for the insurance services and
to satisfy the insurance clients interests of a company.
The demand formation is a goal-oriented influence on potential clients with
one purpose to raise the achieved demand level by the insurance company up to the
wished level. It influences potential insurer with the help of advertising, forming a
positive image of the underwriter, holding the meetings for concluding the
insurance agreements, differentiation of tariffs for the insurance services,
combination of the insurance services with different forms of trade and juridical
service.
The second important task of marketing is satisfaction of insurance interests.
It is noted that the level of the insurance of the clients service influences the
demand, i.e. the higher the service level, the bigger demand for his insurance
services.
If the insurance services demand goes down, the leaders should find out the
reasons and take measures directed to their elimination.
Practically marketing is oriented to:
1) reasons of the necessity and goal-orientation of rendering some kinds of
the insurance services;
2) demand formation on the insurance services;
3) satisfaction of the clients insurance interests;
4) price forming;
5) regulation of the insurance activity;
6) pure organisation of the insurance services promotion;
7) coordinating and planning the production, sales and financial activity of a
company;
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8) organising new insurance services, corresponding to the insurers

demands;
9) regulation and orientation of the companys activity;
10)
current operative leadership of the insurance services realisation and
achievement of goals.
However the specific marketing functions are: collecting and analysing the
information about the market, making contacts with the insurers, managing the
assortment of the insurance services.
Strategic marketing solves the following tasks: the selection of the
perspective company activities, orientation and kinds of the insurance services,
making image and prestigious marking, definition of the price policy.
Tactical marketing is oriented to form the system of relations of the services
consumers, interaction with public, providing forms and methods of sales, sales
management in accordance with the strategic goals.
3.2. Methods of promotion of insurance services.
There are three main methods of insurance services promotion: extensive,
exclusive and selective.
Extensive method is using services of any go-between company, capable to
conclude one or more insurance contracts.
Exclusive method is used when the insurance company counteracts with
only one general insurance agent, which has an exclusive right to conclude
insurance contract in a given region. This contract should be concluded in favour
of the above-mentioned insurance company.
Selective method is used, when the insurance company counteracts with two
or more general agents in a given region.
Insurance service promotion is connected with the process of forming
demand for the insurance services. Promotion includes any kind of informing
people about insurance services or an insurance company. There are two basic and
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two auxiliary kinds of promotion. Basic kinds of promotion include advertising

and personal contacts, auxiliary kinds of promotion include publicity and
stimulation.
Advertising is any paid form of impersonal providing the insurance service.
Personal contact is an oral communication with one or more insured persons
in order to conclude the insurance contract.
Publicity is impersonal and unpaid stimulation of the demand for the
insurance product by means of making people aware of it with the help of mass
media.
Stimulation are short-term measures of encouraging purchase or sale of an
insured product and various non-repeated techniques, which are not included in
traditional promotion.
Actually insurance companies seldom use only one way of promotion,
because any way has its own advantages, disadvantages and fields of application.
Advertising has the following advantages:
- attracts a large geographically spread insurance market;
- informs potential insurers about services, it may be many times repeated
for the same audience;
- the potential insurers have a possibility to compare the offers of this
company with those of the competitors;
- gives a certain idea about the underwriters and their services;
- may change when necessary.
Advertising has also some disadvantages:
- the dialogue with the audience is impossible;
- neither an individual approach to each insurer is possible;
- it requires big charges.
A Personal contact has the following advantages:
- it provides the dialogue with the insurers, raises a counter reaction of the
customers;
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- the costs are lower than those for the advertising;

- it holds regular insurers, helps hesitating insurers to take decisions.
Disadvantages:
- it is ineffective for informing the insurers as a personal contact is possible
only with limited members;
- the costs for one consumer are higher;
- doesnt cover a big, geographically spread market.
Publicity has the following advantages:
- it gives the audience more reliable information, covers a bigger number
of citizens;
- like advertising it has better possibilities for the presentation of the
insurance company and its products;
- it is relatively cheap.
Disadvantages:
- inability of the company to control;
- non-guarantee of positive reaction of mass media;
- mass media may accentuate the customers attention on feedback,
essential characteristics of the underwriter and his services;
- non-regularity of publications.
Stimulation of the insurer has the following advantages:
- it leads to a short-term increase of the contracts conclusion;
- is supplementary to advertising and personal contacts;
- attracts attention and holds the information that can attract the potential
insurers interest;
- has a certain incentive to conclude a contract.
Disadvantages:
- it may be used only as an additional means of promotion;
- can not be regularly used.
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The essence of marketing is that operating by different means of promotion

it chooses the one that has to be accented.
3.3. Insurance middlemen.
In the process of carrying out their activity the insurance company has the
right to use the middlemens services insurance agents and brokers.
The insurance broker is a juridical or a physical person registered in the right
order as an entrepreneur, realising the intermediarys activity on insurance on their
behalf under the instructions of the insurer or underwriter. Brokerage on insurance
that is effected by a physical person must be stipulated in the document about its
validity. A physical person that has become an insurance broker, can not be the
employee of any insurance company.
Insurance agent is a physical, sometimes juridical person fulfilling, on behalf
of the underwriter, the operations of concluding the contract with the population
about the sole and property insurance and insurance payments for them.
Insurance agent is a part-time worker of an insurance company. He gets his
commissions for collecting insurance duties, for serving the insurer on the basis of
the contract concluded. Insurance agent bears complete material responsibility to
the underwriter.
The most important difference between the insurance agent and the
insurance broker is that the broker works as an independent qualified expert for the
insurer.
The insurance broker fulfils the following basic functions:
- appreciates the subject of the insurance, i.e. he defines what kind of
insurance the potential insurer needs and what exact risks are to be insured from;
- makes comparative analysis of the financial health of a number of
underwriters;
- selects the most profitable underwriter for the client;
- legalises insurance agreements agreed with the insurer;
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- controls duly received insurance fees from the insurer to the underwriter;
- renders advice and assistance in receiving insurance sum of money by the
insurer or the insurance compensation when the insurance accident happens.
The insurance broker is not entitled to:
- fulfil other kinds of activity;
- take part in the authorised capital of the insurance companies, hold
stocks, shares and other rights of participation.
The insurance broker is responsible for:
- the fulfilment of liabilities, stipulated in the agreement;
- reliability, objectivity, completeness and due information given to the
client and controlling authorities;
- the secrecy of the information, that is the commercial secret of a client.
The detailed list of the insurance brokers liabilities and the responsibility to
the insurer or the underwriter for their fulfilment are given in the agreement
concluded between them.
3.4. The essence of the insurance market.
Insurance market is a socio-economic area where the insurers that need
insurance services operate, underwriters (insurance companies) satisfying the
demand for them and insurance middlemen.
The first section in the insurance market is an insurance company. That is
the very place where the process of creation and usage of the insurance fund is
exercised, some economic relations are formed and others appear; personal group
and collective interests are interconnected.
Insurance Company is an isolated structure, effecting the conclusion of the
insurance agreements, and their fulfilment. Economically isolated insurance
companies build their relations with other underwriters on the basis of reinsurance
and co-insurance.
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Classification of the insurance market is carried out according to the branch

reasons and scales.
According to the branches reasons we differ the market of life insurance and
markets of property insurance, responsibility insurance and accident insurance.
According to scales we differ national, regional and international insurance
markets.
National Insurance Market is a field of the insurance organisations activity
in a particular country. It consists of insurance companies, specialised reinsurance
organisations, insurance middlemen. All the insurance activities on the national
market are effected within the framework of the National Insurance Legislation,
the control under the fulfilment of which is charged with the State Insurance
Inspection. The bigger National Insurance market has been formed in the USA,
Great Britain, Germany and other countries.
Regional Insurance Market unites insurance companies, National Insurance
markets of some separate regions, connected with tight integration relations
between them. The biggest regional market is the North American Insurance
Market (USA, Canada).
International Insurance Market is a total combination of the National and
Regional Insurance markets. In the narrow sense the local insurance markets,
which are characterised by high specific share of International Insurance
operations (New York, London), are called International market.
Insurance market includes many kinds of potential clients of insurance
services with different interests and demands. Market segment are clients of
insurance services similarly reacted to these or those suggestions of insurance
companies. Market segmenting is a process of dividing consumers into groups
according to any sign actual for the realisation of an insurance service (age, sex,
financial sufficiency, profession, etc.).
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Insurance Company must choose what kind of exact service it will offer and
towards what kind of group it will be orientated. The segmentation is spread
according to geographic and demographic signs, the level of income, etc.
Geographic segmentation is built according to regional signs: republic,
district, city, land, region.
Demography is built on age, sex, level of the family income.
1. Speak on the essence and basic tasks of insurance marketing.
2. Speak what targets the practical marketing is directed to.
3. Specify the basic functions and obligations of an insurance agent.
4. Enumerate the obligations of an insurance broker.
5. Characterise the essence of an insurance market.
6. Classify the insurance market.
7. Characterise the principles of insurance market segmentation.
The literature:
Turbina, ., , 96.
5. Gvozdenko
A.A.
"
",
.,
, 1998.
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Theme 4. Insurance Market in Foreign Countries.

4.1.
Insurance development tendencies on the international level.
4.2.
The Insurance Market of the USA.
4.3.
The Insurance Market of Great Britain.
4.4.
The Insurance Market of Germany.
4.5.
The Insurance Market of Switzerland.
4.6.
The Insurance Market of Russia.
4.7.
The Insurance Market of Moldova.

4.1. Insurance development tendencies on the international level.
The modern level of development of insurance business in industrially

advanced Western countries is characterised by enhancing the tendencies to
monopolisation in insurance business and concentration of capital.
The new role of insurance companies is to pay more attention to crediting
definite areas and branches of economic activities. Insurance companies play the
leading role after commercial banks as to the amount of assets and possibilities of
their using as a loan capital. The character of funds accumulated gives these
companies the possibility to use these funds for long-term capital investments
through the security market. Banks dealing with comparatively short-term finance
dont have such possibilities.
It is typical for insurance market to have a big part of insurance payments in
gross national product. So, in the USA, Great Britain and Japan it makes up more
than 8%, in Switzerland 7.5%, in Germany and Holland about 6% of GNP.
Monetary funds accumulated through insurance serve as a source of large
investments. The State regulation of insurance activities abroad means, in general,
the control of financial operations of insurance companies.
The analysis of the position and the tendencies of the development of
insurance in the USA and the European Community countries make it possible to
23
note
the
process
of
active
concentration
of
insurance
capital
and
internationalisation of insurance business. The process of internationalisation

