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Definition of Captive Agent

Captive Agent Image 1

Captive Agent

A licensed insurance agent who sells insurance for only one company.



Related Terms:

Agent

The decision-maker in a principal-agent relationship.


Agent

One who represents Canada Life when providing services to clients


Principal-agent relationship

A situation that can be modeled as one person, an agent, who acts on the behalf
of another person, the principal.


Transfer agent

ndividual or institution appointed by a company to look after the transfer of securities.


Accidental Dismemberment: (Credit Insurance)

Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.



All or none

Requirement that nOne of an order be executed unless all of it can be executed at the specified price.


All-or-none underwriting

An arrangement whereby a security issue is canceled if the underwriter is unable
to re-sell the entire issue.


Captive Agent Image 1

Amortization (Credit Insurance)

Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.


Asset allocation decision

The decision regarding how an institution's funds should be distributed among the
major classes of assets in which it may invest.


At-the-money

An option is at-the-mOney if the strike price of the option is equal to the market price of the
underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at-the-mOney.


Average life

Also referred to as the weighted-average Life (WAL). The average number of years that each
dollar of unpaid principal due on the mortgage remains outstanding. Average Life is computed as the weighted average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal
paydowns.


Beneficiary (Credit Insurance)

The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor.


Blue-chip company

Large and creditworthy company.


Borrower (Credit Insurance)

A consumer who borrows mOney from a lender.


Call money rate

Also called the broker loan rate , the interest rate that banks charge brokers to finance
margin loans to investors. The broker charges the investor the call mOney rate plus a service charge.


Canada Pension Plan (CPP)

A plan that provides retirement and long term disability income benefits to residents of Canadian provinces (excluding Quebec).


Captive Agent Image 2

Canada Savings Bonds

A bond issued each year by the federal government. These bonds can be cashed in at any time for their full face value.


Canadian Deposit Insurance Corporation

Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.



Canadian Life and Health Insurance Association (CLHIA)

An association of most of the Life and health insurance companies in Canada that conducts research and compiles information about the Life and health insurance industry in Canada.


capital budgeting decision

decision as to which real assets the firm should acquire.


Child Insurance Rider (CIR)

insurance or insurability provided on current or future children of insured.


Co-insurance

In medical insurance, the insured person and the insurer sometimes share the cost of services under a policy in a specified ratio, for example 80% by the insurer and 20% by the insured. By this means, the cost of coverage to the insured is reduced.


Coinsurance effect

Refers to the fact that the merger of two firms decreases the probability of default on
either firm's debt.


Commercial Business Loan (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.


Company Acquisitions

Assets acquired to create mOney. May include plant, machinery and equipment, shares of another company etc.


company cost of capital

Expected rate of return demanded by investors in a company, determined by the average risk of the company’s assets and operations.


Company-specific risk

Related: Unsystematic risk


Companyspecific Risk

See asset-specific risk



Component

Raw materials or subassemblies used to make either finished goods
or higher levels of subassembly.


Concentration services

Movement of cash from different lockbox locations into a single concentration
account from which disbursements and investments are made.


Cost company arrangement

Arrangement whereby the shareholders of a project receive output free of
charge but agree to pay all operating and financing charges of the project.


Cost of Insurance

The cost of insuring a particular individual under the policy. It is based on the amount of coverage, as well as the underwriting class, age, sex and tobacco consumption of that individual.


Creditor (Credit Insurance)

A lender or lending institution that offers financing and loans to a borrower, for the purpose of acquiring a commodity.


Critical Illness Insurance

Coverage that provides a lump-sum payment should you be diagnosed with a critical illness and survive a pre-determined period of time. There are no restrictions on how you use your benefit