spread all over European insurance market.
The legislative acts of Great Britain, Germany, Italy, France and some EC
countries, which regulate the insurance activities, have some differences, but
according to the EC Council directives these countries have to adapt their national
legislation to general rules of common insurance alliance within the framework of
EC. Specifically it relates to motor transport owners responsibility insurance.
Joint-stock companies are the main organisational form of insurance
activities abroad.
In many countries the communities of mutual insurance are highly spread.
As a rule they are organised according to production sign. For example, farmers of
a definite region can organise such mutual insurance. Such communities act as
mutual assistance and profit making is not their task as joint-stock companies do.
Some countries have different juridical organisational forms of organising
insurance communities. For example in the USA and Germany joint-stock
companies prevail, in France the companies of mutual insurance, in Great Britain
the associations of mutual insurance function together with insurance companies.
Insurance intermediaries have a strong position on insurance market of Great
Britain. They operate in the form of a sole proprietorship. Cooperative insurance is
widely spread in Italy and Spain; in Germany, Great Britain, France and Japan
insurance companies operate together with state capital, whose activity is mostly
restricted to foreign economic sphere.
Despite the damage caused to the business world as a result of terrorist act of
September 11, 2001, the insurance business in the USA and other countries wont
fail. The USA insurance market is amounted to $3 trillion. $40 45 billion which
American underwriters should pay come to 3% of the total sum, which is
comparatively small in general. However every insurance company reserves
money necessary for current payments. If the volume of payment unexpectedly
24
increases there arises the necessity to extract money invested into securities, bank
deposits, etc.
At present many insurance companies experience low profitability. It is quite
dangerous for other juridical persons of the market economy as underwriters play a
very important role in their business. The West gets used to insure everything
including bankruptcy consequences, that is why the legislation of any civilised
country protects underwriters as a last instance in property protection.
World reinsurance companies such as Munich Re, Swiss Re tend to
increase reinsurance to 15% for big risks. The largest European underwriter
Lloyds in its turn changes its policy in the area of terrorist acts insurance. Now
they establish the limit to $50 million payment under such kinds of insurance.
4.2. The Insurance Market of the USA.
There are more than 8000 property insurance companies and about 2000 life
insurance companies in the USA, while in the countries of European Economic
Community only 4200. The American insurance monopolies control about 50% of
the whole insurance market of developed countries in the world.
The insurance industry of the USA is the only industry, which is not subject
to antimonopoly legislation of the country.
Every state has its own insurance supervision and its own regulation body.
There is neither a single federal legislation about the insurance and nor a single
federal body on insurance activities supervision. Every state puts forward its own
requirement to a minimum capital level, kinds of future companies; it regulates in
general the insurance activity by giving licenses to brokers, agents and insurance
companies themselves.
There are two types of insurance companies in the USA: joint-stock
companies and mutual insurance companies. There are no federal insurance
companies. The shares of stock companies may be acquired both by physical and
juridical persons.
25
Insurance companies carry out three types of insurance:

1) Personal
2) Commercial
3) Property
Personal insurance is widely used in the USA. It is divided into life
insurance, rent and pension insurance, accident and disease insurance. Life
insurance in its turn is subdivided into death insurance and living till death
insurance. The annual premium on life insurance makes up about 9 billion dollars
USA.
The second important kind of insurance in the USA is credit financial
insurance. This importance is explained by a wide variety of credit payments in the
field of trade and services in the country.
Property insurance and the insurance of responsibility of big trade and
industrial companies in the USA bring about 8 billion dollars of insurance
premiums every year.
A major peculiarity of big life insurance companies of the USA is the fact
that billions of dollars from different pension funds are passed over to them. The
task of insurance companies in this case is not only to secure these funds but to
ensure the capital gain of these funds as well. The insurance premium interest is
charged for operating these funds. Even a small amount of 0.1% interest charged
from the sum being under operation brings about millions of dollar profit. Huge
investment resources make insurance companies a major financial controlling
centre regarding industrial corporations.
The insurance system of the USA is also characterised by the participation of
different middlemen in the insurance, i.e. the Insurance Policy is not accepted
direct but through an insurance agent or broker. The number of brokers and agents
in the country makes up 0.5 million people. Both individuals and large specialised
firms deal in brokerage. For example one of the largest life insurance companies
Prudential accounts for about 22 thousand insurance brokers. Marsh &
26
McLenan, Alexander & Alexander, French Hall, Fred G. James and others
may be enumerated as independent brokerage firms.
Some companies, especially brokerage companies, have special subdivisions
dealing with the analysis of other companies activities. The major factors on
which the analysis is made are: financial situation, claim payments, level of
services, safety and loss prevention, flexibility in the activity of the company, cost
of services (minimal prices).
The electronic bank of all insurance companies is widely used in the USA. It
gives the possibility to divide the companies according to their risks, premium
sizes and so on.
The largest insurance companies of the world and first of all of the USA are
the financial conglomerates: besides insurance activities they can also deal with
crediting, organising checking services for their clients, issuing credit cards, as
well as operate with real estate, securities and capital through their branches on
their clients behalf. The internationalisation of insurance business is going on.
The leading companies of the insurance market of the USA.
The largest transnational property insurance company State Farm Mutual
Automobile Insurance Company headed the list for premium collection not only
in the USA but in the world as well. It was set up in 1922 in Illinois. This is a
company dealing with mutual transport insurance, property insurance, accident and
aviation insurance and reinsurance.
Signa is one of the leading widely diversified insurance corporations.
American International Group is one of the leading international
diversified insurance groups and the largest underwriter against trade and industrial
risks in the USA. It started operating in 1919 in Shanghai. Now its a holding
company, which holds 44 branches in 130 countries of the world. Staff is about 28
thousand people.
27
The largest companies of the USA are also: Metropolitan Life Insurance
Co, Continental Corporation, Prudential Insurance Company of America,
Allstate Insurance Company.
The foreign business of American monopolies and foreign companies
activities in the USA bring about 2 trillion $ premiums.
The activities of all underwriters in the USA are thoroughly analysed by
consulting companies: A.M.Best, Moody S., Standart & Poors, which issue
their activities catalogues quarterly. They publish the official ratings of insurance
companies relating to their reliability and payability. The major factors for
analysing are: financial situation, payments of claims and the level of services,
safety and loss preventing, flexibility and cost of services. The level of losses,
income and the efficiency of investment interests and the level of debts are
considered the main criteria of the insurers activities.
4.3. The Insurance Market of Great Britain.
Within many years the insurance business of Great Britain is concentrated in
London being the world financial centre. The largest London international
insurance market services financial flows of a number of countries and companies.
The representations and subsidiaries of the world largest insurance companies are
located in London. Within many decades and up till now English insurance market
dictated rules and conditions of insurance.
The English insurance market is unique on some criteria. So, having a
comparatively small size of domestic insurance market (5.3%), its share in
international operations makes up nearly 20% of total world insurance business.
The British insurance companies operate in 43 countries.
Nearly the tenth part of all insurance premiums in the world enters the
British insurance corporations accounts.
Personal insurance in Great Britain is concentrated in specialised insurance
companies and pension funds, as well as in investment companies effecting the
28
sale of real estate to the people. A stable increase of insurance premiums takes
place within the recent ten years. It has happened thanks to the alteration of
pension legislation in Great Britain, which, in its turn, has created economic
stimuli to acquire Policies of private pension insurance by able-bodied population.
The property insurance among people is presented by a number of
traditional kinds. They are the insurance of automobiles and house-holding
property. The property insurance is also characterised by stable rates of
development.
The basis structure of London insurance market Lloyds is presented by
400 insurance syndicates, which join physical persons underwriters carrying out
the insurance business of a corporation. The underwriters bear unlimited
responsibilities for obligations under the terms of insurance contracts within the
framework of the syndicate. Lloyds operates on 5 major markets marine,
property, aviation, automobile and short-term life insurance.
Marine insurance makes up 40% of all insurance premiums, received by the
corporation, the biggest part comes from international operations.
Annually more than 5 trillion pounds are accumulated by insurance offices
of Great Britain.
Insurance contracts in Great Britain are made by insurance companies direct,
as well as through underwriters agents and middlemen.
Large international insurance brokers and independent insurance agencies,
working on a commission basis, play an important role on the insurance market of
Great Britain.
The legislative basis of insurance activity of Great Britain is the law about
the insurance companies, which was passed in 1982, with further alterations and
amendments.
The insurance legislation of Great Britain is in harmony with new insurance
instructions of EC. The special Law of the Lloyds insurance corporation, passed
in 1982, regulates the insurance activity of this corporation.
29
The functions of the insurance control body in Great Britain are performed
by the Insurance Department of Trade and Industry.
The activities of insurance middlemen in Great Britain also subject to
regulation and licensing. First of all it refers to the activities of insurance and
reinsurance brokers. In accordance with Insurance Brokers Act, 1977 there has
been established the Insurance Brokers Registration Council, IBRC in Great
Britain. This body regulates and supervises the activities of insurance brokers
operating on the British insurance market. The IBRC also holds the State Register
of insurance brokers.
There is also a special organ of British insurance market Policyholders
Protection Board which has been established in accordance with the Policyholders
Protection Act, 1975. Due to this Act there have been created all the necessary
conditions for setting up a special compensation fund for insurers which is formed
for the account of all monetary charges of insurance companies having licenses
and performing insurance activities in Great Britain. In case of insurance company
failure monetary means of the compensation fund will be used for full or partial
compensating of their losses under the agreements of obligatory insurance.
Insurance Company Act, 1982 establishes minimal requirements to the level
of underwriters paying capacity. The technique of calculation of the level of
paying capacity corresponds to the requirements of EC directives on the matters of
insurance activity. All insurance companies are obliged to make an annual financial
report. The financial report by all means goes through the independent audit
procedure.
There exists a compulsory responsibility insurance of car owners, air
transporters, riders, domestic animals owners. Besides there has been envisaged a
compulsory insurance of professional responsibility for lawyers, accountants,
insurance brokers as well as for operators of atomic energy units.
30
4.4. The Insurance Market of Germany.

The insurance market of Germany is characterised by its dynamical
development. Annual increase of insurance premiums makes up 10% in Germany.
Personal insurance accounts for 37% within the framework of National Insurance
market. Medical insurance, which is less popular than in other European countries,
accounts for 12% of total volume of insurance premiums. Property insurance
makes up 51% of Germany insurance market.
The insurance market in Germany is divided into the system of State Social
Security and private sector of insurance services.
Private insurance includes joint stock insurance associations which belong to
their stockholders, associations of mutual insurance and state insurance
corporations.
The private sector of insurance compete with commercial banks, which try
to organise insurance service for their clients using operation halls of commercial
banks. In general the profitability of insurance of physical persons is higher than
that of juridical persons. The sector of private person insurance takes 87% of
German insurance market, the sector of juridical persons insurance takes 13%.
Dividends on stocks of insurance companies are rather stable, but a little bit lower
than those in other West-European countries.
Federative structure of Germany is a very important factor to develop the
channelling of insurance services towards consumers. Regional insurance agents
are present in all federal lands of Germany. The main source of attracting clients
are independent insurance brokers, working for different insurance companies. The
direct sale of insurance policies from offices is also wide spread.
Compulsory insurance in Germany has a limited character. Federal
legislation requires compulsory insurance of an employee by the employer for
damage suffered from production trauma or harmful working conditions. It also
requires compulsory responsibility insurance for car owners, air carriers insurance,
31
accountants and hunters insurance and so on. Some federal lands require
compulsory fire insurance.
Insurance business in Germany is strictly limited by Federal Insurance
Supervision Act, 1983, with subsequent amendments adopted in December 1985
and October 1990.
All underwriters operating in Germany are obliged to follow the level of
payability according to legislation adopted in regards to insurance companies of
EC countries. There are additional requirements for foreign underwriters operating
in Germany.
Germany has accumulated a considerable experience in reinsurance. The
biggest reinsurance company is Cologne reinsurance company, whose premiums
account for 2 billions Euro, and Munich reinsurance company, which is the biggest
reinsurance company in the world. It offers reinsurance protection, and skilled
assistance in the problems of insurance and reinsurance.
German insurance market is divided into 39 insurance groups. Ten of them
collect 51% of total premiums. The first place is taken by insurance group
Alliance. Its market share is more than 20%. Alliance company is included
into a list of 10 biggest world companies. Other big insurance companies are
insurance company Colony, concern Gerling. The Folksfurzorge group
controls 5% of the total market. Companies dealing with reinsurance have higher
concentration. In this field 5 firms possess almost 75% of total premiums.
The stability of these monopolists is based on accumulated financial
resources. In general only 13% of companies financial resources are paid to
policyholders, the main part of them are capital investments. Capital investments
of insurance companies provide 25% of all investments into national economy, and
their profit forms 1/5 of gross revenue of insurance agents.
The typical feature of recent years is international character of German
insurance companies activities. The process of developing foreign markets began
32
in 1950. Even then reinsurance companies were more active than primary
insurance companies.
All operations abroad are executed by branches and through controlled
foreign companies. The greater part of foreign branches is situated in WestEuropean countries. In other countries there prevails participation in local
insurance
companies.
In
general,
German
insurance
companies
have
representations in 17 countries.
4.5. The Insurance Market of Switzerland.
Insurance market in Switzerland is highly developed. There are 117
insurance companies in the country, including 23 personal insurance companies, 82
companies of general insurance and 12 reinsurance associations.
The characteristic feature of Switzerland insurance market is a combination
of national and foreign capitals. Insurance companies are often transnational
corporations with vast foreign interests.
The biggest insurance company is Zurich Ferziherungsgezelishaft. The
company is a leader of powerful insurance group including 34 subsidiaries in the
country and abroad. The Zurich group also includes Vita the third company
for personal insurance, as well as Albina and Turegum public insurance
companies. Zurich concern occupies the strongest positions in the USA, 6
subsidiaries control practically all kinds of insurance there. There is Zurich
American among them, its premiums allowed it to be listed in 40 main American
insurance companies. There are subsidiaries in Germany, Canada, Great Britain
and many other countries.
Swiss companies occupy the strongest positions in reinsurance business.
They account for more than half of all premiums from abroad. Inside the country
more than half of all premiums is from personal insurance.
Switzerland has the highest index of collecting premiums per capita. A Swiss
family spends 15% of family income on insurance policies. It is the main item of
33
family expenditures. An average Swiss family spends on insurance more money

than on food. Entrepreneur insurance is also highly developed. Practically all
industrial, trade, transport enterprises are the clients of insurance companies.
The successful activities of Swiss insurance companies are explained by
their active investment policy. More than half of all assets of insurance companies
is invested in loans and securities.
4.6. The Insurance Market of Russia.
In 1992 Rosgosstrah was formed on the basis of Gosstrah. According to
the Presidents Act of January 29, 1992 all state and municipal insurance
institutions were transformed into joint-stock insurance companies of open and
close type and insurance limited partnerships. All insurance companies in Russia
were divided into two types depending on the formation of authorised capital:
- joint-stock, cooperative and other companies;
- joint-stock companies with some participation of the state capital.
The legislative basis of Russian insurance market is Russian Federation Act
About Insurance passed in January 12, 1993. The Department of Insurance
Supervision of RF Ministry of Finance performs the control function for the
supervision of insurance activities.
Public companies, more than any other companies, serve all categories of
clients. The overwhelming majority of public companies serve and conclude
agreements with physical persons, joint-stock companies of open type have clients
both among state enterprises and commercial businesses.
The Russian market is as greatly monopolised as it was before. 100
companies account for 60% returns and two largest underwriters Rosgosstrah
and joint-stock company Ingosstrah account for 25% of total insurance
premiums.
The characteristic feature of insurance market is the essential exceeding of
the amount of collected premiums over the volume of payments. The average level
34
of payment works out at 70%, which is incomparable to the world level of 90%
and more. In fact Russian underwriters exceedingly evaluate the undertaken risks
and the probability of insurance incidents. The high share of insurance premiums
remaining at the disposal of the company enables it not to search other variants of
profitable and reliable investing.
Less than 10% of potential risks is being insured (against 90 95% in the
majority of advanced countries), 90% enterprises property is not secured by
insurance protection.
The most well-known insurance companies in Russia are Rosno, Afes,
Ingosstrah, Energogarant, Lukoil.
4.7. The Insurance Market of Moldova.
At present in Moldova there are about 40 insurance companies having
licences to fulfil the insurance activities on the territory of Moldova. In general
insurance companies were formed as multi-branch organisations and they have
licences for different kinds of insurance activities.
For many years the insurance in Moldova was done by the Gosstrah that
was the monopolist on the local insurance market. In the beginning of 1990 there
was the demonopolization of the insurance market. The joint-stock insurance
company Asito has appeared. Many private insurance companies began to be
formed and by the middle of 1990 they have achieved big and essential results.
Now Joint Insurance Company QBE-ASITO possesses 70% of all
operations effected on the National Insurance market of Moldova. Thus the
majority of the underwriters are small and weak.
Eight insurance firms have approximately 9% of the market portfolio of
shares that belong to private foreign investors (England, Ireland, Russia, Ukraine,
Romania, Bulgaria, Malta). These companies are: QBE-ASITO, AFES-M,
ARTAS, ASSIND, BOIANA, DELTA, GALAS, PROTECT-IMPEX,
SAIMEX and others.
35
In accordance with the rating, being held by the insurance supervision of the
republic, the most reliable companies of Moldova are: QBE-ASITO, AFES-M,
MOLDOVA-ASTROVAZ, CARAT, ORATEH, AUTO, DONARISGROUP, PROTECT-IMPEX, GALAS, ASIVIT.
The insurance activity in RM is effected on the basis of The laws about the
Insurance and is controlled by the State Insurance Supervision.
Moldova Republic legislation stipulates for the contracts of insurance being
concluded abroad only those kinds of activities which are not under national
underwriters insurance. Foreign companies are allowed to open representations in
Moldova which have the right to fulfil the insurance activities on the territory of
the republic, having licences given by the State Insurance Supervision body.
In Moldova the Regulation of the insurance broker is established. It arranges
relations between the insurers, underwriters and brokers. However, today only
three broker firms have been established and registered, and the majority of
policies are distributed through the insurance agents.
1. Enumerate and characterise the organisational forms of insurance most
spread all over the world.
2. Characterise the most advanced insurance markets.
3. Speak on peculiarities of the USA insurance market.
4. Enumerate types of insurance most often applied in the USA.
5. Characterise the methods of state regulation of insurance activities in
Great Britain.
6. Speak on international Insurance Corporation Lloyds.
7. Characterise insurance and reinsurance markets in Germany.
8. Enumerate and characterise types of voluntary and obligatory insurance
in Germany.
9. Speak on peculiarities of insurance market in Switzerland.
36
10. Enumerate and describe types of insurance, which are practicable in

Russia.
11. Enumerate the leading insurance companies operating on Moldova
market.
12. Speak on state regulation of insurance activities in Moldova.
The literature:
Turbina, ., , 96.
6. Zubritski
V.P.,
Enikov
I.G.
, ASEM, Kishinev, 2000.
Theme 5. Property Insurance.

5.1.
Physical persons property insurance.
5.2.
Juridical persons property insurance.
5.3.
The conclusion of insurance contract.
5.4.
The measuring of damage and compensation.
37
5.1.
Physical persons property insurance.
According to the terms of property insurance contract the following kinds of

property can be insured:
- household property;
- buildings of different character (living, countryside) which are constantly
located and consist of foundation, walls and roof;
- dwelling fund flats and rooms in condominiums owned by an insurer;
- personal property clothes, shoes, portable audio and video devices,
musical instruments and other home utensils.
Physical persons property can be insured against:
- fire;
- flood;
- damage;
- illegal actions of the third parties.
Insurance contract can be concluded against all risks or particular risk only
(its up to the insurer). If the insurer is insured against particular risks, he will have
no compensation for other risks.
Items of property which cant be insured, are the following:
1) property in officially claimed area of natural disaster;
2) unsafe property to be pulled down, property that requires general
reconstruction and property that is more than 60% worned out;
3) property in subsidiary spaces for communal use;
4) home and decorative plants, domestic animals and birds;
5) money and securities, documents, manuscripts, precious metals ingot;
6) equipment, machine-tools and other items of property, used in producing
goods;
7) property bought or produced for the subsequent selling;
8) agricultural, viticulture and live-stock-breeding production;
9) means of transport;
38
10)
shops and other industrial areas.
The compensation will not be paid in case of:

1) military operation and civil riots;
2) nuclear accident;
3) bad intention or negligence from the insurer or insurant;
4) collapse of buildings and their parts;
5) stealing of property in time of insurance case or immediately after it;
6) non-observance of instructions on keeping the insured property, if it was
used for improper purpose.
Property can be considered insured if it is located in the place, stipulated in
the Insurance Policy (except personal property). In case of moving to another place
the insurance contract remains in force if the underwriter was informed in advance.
The insurance sum is defined within the framework of real value of property.
This value is defined, taking into consideration its price at the given date and
deducting depreciation.
The insurance sum should not be changed in case of inflation and price
growing.
5.2.
Juridical persons property insurance.
This type of insurance can be applied to juridical persons property, which

can be damaged as a result of the insurance case.
According to the insurance contract, the juridical person can be insured
against
- fire;
- theft;
- natural disaster;
- malicious mischief from the third persons;
- explosion of steam-boilers, gas-pipers, machines and similar devices;
39
- damage of the insured property by water from sewage, heating and

firefighting system;
- breaking of windows, mirrors and shop-windows.
The damage will not be compensated, if it is resulted from:
- military operations, civil riots;
- if the property was damaged in accordance with civil and military
authorities decisions;
- nuclear accidents;
- the insurers bad intention or negligence;
- spontaneous combustion, fermentation, decay and other natural processes
in the insured property;
- collapse of buildings and their parts, unless this collapse is caused by the
insurance case;
- propertys theft in time of the insurance case or immediately after it.
Property can be considered insured if it is owned by the insurer, bought by
the insurer on credit and served as a collateral for this credit.
Items of property, that cant be insured, are the following:
1) cash in the form of national and foreign currency;
2) stocks, bonds and other securities;
3) manuscripts, drafts, designs and other documents, books in accountancy;
4) models, patterns, samples and so on;
5) precious metals ingot and precious stones without mounting;
6) information keeping devices in computer systems and the like;
7) stamps, coins, pictures, sculptures and other works of art;
8) explosive substances;
9) goods in stock and taken on commission;
10)
means of transport;
11)
objects, which are in the insured space, but not owned by the
policyholder.
40
A special contract, including inventory, can be concluded in respect of these

items.
The basis for measuring insurance sum is a real value of the insured property
at the moment of concluding the contract (taking into consideration its
depreciation).
A real value is defined:
1) for equipment, machine-tools by a real price on similar objects;
2) for buildings by a real price on a similar building in a given locality;
3) for products, manufactured by the policyholder by a real cost;
4) for different things of value, bought by the insurer by a real price
(including overheads).
Any movable property is considered insured in areas, stated by the contract.
5.3.
The conclusion of insurance contract.
The insurance contract is concluded on the basis of the formal letter from the
insurer.
The insurance contract is confirmed by the Insurance Policy.
Premiums can be paid in a lump sum or at agreed dates. Insurance contract
comes into force after the first premium is paid, but not before the date, stipulated
by the contract.
The underwriters responsibilities:
1) to make the insurer aware of general terms;
2) to pay compensation in the insurance case;
3) to pay compensation in advance (if the amount of compensation is clear
and investigations are not completed within 3 months period);
4) to compensate the expenses, caused by preventing damage;
5) to keep in secret all kinds of information obtained in the process of
insurance.
The insurers responsibility:
41
1) at the moment of concluding the contract to inform the underwriter about

all circumstances, influencing the insurance risk;
2) to inform the underwriter about other insurance contracts on the object;
3) to pay premiums in due time;
4) to keep official and agreed rules of security;
5) if insurance case takes place, the insurer should inform about the possible
steps in order to prevent the insurance case or to reduce the damage;
6) to keep the damaged property as it is.
The underwriters responsibilities are cancelled if:
- period of contract is expired;
- compensation is paid completely;
- the contract is not valid.
If the compensation is paid partly, the contract remains in force, but the
present compensation could be the difference between total insurance sum and the
compensation already paid. If the contract is concluded for more than 1 year and
some compensation is paid during this year, it remains in force for the total sum.
5.4.
The measuring of damage and compensation.
Compensation is paid:
- if the property is fully destroyed, total insurance sum is paid after
deducting the value of the remains;
- if the property is partly damaged, the compensation will be equal to the
sum of restoring expenses.
Restoring expenses include:
- expenses on materials, spare parts and payment for workers;
- delivery expenses;
- other expenses, connected with improving the objects;
- expenses connected with temporary or additional repairing.
42
Full destruction takes place if remaining cost and expenses for restoring
taken together exceed of the insured object.
The insured object is considered damaged, if restoring expenses and
remaining cost do not exceed the real cost of the insured object (at the moment of
insurance case).
Compensation includes the insurers expenses on saving the insured
property and reducing the damage.
In all cases compensation, including expenses on reducing the damage and
restoring the damaged property, should not exceed the insurance sum.
The underwriter, who paid compensation, has the right to claim the sum
from the third party, responsible for caused damage.
If the insurer has already received the compensation from the third party, the
insurance company should only pay the difference between the sum stated in the
insurance contract and the sum received.
1. Enumerate the objects and risks of physical persons property insurance.
2. Give types of property which are not subject to insurance coverage under
the conditions of insurance of physical persons property.
3. Speak how the insurance sum and insurance premium are determined
under juridical persons property insurance.
4. Enumerate the risks taken for insurance under juridical persons property
insurance.
5. Speak what property is not taken for insurance under the conditions of
juridical persons property insurance.
6. Speak on the regulations of concluding the insurance contract on
property types of insurance.
7. Enumerate the liabilities of an insurer and an underwriter on the
conditions of property types of insurance.
43
8. Speak on principles of determination of the size of damage and insurance

reimbursement in property insurance.
The literature:
Turbina, ., , 96.
6. Rules and conditions for property and personal types of insurance
responsibility and financial risks, elaborated by the insurance stock company
QBE-ASITO.
Theme 6. International Practice of Transport Insurance.

6.1.
Motor-vehicle insurance.
6.2.
Vessel insurance
6.3.
Marine freight insurance
6.4.
Containers insurance
6.5.
Air-craft insurance
44
6.1. Motor-vehicle insurance.

Motor-vehicle insurance is one of the kinds of transport insurance whose
objects are mechanised and other means of transport. This kind of insurance is
voluntary.
Motor-vehicle insurance under which the underwriter repays the losses
suffered by the insurer when the vehicle itself was damaged or destroyed is called
casco insurance.
In practice however motor-vehicle insurance is a combined insurance under
which not only the motor-vehicle but auto-owner responsibility are insured as well
as luggage and additional equipment. While insuring luggage insurance coverage is
not applied to antique objects, precious metals and stones, objects of religious
cults, collections, paintings, manuscripts, banknotes, securities, documents and
photos as well as to objects which neither belong to the insurer or family members
nor sale due to entrepreneur activities.
In practice there are different variants of vehicle insurance.
1) complete casco: loss repayment against all insurance accidents.
2) partial casco: loss repayment against all insurance accidents except glass
damage.
3) insurance against theft: damage suffered due to theft or car stealing.
4) transit insurance: repayment of loss suffered due to breakdown, stealing
while the vehicle is transported by the insurer from the place of purchase to the
place of destination.
Losses being occurred due to military actions, civil war, popular uprising or
radioactive pollution are not repaid whatever variant of insurance is exercised.
Cars and other vehicles can be insured within the limits of their actual cost.
According to the insurers wish additional equipment and luggage can be insured
together with the vehicle or separately. While insuring the car the driver and
passengers can also be insured against the accident. According to the conditions of
45
insurance agreement these persons are insured against long or constant disability or
death.
The insurance of the driver and passengers can be exercised according to the
system of places or to the lumpsum system. It is stipulated that the insurance
sum is established for each place in the car. The total number of insured places are
determined according to the motor-vehicles technical passport data. Under
lumpsum system the total insurance sum is established for all passengers and the
driver. Each of them is considered to be an insured person having a definite share
from the total insurance sum.
As a rule an insurance agreement is concluded for the period of one year or
from one to eleven months.
When concluding an agreement, the insurer is obliged to present information
about the motor-vehicle, the model, the year of car output, power and volume of
the engine, colour, registration member and so on. If the insurer doesnt present
full and authentic information, which affects the determination of risk or the
amount of insurance premium, the underwriter has the right to consider the
insurance agreement to be invalid.
As a rule, documents which are regarded to be the basis for the
determination of the amount of insurance premium for locally produced motorvehicles are the data from corresponding price-lists. As to foreign made motorvehicles the corresponding documents are the invoice of manufacturing works of
the official dealer as well as home and foreign catalogues.
The amount of insurance premium is calculated according to the rates being
set up depending on the model of motor-vehicle or variant of insurance.
The insurance agreement under which the insurance reimbursement is paid
remains valid until the period of insurance expires. The underwriters liabilities for
insurance repayment are established as difference between insurance sum and
repaid insurance reimbursement.
46
Insurance reimbursement for destroyed, damaged or stolen automobile or

another motor vehicle, additional equipment or luggage is repaid in the size of
suffered damage but not more than the corresponding insurance sum.
When the motor-vehicle is destroyed the damage is determined in size of its
cost at actual retail prices after deducting the depreciation sum and the cost of
remainders with due regard for their depreciation as a result of the given insurance
case. The complete loss is acknowledged if the cost of restoring repair of the
motor-vehicle (including the cost of transportation to the place of repairing) makes
up 75% of the insurance sum or the actual cost of the motor-vehicle for the
moment of concluding the agreement.
In case of damage of the motor-vehicle the size of damage equals to the cost
of repair at actual tariffs. The sum of damage includes expenses for the
replacement of damaged spares during the repairing works; the cost of remainders
suitable for further using (with due regard for their depreciation) is deducted.
Besides the sum of damage includes expenses for rescuing, repairing,
transportation of damaged motor-vehicle to the nearest car servicing or parking.
When the insurance case happens the insurer is obliged:
- take all possible measures to rescue the automobile, passengers;
- immediately inform the competent bodies about it (the road police);
- to inform in written form the insurance company which concluded the
insurance agreement about the accident;
- to show the insurance company the damaged automobile or its
remainders before the repair.
The underwriter is obliged:
- to examine the automobile on the day of receiving the notification;
- to effect the payment of insurance reimbursement within the stipulated
period of time.
In case the automobile was returned to the insurer after the insurance
reimbursement had been paid, the insurer is obliged to return the corresponding
47
amount of received reimbursement after deducting the cost of stolen spares and
repair of the motor-vehicle.
6.2.
Vessel insurance.
Different conditions and terms of insurance coverage uniting a definite

group of risks are applied in practice of vessel insurance:
- Responsibility for loss of or damage to the vessel. It means that losses as
a result of damage or wreck of the vessel due to calamities, collision, Masters
error as well as expenses for vessels rescuing are subject to reimbursement.
- Responsibility for complete loss of the vessel only stipulates the
reimbursement of losses against complete destruction, its missing, as well as
expenses for vessels rescuing.
The above conditions of vessels insurance are basis ones for the contract.
They can be expanded by including other risks in them when parties agreed to it.
While insuring vessels there may be applied premium rates individually for
each vessel. They depend on the model of the vessel, conditions of insurance, the
place of moving, season, type of cargo, etc.
Vessels as subject to tough examination once per 12 years and once per 4
year they are subject to usual examination with the purpose of determining whether
the vessel is a source of high danger. The main characteristics of the vessel is its
seaworthiness. If the insurer knew about possible unseaworthiness of the vessel
when it was in the port or when it was leaving it, the underwriter can terminate the
contract of insurance, lessen the sum of insurance reimbursement or decline its
payment at all.
Insurance coverage exceptions:
- evil intent or tough carelessness of the insurer and beneficiary;
- vessels unseaworthiness known to the insurer or the beneficiary before
the vessel leaves the port;
48
- depreciation and corrosion of the vessel, its spares, machines and

equipment;
- running of the vessel under the conditions which were not stipulated by
its ice type (except cases when the vessel changed its route for rescuing peoples
lives);
- direct or indirect influence of radiation;
- losses and expenses associated with damage caused to the environment,
health of passengers and the crew;
- any indirect losses of the insurer.
The insurance contract is concluded for the time or for the voyage.
In the first case the insurer should inform about the place of movement and
about the required period of policy operation. In the second case the insurer
informs about the places of departure and destination, the length of route, the
places of entering any other ports.
Insurers liabilities when the vessel is damaged:
- to notify urgently the underwriter about the insurance case;
- to give the underwriter the possibility to examine the damaged vessel;
- to agree with the underwriter the choice of the dock for the repairing.
When the vessel is completely crashed the insurance sum is paid provided:
- it is sink, completely lost for the insurer or destroyed;
- it disappeared (in case of the lack of information about it within 3
months);
- it was completely ruined.
The insurance reimbursement is determined taking into account the actual
cost of the vessel but not higher than the stipulated insurance sum.
6.3.
Marine freight insurance.
Agreement of Marine Freight Insurance is concluded on the basis of the

written statement of the insurer, where the following clauses should be stated:
49
exact naming of cargo, kind of packing, number of places, weight of cargo, the
number and the date of the bill of lading or of some other transport documents;
naming the year of shipbuilding, flag and tonnage of the vessel; method of placing;
the place of sailing, transfer of cargo and its destination; the date of the vessels
sailing, insurance amount of cargo, insurance conditions.
These requirements in this or that modification correspond to the Standard
Conditions of London Institute Underwriters the most authoritative International
Insurance Organisation in the sphere of Marine Insurance.
The responsibilities for all risks are the widest, though they dont cover all
the risks. Some risks are excluded: damage to and loss of cargo due to any military,
pirate actions, confiscation, arrest or distraction of cargo on the authorities
demand (these risks can be insured additionally); radiation, infringement of the
rules of cargo transportation and storage, lack of cargo while packing is not
damaged, etc.
The responsibilities for private accident, in contrast to the first variant, are a
definite list of risks under which the underwriter bears the responsibility, but the
volume of underwriters responsibility is less here.
The responsibility for loss or damage only in case of a shipwreck coincides,
on the whole, with the responsibility for the private accident. The difference is that
in the latter case the underwriter bears the responsibility only for the complete loss
of cargo, as to the damage to the cargo the underwriter is responsible for it only in
case of the shipwreck.
In all above cases the underwriter compensates losses and expenses
associated with the wreck and all necessary charges for cargo rescuing and of loss
lessening.
The international trade unifying terms of loss and types of trade contracts
have been elaborated. Four basic types of trade deals (CIF, CAF, FOB and FAS)
are most widely spread.
50
Under CIF terms (cost, insurance, freight) Sellers are obliged to deliver
goods to the port, to load them on board the vessel, to pay freight, to ensure the
cargo against marine risks in transit and to send buyers all necessary documents.
Under CAF terms (cost and freight) Sellers undertake to conclude and to pay
the contract of marine transportation of goods to the place of destination and to
deliver the goods on board the vessel. Buyers should ensure goods.
Under FOB terms (free on board) Sellers deliver and load goods on board
the vessel which is hired by Buyers and the Buyers should ensure goods in transit.
Transactions on FAS terms (free alongside ship) are similar to those on FOB
terms, the difference is that under FAS terms Sellers deliver goods to the quay and
the risks pass on to correspondingly.
6.4.
Containers insurance.
International practice shows that the most effective, from the point of view
of cargo storage, is their transportation in special containers.
Containers insurance has its specific features. The objects of insurance are
containers where the cargo is placed and in this capacity they are a part of the
vessel. Their insurance is exercised under special insurance contracts usually
concluded on standard English conditions. The volume of insurance coverage may
be different at that.
Under the insurance of containers against all risks, the underwriter is
responsible for all risks of their complete loss within the period of insurance.
The underwriter is not responsible for the depreciation or gradual worsening
of containers quality as well as for their loss, damage and possible expenses
caused by the delay in voyage. Losses because of containers damage are
reimbursed in the sum which does not exceed the cost of restoration of damaged or
lost parts after deducting their depreciation interest.
Under containers insurance against complete loss they reimburse losses
against containers destruction as well as against containers share in the shipwreck
51
as well as expenses incurred for the rescuing of containers and lessening the losses.
Charges for containers repairing are not subject to reimbursement under given
conditions.
The insurance agreement is concluded on the basis of the written statement
of the insurer which must include the following information about the object of
insurance: the type of the container, volume, cost, the naming of the vessel-carrier,
the date of the vessels voyage, the place of departure, the place of destination, etc.
6.5.
Aircraft
insurance
contract
Aircraft insurance.
is
an
agreement
about
underwriters
reimbursement of damage suffered by insured air-transport when an insurance case

happens.
Aircraft may be insured on the conditions of complete loss only and
against all risks.
Under insurance only against complete loss when the insurance case
happens the insurer is paid the insurance reimbursement of total insurance sum (if
the cost of its restoration and rescuing exceeds 75% of the agreed insurance sum).
Under aircraft insurance against all risks the insurer is paid the insurance
reimbursement not only when the aircraft is crashed, but when it has been damaged
due to any causes besides those specially agreed on as exceptions in the Policy.
In international practice Aircraft Insurance Policy against crash and damage
is applied. It doesnt contain a detailed enumeration of all risks covered by
insurance. It gives a list of exceptions, addenda and special conditions after a
statement about the insurance of aircraft against all risks and quite brief general
provisions.
Damage is not covered if it has happened due to depreciation, corrosion,
design defects, breakage of electrical equipment or mechanical breakage of some
mechanisms, spares or parts. In this case if the aircraft is damaged as a result of it,
52
the damage suffered by the object of insurance is reimbursed after deducting the
cost of this spare part.
While insuring the aircraft the insurance sum can be calculated at the
amount that doesnt exceed its actual cost for the moment of concluding the
insurance contract.
The Aircraft Insurance Policy can contain the following conditions:
- the losing of aircraft (if there is no information about it within 15 or more
days);
- emergency landing and expenses associated with the rescuing of the
aircraft (in case of its landing due to force major circumstances and impossibility
to take off from the place of such landing, the expenses for providing this taking
off or aircraft transportation are reimbursed);
- the cost of repair of damaged aircraft (if the insurance case is
acknowledged, the terms and limits of the corresponding expenses reimbursement
is agreed upon);
- the determination of complete loss of aircraft.
Under aviation insurance in contrast to other kinds of insurance, premiums
are calculated individually taking into account the factors which determine the
degree of the risk, type of aircraft, the year of its manufacture, technical
conditions. Pilots skills, the intensity of aircraft operation, information about
conditions of its maintenance, the character of transported cargoes and a number of
other factors are taken into consideration.
1. Enumerate variants of vehicle insurance.
2. Speak on the regulations of concluding an insurance contract and
payment of insurance reimbursement under the terms and conditions of vehicle
insurance.
53
3. Enumerate the liabilities of an insurer and the underwriter while

performing vehicle insurance.
4. Speak on peculiarities of vessels insurance.
5. Enumerate the risks, which are excluded from insurance coverage under
marine insurance.
6. Characterise the peculiarities of marine insurance of cargo.
7. Speak on international unifying terms of trade Incoterms.
8. Characterise the containers insurance and its peculiarities.
9. Speak on international practice of aircraft insurance.
10. Enumerate the terms and conditions, which can be included into the
Policy of aircraft insurance.
The literature:
Turbina, ., , 96
Theme 7. The Insurance of Responsibility on the International Level.

7.1.
The insurance of the civil responsibility of car-owners.
7.2.
The insurance of the civil responsibility of carriers to passengers.
54
7.3.
The insurance of the civil responsibility of the enterprises the
sources of high danger.

7.4.
The insurance of professional responsibility.

7.1.
The insurance of the civil responsibility of car-owners.
Insuring the civil responsibility of car-owners, underwriter undertakes to

compensate damages to third persons that resulted from the insurers maintenance
of the automobile. On the territory of RM this kind of insurance is obligatory.
The object of insurance is a car-owner responsibility for damage to life,
health and property of third persons, suffered in the result of car accidents.
Insurance agreements with car-owners registered in RM are concluded for 1
year, and with foreign owners, staying in the country temporarily from 15 days
up to 11 months. Insurance premiums are paid all at once.
Insurance reimbursement is paid at the rate of actual damage, confirmed by
corresponding competent bodies and documents about losses suffered by victims.
In case of causing bodily injuries or death of the victim, insurance
compensation is not limited by the maximum rate, independently on the number of
the victims suffered in the result of one car accident.
The insurance compensation for the damage to life or health of the victim
includes:
- spent earnings for the period of temporary disablement and in
consequence of disability;
- additional expenses for buying medicines, prosthetic appliance, care,
transport expenses;
- part of earnings, that in case of death of the victim his dependent disabled
persons lost;
- expenses for burial.
In case of damage or destruction of the estate in the result of car-accidents
the insurance reimbursement is fixed depending on the actual damage expressed in
55
money, according to the current exchange rate taking into consideration the
depreciation and is limited by 10 000 minimal salaries.
The insurance compensation for damage to the property of third persons
includes:
- expenses in connection with the loss of the estate;
- expenses on the reconstruction works of the estate;
- transport expenses of the suffered and expenses for taking the damaged
transport in tow.
In case of causing bodily injuries or death, the compensation is paid only to
those suffered persons that were outside the transport, which caused the accident.
Green card is an agreement that forms a special group of international
agreements about the insurance of the car-owners responsibility. The main
elements of Green card system are national bureaus of countries participants of
the agreement. The control under the fulfilment of the car-owners responsibility
insurance in the international auto communication is made through these bureaus.
As a rule, this control is made at the equipped frontier crossings. The National
Bureau together with the insurance companies decide questions of how to settle the
claims submitted by third persons concerning the insurance cases inside the
country and abroad. The National Bureaus are united into the International Bureau
of the Green card (head-quartered in London), that coordinates their activities.
7.2.
The insurance of the civil responsibility of carriers to passengers.
Carrier is a transport enterprise that issues the transportation document and

performs the carriage of goods and passengers. The carrier is responsible for the
property damage, resulted from the infringement of the rules or the agreed
conditions of the carriage.
The suffered persons are paid the compensation by that sum of money that
was exacted on the civil claim.
56
Insuring the responsibility of the air-carriers the insurers are those persons
that run the air transport belonging to them.
The injury is understood to be as death, bodily injury or the damage caused
to the property of third persons out of the air transport and on the land.
The matters of the civil responsibility of the air-carrier are regulated by the
rules of the International air-rules, particularly by Rome Convention about
reimbursement of the damage, caused by foreign airplanes to third persons.
According to the insurance contract of the carriers responsibility the underwriter
pays that sum of money that the insurer is obligatory to pay according to the law as
the compensation for causing bodily injuries or causing the damage to goods or to
the property of the third persons in the result of the insurance accident.
As to the sea-transport the insurance of the ship-owners responsibility that
is considered as an independent branch of the insurance is made. This insurance
stipulates the liabilities of the ship-owner connected with the harm caused to life,
health of the passengers, to the crew, dockers in the port and so on. The damages
caused to the property of the third persons are also the obligations of the insurance.
This property are: other vessels, goods, personal things of the vessels crew,
passengers or other persons and port installments.
The insurance of the ship-owners responsibility is effected through the
clubs of the mutual insurance. At present, there are about 70 of such kinds of clubs
in Great Britain, Switzerland, Norway, USA.
The insurance of the auto-carriers responsibility on the auto-transport is
made in case of damages connected with the transportation of goods or passengers.
The conditions of the auto-carriers responsibility are determined by the legislation
of every country and rules of the international laws, established by the Convention
about the international carriage of goods by roads.
The contract of the insurance of the auto-carriers responsibility in
international transportation includes the following risks:
57
- the responsibility of the auto-carrier for the damage to or loss of the

goods in transit and for losses resulted from these accidents;
- the auto-carriers responsibility for the financial losses of the clients;
- the auto-carriers responsibility to customs bodies;
- the responsibility to the third persons in case of damaging the goods.
7.3.
The insurance of the civil responsibility of the enterprises the

sources of high danger.
In this kind of insurance, the responsibility is understood as the obligation to

reimburse the damage, caused to the owners of the enterprises or the third persons.
The subjects of the civil insurance responsibility of the enterprises are the
causes of harming the person (death, injury and other body injuries) and the
damage caused to the property.
The risks connected with the usage of the transport by the enterprise that can
be insured on separate kinds of the insurance are excluded from this kind of the
insurance.
The insurance agreement is concluded after detailed studying of a concrete
risk. The limit of the insurance responsibility is usually established.
The sum of the insurance premium depends on the volume of the
responsibilities undertaken by the underwriter, the number of the insurance risks,
the limit of the insurance responsibility, the period of the insurance and other
factors.
The insurance reimbursement can not exceed the stated limit of the
responsibility and the volume of the damage caused to the consumer (third
persons).
Concluding the insurance agreement for 1 or more years the insurer is
usually granted the right to pay the insurance premium by instalments.
Under this kind of the insurance the following things are compensated:
58
1) expenses connected with the compensation of the damage caused to the

suffered and additional expenses in the result of the damage or loss of its property;
2) harm caused to his health or life;
3) missed profit;
4) moral harm;
5) losses of the insurer connected with court expenses during considering
his case about the reimbursement of the damage;
6) expenses of the insurer to liquidate the accidents consequences,
connected with the cleaning of the polluted territory;
7) expenses of the insurer to hold an independent expertise.
7.4.
The insurance of professional responsibility.
The insurance of the professional activity unites the insurance of different

persons who, while performing their professional activities, can damage the third
persons. The object of the insurance are: the property interests of the insurer
connected with the responsibility for the harm caused to the third persons in the
result of the mistake during the fulfilment of the professional liabilities.
The insurance risks are carelessness or mistakes during conscientious and
competent fulfilment of their liabilities. The insurers competence must be
confirmed by the corresponding documents. From the volume of the responsibility
the intentional actions of the insurer are excluded.
According to the insurance of the professional responsibility two groups of
risks can be insured:
1) The risks connected with the possibility to make body injuries or to harm
the health. These cases are met in the practice of surgeons, dentists, and so on.
2) The risks connected with the moral damage.
In case of damaging the client, the suffered has the right to make a claim
from the moment when the consequences of the caused damage were discovered.
The period of claim duration makes 15 years from the date of causing the damage
59
and 3 years from the date of discovering hidden consequences of the caused
damage.
The responsibility of the underwriter on all the damages appeared during the
process of the Policy can not exceed the certain limit. The rate of the premium
depends on the profession, age, the length of service, the date of receiving the
qualification, the total number of the employees and so on.
1. Specify the objects and risks of insurance of civil responsibility of
automobile owners.
2. Speak on the regulations of concluding the insurance contract and
insurance reimbursement under the conditions of insurance of civil responsibility
of automobile owners.
3. Enumerate types of losses which are included in insurance coverage
under the insurance of civil responsibility of automobile owners.
4. Speak on international system of insurance of civil responsibility Green
card.
5. Characterise the insurance of civil responsibility of air-carriers.
6. Speak on peculiarities of insurance of civil responsibility of shipowners.
7. Characterise the insurance of civil responsibility of auto-carriers.
8. Specify the objects and risks of insurance of civil responsibility of
enterprises sources of high danger.
9. Enumerate types of losses which are reimbursed under the conditions of
insurance of civil responsibility of enterprises sources of high danger.
10. Characterise the conditions and risks of insurance of professional
responsibility.
60
The literature:
2. The conditions of compulsory insurance of civil responsibility of the
owners of transport and municipal electric transport, the Official Monitor of the
RM 1 of 26 January 1995.
Turbina, ., , 96.
responsibility and financial risks elaborated by the insurance stock company
QBE-ASITO.
Theme 8. Economic and Political Risks Insurance.

8.1.
Commercial risks insurance.
8.2.
Insurance against losses due to production interruptions.
8.3.
The insurance of new technique and technology risks.
8.4.
Political risks insurance.
8.5.
Export credits insurance.
61
8.1.
Commercial risks insurance.
Entrepreneur activities and insurance are two closely interconnected

categories of the market economy.
The main aim of entrepreneur activities is getting profit, increasing capital
invested into business. That is why insurance against possible loss of expected
profit or unearned profit becomes very important.
The object of insurance is the commercial activities of the insurer, that
stipulate monetary and other investments into some kind of production, works or
services and getting profits from these investments within a definite period of time.
The liability of the insurance company on insuring the risks is to reimburse
the insurer the losses suffered due to unfavourable, unpredictable changes of
current market situation and worsening of other terms and conditions for
performing commercial activities.
The insurance sum is defined by two ways:
1) the insurance sum is established within the limits of insurers capital
investments into insuring operations;
2) the insurance sum includes not only capital expenses but definite profits
being expected from them.
In the first case insurers expenses are reimbursed; it may be called
insurance of investments. As to the second one, both expenses and standard profits
are reimbursed, thats why it may be called the insurance of return (profit).
The purpose of insurance is to reimburse possible losses to the insurer if the
insured operations dont return the stipulated payback. The insurance
reimbursement is defined as difference between insurance sum and real financial
results of the insured commercial activities.
As the main aim of insurance is protection against possible losses of
investment sums, the period of insurance contract is stipulated by the period of
payback of capital input. The insurer seeking to quicker payback of entrepreneur
activities, is, in fact, interested in the reduction of the period of insurance. For the
62
insurance company a short period of insurance contract increases the risk of

unjustified reimbursement repayment. The increase of this period makes the
payback more real thus reducing the possibility of the appearance of losses subject
to reimbursement, though there may appear some other factors as well.
The peculiarity of insurance under consideration is that the repayment of
reimbursement is effected in general, at the end of the period of insurance when the
final results of insured commercial activities have been cleared up. As to other
types of insurance the necessity of losses compensation may appear at any moment
of insurance contract period. The stipulation of the period of possible repayments
under commercial risks insurance leads to use insurance in a planned manner and
creates conditions for collecting reserves by this period.
The character of insurance determines a number of definite requirements for
contracts to be concluded. The insurer should have releases, licences, patents for
given activities and all other required documents. While filling in the insurance
application form he is obliged to give as full as possible information: about
forthcoming commercial activities, the expected returns and expenses associated
with them, concluded contracts, and all circumstances helping to consider the
degree of a risk.
Some losses are excluded from the insurance liability. They are: losses due
to war or military actions, state authorities decisions and political upheavals,
exchange rate changes, banking refusal to credit an enterprise being set up,
legislation infringement, changing of the type of commercial enterprise, unskilled
management.
Insurance should be carried out only by stating minimum deductible (e.g.
5%). And it should also give the insurer the right to increase deductible rate. The
restriction of minimum sum of reimbursement (e.g. 80% of the loss) is also
worthwhile.
Premium rates depend on many factors: the kind of activities, the period of
insurance, the degree of market relations stability, etc.
63
8.2.
Insurance against losses due to production interruptions.
Insurance against forced idleness is, in its essence, an addition to the

insurance of fixed and working capital as interruption in production is caused by
their loss or damage.
It is advisable to include into insurance liability losses due to nondelivery of
electric power, fuel, water because of accidents which did not happen at the
insurers but at the suppliers, on transmission lines, etc.
The essential peculiarity of insurance against production idleness is that the
damage rate depends on the period of production idleness. So it is very important
to define the length of underwriters liability, i.e. the period of time within which
he is obliged to reimburse losses against idleness. The period of such liability most
often experienced in the world practice is up to one year.
The terms of insurance against idleness stipulate, as a rule, the determination
of definite limits with which the underwriters liability begins. Such limit may be
either deductible in monetary expression or the period of idleness. And the insurer
has the right to receive insurance reimbursement when this period is exceeded, for
example, when the idleness lasts more than 5 days.
Damage due to idleness subject to reimbursement is added up from expenses
arose within production stop, unearned profit, additional expenses being effected
for the purpose of damage reduction. As the second part prevails they often say
about insurance against loss of profit.
Expenses effected within the period of production stop include those current
expenses of an insurer which he is forced to make irrespective of the fact whether
the production process continues or is stopped.
Profit being unreserved within the production stop may be counted by
multiplying the volume of unreserved products within the idle time by the profit
rate per unit of produce.
The amount of additional expenditures connected with the reduction of
losses due to idle time should be defined on the basis of records. They may be
64
connected with the introduction of additional shifts, overtime works, urgent repair,
the use of less intensive machines and processes, etc. The necessary condition of
reimbursement of such expenses is the following their amount shouldnt exceed
the sum of damage under other clauses.
In order to make the insurers interested in avoiding idleness and making
steps to reduce losses one should reimburse only part of damage suffered by
insurers, the rest of it is left on the insurers liability.
Together with general limits of liability under given insurance there should
be excluded from reimbursement additional damage caused by production stop due
to the change of initial project of reconstruction of damaged objects, planned
repair, the authorities prohibition to carry out reconstructing works, the insurers
lack of material, labour and financial resources necessary for removing the causes
of idle time.
Payment rates are established in percentage to the cost of manufacturing
gross produce.
8.3.
The insurance of new technique and technology risks.
The insurance of risks associated with introduction of new technique and

technology can be divided into two directions:
1) The insurance of machinery, installations, technological lines themselves
in case of their breakdown, destruction. In this case the protection against direct
losses in insured objects is stipulated.
2) The insurance against unexpected unfavourable consequences caused by
introduction of technical and technological innovations or their destruction. Hence
indirect losses in the form of additional expenses and unreserved profit happen
here.
Machines, technical and technological installations, which are considered to
be suitable for operation after inspection and trial testing are the objects of
65
insurance. As high valuable objects are subject to insurance, as a rule their full list
with the indication of their characteristics is made up.
The insurance of new technique and technology is carried on against risks
associated with their use. These are the following risks:
- errors in machines design and technology elaboration;
- errors in materials selection and in manufacturing;
- unexpected appearance of more sophisticated technique and technology
on the market;
- hidden defects which cant be revealed during testing;
- the operation stop of measuring, regulating and precautionary devices;
- increased tension and pressure, short circuit;
- errors in servicing the techniques and technological line;
- carelessness, evil intent of separate persons;
- other causes leading to machine destruction and production stop.
Losses are subject to reimbursement if they appeared due to accidental error
or premeditated actions of persons, who were professionally trained for the
operation with new technique or technology. If unskilled employees are allowed to
run the modern technical (technological) installations then the appearance of losses
mustnt be regarded as premeditated ones and they are not subject to
reimbursement.
The insurance against technical and technological risks doesnt stipulate the
coverage of losses against military actions, strikes, confiscation of property, fires,
explosions, calamities.
8.4.
Political risks insurance.
As a rule political risks are divided into:

- the
risk
of
nationalisation
or
expropriation
without
adequate
compensation;
66
- transfer risk associated with probable limitations for local currency

convertibility.
The nationalisation risk is interpreted rather widely by businessmen from
ordinary expropriation to forced redemption of companys property by authorities
or simply restriction of investors access to the running of companys assets.
Businessmen consider as political risks the risks of alterations of taxation
policy, the prohibition for using credit cards, etc.
The transfer risk is associated with the convertibility of local currency into
foreign one. For example an enterprise runs well, earns profit, has local currency
but the firm cant convert it into the investors currency in order to repay, say, the
credit. There may be a lot of situations here, e.g. a forced long expectation to
convert currency.
One should remember that alteration of exchange rate is not considered the
insurance against transfer risk. One of the transfer risks is the risk of difficulties
concerning the repatriation of profit.
The risk of termination of the contract stipulates situations when neither
penalty sanctions stipulated by the contract nor arbitration help, i.e. the contract is
terminated through no causes depending on the partner, e.g. in connection with the
alteration of national legislation.
8.5.
Export credits insurance.
Under present conditions export credits insurance or the insurance against

non-payment risks are of great importance in foreign economic relations. It means
the insurance company guarantees the creditor due payment of goods deliveries,
equipment or services rendered by him on credit. As a rule the volume of
underwriters liability excludes the cases of non-payment or delay in payment if
they happen due to the following causes:
- delivery or rendered service was done with infringement of the terms and
conditions of the contract;
67
- the terms and conditions of the contract of sale or service rendering dont
conform to the legislative or other requirements of the country of a shipper, buyer
or transit;
- the lack of set of a shipping documents;
- the payment is not effected or cant be effected due to reasons depending
on the exporter country;
- goods are not accepted or accepted and given back .
The exchange rate difference, interests for failing payments causing from
contractual liabilities, the sum of penalty and other similar expenses are not
considered as a risk.
The important condition of insurance contract of export credits is the socalled period of expectation of payment. Under this condition the underwriters
liability doesnt happen immediately after the payment has been effected within
stipulated period of time but after expiring of a definite period. As a rule it is 60
90 days. This period is necessary in order to clear up the causes of non-payment
and to take steps for their elimination.
Export credits insurance abroad is exercised by specialised companies
usually belonging to the state or the state has the control block of shares in them.
In Great Britain the insurance of such risks is exercised by governmental
Department of Export Credits Guarantee, Lloyds corporation, in Germany the
company Germes, in France the company Caface. It should be born in mind
that the companies carrying out export credit insurance have at their disposal a
bank of data of the majority of world export import firms. It contains
characteristics of their financial situation and soundness.
1. Characterise objects and methods of determining the insurance sum
under the insurance of commercial risks.
68
2. Enumerate all necessary requirements presented to the insurer when

concluding the contract of insurance of commercial risks.
3. Specify risks, which are included into the insurance coverage of
insurance of losses due to production breaks.
4. Enumerate expenses, which are reimbursed under the conditions of
losses insurance due to production breaks.
5. Speak on peculiarities of insurance of new technique and technologies.
6. Enumerate risks being covered by insurance of new technique and
technologies.
7. Characterise risks, which can be insured on the conditions of insurance
of political risks.
8. Speak on terms and conditions of insurance of export credits.
9. Enumerate causes under which the underwriter has the right not to pay
the insurance reimbursement on the conditions of export credits insurance.
The literature:
Turbina, ., , 96.
5. Alenicheva V.V., Alenicheva T.D. ,
, East-service, 1994.
6. White Eugen, Deposit Insurance, Washington, The World Bank, 1995.
7. Garcia G.G.H., Deposit insurance: Obtaining the Benefits and Avoiding
the Pitfalls, International Monetary Fund, 1996.
69
8. Garcia G.G.H., Deposit insurance: A survey of actual and best

practices, International Monetary Fund, 1999.
QBE-ASITO.
Theme 9. Personal Insurance.

9.1.
Life insurance.
9.2.
Additional pension insurance.
9.3.
Accident insurance.
9.4.
Compulsory insurance of passengers.
9.5.
Voluntary medical insurance.
9.6.
Medical insurance of persons going abroad.

9.1.
Life insurance.
The distinguishing feature of this insurance is its double function: risk and
accumulative one. Life insurance contract can be concluded in favour of a physical
person from his birth (but at the moment of concluding the contract his or her age
should not exceed 70 years old). Insurance contract cant be concluded in favour of
disable persons, if they are more than 49% disable (I and II group invalids).
The insurance sum is stipulated at the moment of concluding the contract
and should not be less than 1000 leis, maximum sum is not limited. The insurance
premiums depends on the insurant age, insurance period, insurance sum. Special
tables help to calculate these premiums.
The insurance cases are:
- the insurance contract termination;
- disability, resulted from an accident;
70
- the insurants death, resulted from a sudden accident;

- the insurants death, resulted from professional and other diseases,
suicide (if the death took place more than 12 months later after the insurance
contract had come in force).
All these items can be considered insurance cases, if they took place within
the period of insurance contract.
The insurants death is not considered an insurance case, if it resulted from:
- an accident within period of military actions, state of emergency, martial
war;
- an accident, caused by bad intentions of the insurant.
If the insurant died within the period of the insurance contract, the insurance
sum will be paid to the beneficiary or to the insurants heirs.
9.2.
Additional pension insurance.
The main core of this kind of insurance is to increase pension paid by the
state after retirement. According to the insurance contract, additional pension is
paid to the insurant monthly. Insurance period is defined as difference between
pension age of the insurant (60 years for men, 55 years for women) and his (her)
actual age at the moment of concluding the contract. When the insurance period
expires, the pension period comes in force. Life-long additional pension will be
paid to the insurant within this period.
Additional pension amounts to 50 leis and more (as the insurer wishes).
Agreed additional pension can be paid monthly or within agreed period of
time after the insurance period expires (if the insurer has paid all premiums).
If the insurant died, no compensation will be paid in case that he had
received less than 5 annual pensions. If the insurant has received less than 5 annual
pensions, the beneficiary will get the difference between 5 annual pensions and
sum of pensions already received by the insurant.
71
If the insurant has died within the period of the insurance, the beneficiary
will get the insurance sum equal to premiums paid by the insurer.
9.3.
Accident insurance.
Accident insurance is a voluntary insurance, including risk of death, trauma,

injures, caused by an incident.
An accident is a sudden event, caused by circumstances, not depending on
the insurants will, and resulted in injures or death.
This kind of insurance is not applied to the disabled people of I and II group.
Cases, which are not included in this kind:
1) an accident, caused by mental diseases, epilepsy, convulsion, taking
alcohol, drugs, medicines;
2) an accident, happened to the insurant in the period of committing crime
or being pursued;
3) an accident, resulted from military actions, wars, civil riots, nuclear
energy affects;
4) injures, resulted from medical treatment;
5) infections, food intoxication, insects bites (excluding scorpion-bites and
spider-bites);
6) poisoning by alcohol, drugs, medicines and poisoning resulted from
wrong use of household chemical products;
7) disorder in blood circulation resulted from cardiac and cerebral diseases
(infarction, cerebral thrombosis);
8) suicide and results of suicide;
9) an accident, happened to the insurant as a result of his participation in
risky sports contest and training.
The total sum of insurance compensation paid for one or more insurance
cases, should not exceed the insurance sum, stipulated by the insurance contract.
72
9.4.
Compulsory insurance of passengers.
A passenger transportation is a source of danger, thats why passengers

insurance is a compulsory one.
Passengers are the insurers and the insurants simultaneously. According to
the law in force, this insurance is applied to only those who:
- travel by long-distance railway transportation;
- travel by intercity auto transportation;
- travel by water transportation (excluding excursion and suburban routes);
- air transportation.
The insurance sum is paid in case of death or disability of the insurant. The
terms of insurance contract can be limited, if the accident is associated with the
crime, committed by the insurant, attempt to suicide, refusal to meet the
administrations requirements, breaking the rules for passengers.
The period of travelling starts from the moment of boarding announcement
and finish at the moment of the insurants arrival at the place of destination. Transit
passengers are considered insured within a period of changing means of transport,
if they are at a station.
If they leave a station, the insurance is suspended. When the passengers
come back, the insurance comes in force again.
The insurance premiums, included in price of tickets, are paid by passengers
when they buy tickets. Some kinds of passengers are insured free of charge, if they
can travel free. The staff of trains and of other means of transport is not insured.
Insurance premiums received by transport companies for the tickets sold
should be transferred to insurance companies. Non-paid in due time premiums
should be received.
9.5.
Voluntary medical insurance.
Medical insurance is a form of populations social protection, it provides

medical services to the population in the insurance case.
73
According to the terms of voluntary medical insurance, citizens of Moldova

from 1 month to 65 years old are subject to this form of insurance.
People, who cant be insured, are the following:
- AIDS-infected;
- suffering from malignant tumour;
- staying in hospital;
- belong to any group of disability;
- registered in narcotic, mental and skin-diseases hospitals, tubercular
prophylactic centres;
- suffering from serious endocrine diseases.
According to the insurance contract, the insurant has the right to medical
services in the medical organisation, stated in the insurance contract.
The subject of the voluntary medical insurance is the insurance risk,
connected with expenditures on medical treatment (if the insurance case takes
place).
The underwriter doesnt pay for the insurers treatment if:
1) medical services, provided to the insurant, are not stipulated by the
contract;
2) medical services were provided by the medical organisation, not
mentioned in the contract;
The insurance sum is stipulated by the insurance contract and should not be
less than the sum stipulated by the underwriter under the definite insurance
program.
The insurers responsibilities:
1) to pay premiums in due time;
2) to inform the underwriter of all circumstances, possibly important for
evaluating the insurance risk;
3) to keep the doctors instructions, received during medical treatment;
74
4) to allow the representative of the insurance company to inspect his

health.
The underwriters responsibilities are:
1) to control the quality and the quantity of the rendered medical assistance
in accordance with the insurance contract;
2) to protect the insurants interests (medical services should be rendered in
due time, at high level and in necessary quantity);
3) to make the insurer aware of the terms of the insurance contract;
4) to issue the insurance policy, in case of its loss to issue the copy;
5) to pay for medical assistance in accordance with insurance contract.
9.6.
Medical insurance of persons going abroad.
This form of insurance is to compensate the expenditures of Moldovas

citizens and residents for urgent medical assistance, if an accident or sudden
disease took place abroad. It should also compensate all the expenditures,
associated with medical or post mortal repatriation.
The insurance cases are:
- sudden disease or unexpected health disorder, which is dangerous for the
insurants life;
- injuring the body, resulted from an accident;
- the insurants death, resulted from sudden disease or an accident.
The underwriter should compensate expenses on:
- in-patient treatment in a medical institution;
- out-patient treatment in a medical institution;
- medicines, bought in accordance with the doctors prescriptions;
- dentists services (they should not exceed 50$);
- urgent medical assistance at the place of the insurance case;
- medical transportation;
- dead bodys repatriation.
75
The underwriter should compensate medical treatment abroad within the

Policy limit till the moment, when the insurant can be transported to Moldova for
further treatment.
1. Enumerate types of transport where passengers are insured against
accidents.
2. Speak on peculiarities of passengers insurance against accidents.
3. Specify objects and risks of voluntary medical insurance.
4. Tell in what cases the underwriter has the right not to pay for the
treatment.
5. Enumerate the liabilities of an insurer and an underwriter while
performing voluntary medical insurance.
6. Specify risks, which are included in the conditions of medical insurance
of persons leaving abroad.
7. Enumerate expenses, which should be paid by an underwriter on
conditions of medical insurance of persons leaving abroad.
The literature:
Turbina, ., , 96.
76

QBE-ASITO.
Theme 10. Reinsurance.

10.1. The essence and the meaning of reinsurance.
10.2. Types of reinsurance contracts.
10.3. Proportional reinsurance.
10.4. Disproportional reinsurance.
10.1. The essence and the meaning of reinsurance.
Reinsurance is a system of economic relations in the process of which the
underwriter, undertaking insurance against risks, passes part of their liability on
(taking into account his financial possibilities) to other underwriters under agreed
conditions in order to create a portfolio of insurance contracts, to provide financial
stability and profitability of insurance activities.
An underwriter who undertook the insurance against the risk and passed it
on to another underwriter for reinsurance is called reinsurer or cedent. An
underwriter who undertook the risk for reinsurance is called cessioner. Having
undertaken the risk for reinsurance cessioner can pass it on partially to the third
underwriter.
The correct determination of reinsurance amount is of great importance for
each insurance company. In this connection the so-called deduction of cedent
which means the economically grounded level of amount is a determining factor.
An insurance company leaves on its liability definite sum of insurance risks within
these limits and passes on to reinsurance sums exceeding this level.
77
A comparatively optimal variant of limit of deduction can be determined on

the data basis within 5 10 years if there is the definite soundness of insurance
portfolio.
Factors being the basis for the definition of limits of deduction are the
following:
- The average nonprofitability on insured risks of types of insurance on
which the limits of deduction are established. At that not only the quantity and
frequency of insurance cases but also the maximum probable loss are taken into
account.
- Premiums volume. The more the volume of premiums being
insignificantly deviated from the total number of risks, the higher the limit of
deduction can be.
- Average yield or activities profitability according to the type of
insurance. The more profitable the activities are, the higher the limit of deduction
is established.
- The territorial distribution of insured objects. The more the insured
objects are in one zone, the lower the limit of deduction is established.
- The rate of expenses while carrying on business. If expenses are too high
the insurance company tries to establish the limits of deduction on such a level so
that part of these expenditures are to be passed on to underwriters.
10.2. Types of reinsurance contracts.
There is an active and a passive reinsurance. The purpose of active
reinsurance is the passing the risk on, the purpose of passive reinsurance is in its
acceptance. But in practice both active and passive reinsurances are carried on
simultaneously by one and the same insurance company which performs three
functions: of the underwriter, cedent and cessioner. Active and passive reinsurance
must be balanced within the given period of time.
78
The reinsurance contracts are divided into contracts of facultative,

obligatory, and facultative-obligatory reinsurance according to the form of mutual
liabilities.
The idea of facultative method of reinsurance is that both the cedent and
cessioner are given the possibility to evaluate risks which may be passed on to
reinsurance. The contract of facultative reinsurance is an individual deal
concerning, in general, only one risk. It grants the full freedom to the contracting
parties: the cedent has the right to offer some kind of risk and the cessioner has the
right to accept or decline the cedents offer and to propose counter terms and
conditions of the contract. The matter is considered and solved on each risk
separately. Passing the risk on to the reinsurance, the cedent has the right to deduct
the commission fee.
The contract of obligatory reinsurance forces the cedent to pass on a part of
risks accepted for insurance. On the other side the contract of obligatory
reinsurance forces the cessioner to accept the risks offered for reinsurance.
Reinsurance payments under the contract of obligatory reinsurance are always
defined in percentage of the sum of insurance payments being received by the
underwriter while concluding the initial contract of insurance.
Obligatory reinsurance covers all or the considerable part of insurance
portfolio of an underwriter. The servicing of such contract is cheaper for both
parties as compared to the contract of facultative reinsurance.
Facultative-obligatory reinsurance gives the cedent the freedom for decision
making. He may choose which risks and in what rate are to be passed on to the
cessioner. The cessioner, in his turn, should accept the given risks on terms agreed
on beforehand. Such a contract may be unprofitable and unsafe for the cessioner.
That is why they are concluded only with cedents being fully confident on the
basis of many years cooperation.
79
10.3. Proportional reinsurance.

The contract of proportional reinsurance stipulates, that the cessioners share
in any given risk is defined according to previously agreed correlation of cedents
participation. A cessioners participation in payments and reimbursement of
damage is defined on the same correlation as his participation in risks payments.
Proportional reinsurance includes such kinds of contracts as quota, excedent ones.
Under the contract of quota reinsurance a cedent undertakes to pass on to a
cessioner a share in all risks of a given kind, and cessioner undertakes to accept
these shares. As a rule, the share of participation in insurance is a certain
percentage of insurance sum. Contracts of quota reinsurance are easy to be served
mainly for a cedent. A cedent transfers to a cessioner a proportional part of
received insurance payments, leaving on his account agreed commission for risks
passing on. The commission is usually higher than that under other kinds of
reinsurance contracts as quota reinsurance contracts provide higher insurance
payments to the cessioner.
In spite of some advantages, quote reinsurance has some disadvantages. It
really reduces cedents risk on all contracts passed on to reinsurance, but doesnt
involve enough levelling of insurance portfolio. The main fault of quota contract is
also the necessity of reinsurance of small risks, which are not dangerous. Under
other circumstances the transferring company could keep these risks under its
control, retaining high premiums.
The agreement of excedental reinsurance can lead to complete levelling of
that part of insurance portfolio, which remains as a cedentss participation in risks
payments. The maximum of cedents participation is called an excedent.
The exceeding of insurance sums over stipulated level of a cedents
participation in risks payments is passed on to one or several cessioners. This
exceeding of insurance sums is called excedents property.
The servicing of excedent reinsurance contracts is quite laborious for a
cedent. It is caused by the necessity of individual consideration of any insurance
80
agreement, whose risks are passed on to reinsurance. In spite of it, excedent

reinsurance agreements are quite common, because in this way a cedent can level
his insurance portfolio, keep all small risks, as to smaller sum of insurance
payments it is transferred to the cessioner.
10.4. Disproportional reinsurance.
Disproportional reinsurance is characterised by the lack of upper limit of
underwriters liability. We should distinguish reinsurance of excedent of loss and
excedent of non-profitability.
Reinsurance of excedent of loss is used when underwriter doesnt want to
level separate risks of this kind, but to reach the financial balance of insurance
activities in general, which can be violated by causing big damage on some risks
from insurance portfolio.
The agreements of this type of reinsurance are usually concluded in the
obligatory form. Reinsurance on the basis of excedent of loss is, as a rule, formed
in the form of an agreement, according to which reinsurance is in force only when
the final sum of loss on insured risk as a result of insurance case is higher than the
sum agreed upon in the contract.
The personal participation of a cedent in payment the damages is called a
priority, but the upper level of cessioners liability for the consequences of
insurance case is called a limit of reinsurance payment.
The servicing of reinsurance contracts is simple and profitable for a cedent.
On the whole professional cessioners willingly conclude contracts of reinsurance
of cedent loss, because this type of contracts allows them to earn high profit. This
type of contracts is widely used in civil responsibility insurance, transport
insurance, fire insurance, i.e. in the cases when the loss of disastrous origin is
possible.
The excedent of non-profitability is an agreement of reinsurance, under
which the cessioner protects general results of a case under definite kind of
81
insurance provided the non-profitability exceeds the percentage stipulated in the

contract.
While concluding the contract the cessioner undertakes to level the cedent
the exceeding of non-profitability over established limit which can make up, for
example, 105% from insurance payments, collected by the cesioner. In this case it
means that the loss up to 105% will be covered by the cessioner at the expense of
this own funds, while the loss over 105% will be covered according to the terms
and conditions of the concluded contract.
1. Determine the essence and basic elements of reinsurance.
2. Characterise factors, which are the basis for the determining the limits of
proper deductions.
3. Speak about the difference between active and passive reinsurance.
4. Characterise types of reinsurance contracts.
5. Give the characteristics of quota reinsurance.
6. Speak on peculiarities of excedent reinsurance.
7. Characterise the reinsurance of excedent of loss.
8. Speak on reinsurance of excedent of nonprofitability.
9. Consider the advantages and disadvantages of the above types of
reinsurance.
The literature:
82

Turbina, ., , 96.
6. Juravliov U..
. , . , 1993.
7. Kaminkina .G., Solntseva .. , a practical guide
for insurance companies, ., , 1994.
83
BIBLIOGRAPHY
the RM 12. December 1993 page 376, pages 121139 or
of 15 December 1993.
2. The conditions of compulsory insurance of civil responsibility of the
owners of transport and municipal electric transport (enclosure 1 to the decision
of the Government of the RM 956 of 28 December 1994) the Official Monitor of
the RM 1 of 26 January, 1995, pages 285 295.
3. The decision of the Government of the RM 77 of 3 February 1996
.
4. Green Mark R., Trieschmann James S. Risk and Insurance, 7th ed.,
Cincinnati, 1988.
5. Webb Bernard L., Horn II Stephen, Flitner Arthur Commercial
Insurance, Malvern, Insurance Institute of America, 1987.
6. White Eugen, Deposit Insurance, Washington, The World Bank, 1995.
7. Garcia G.G.H., Deposit insurance: Obtaining the Benefits and Avoiding
the Pitfalls, International Monetary Fund, 1996.
8. Garcia G.G.H., Deposit insurance: A survey of actual and best
practices, International Monetary Fund, 1999.
9. Purcaru Ion, Mircea Iulian, Lazar Gh., Asigurari de persoane i de
bunuri: Aplicaii. Cazuri. Soluii., Bucureti, Ed. Economica, 1998.
10. Vacarel Iulian, Bercea Fl., Asigurri i reasigurri, Bucureti, Ed.
Expert, Coediie Marketer, 1993.
12. Alenicheva V.V., Alenicheva T.D. ,
, East-service, 1994.
84
13. Juravliov U..

. , . , 1993.
14. Kaminkina .G., Solntseva .. , a practical guide
for insurance companies, ., , 1994.
15. Shahov V.V. , Insurance Policy, ,97
QBE-ASITO.
19. Ageev S.R., Vasiliev N.., Katirin S.N. : ,
, ., 1998.
Turbina, ., , 96
21. Gvozdenko
A.A.
"
",
.,
, 1998.
22. Zubritski
V.P.,
Enikov
I.G.
, ASEM, Kishinev, 2000.
85

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ACADEMY OF ECONOMIC STUDIES OF MOLDOVA

Doctor of Economic Sciences, professor L. Cobzari, T.Vsokaia,

Theme 1. Economic Essence, Functions and Classification of Insurance.

Economic essence and functions of insurance.

Types of insurance funds.

Insurance is a complex of economic relations associated with forming the

company. The given property is automatically included in the field of insurance. It

insurer do not contradict the conditions of insurance. The given principle

Liability insurance is the branch of insurance the object of which is the

Under self-insurance a reserve fund is formed by any juridical or physical

3. Basacov I.I. , Rostov-on-theDon, , 1999.

Theme 2. Juridical Aspects of Insurance Activity.

Forms of insurance activity.

State control over the insurance activity.

Forms of control over insurance companies activities.

The core and main elements of the contract of insurance.

8) providing official information about underwriters registration.

For the underwriters operating in Moldova to have a license is a must. To get

There may be essential and nonessential terms of the contract.

Theme 3. Insurance Marketing.

The essence of the insurance marketing.

Methods of promotion of insurance services.

The essence of the insurance market.

Marketing is a philosophy of the underwriter, determining the strategy and

8) organising new insurance services, corresponding to the insurers

current operative leadership of the insurance services realisation and

two auxiliary kinds of promotion. Basic kinds of promotion include advertising

- the costs are lower than those for the advertising;

The essence of marketing is that operating by different means of promotion

Classification of the insurance market is carried out according to the branch

Theme 4. Insurance Market in Foreign Countries.

Insurance development tendencies on the international level.

The Insurance Market of the USA.

The Insurance Market of Great Britain.

The Insurance Market of Germany.

The Insurance Market of Switzerland.

The Insurance Market of Russia.

The Insurance Market of Moldova.

The modern level of development of insurance business in industrially

internationalisation of insurance business. The process of internationalisation

Insurance companies carry out three types of insurance:

4.4. The Insurance Market of Germany.

family expenditures. An average Swiss family spends on insurance more money

10. Enumerate and describe types of insurance, which are practicable in

, ASEM, Kishinev, 2000.

Theme 5. Property Insurance.

Physical persons property insurance.

Juridical persons property insurance.

The conclusion of insurance contract.

The measuring of damage and compensation.

Physical persons property insurance.

According to the terms of property insurance contract the following kinds of

shops and other industrial areas.

The compensation will not be paid in case of:

Juridical persons property insurance.

This type of insurance can be applied to juridical persons property, which

- damage of the insured property by water from sewage, heating and

A special contract, including inventory, can be concluded in respect of these

The conclusion of insurance contract.

1) at the moment of concluding the contract to inform the underwriter about

The measuring of damage and compensation.

8. Speak on principles of determination of the size of damage and insurance

Theme 6. International Practice of Transport Insurance.

Marine freight insurance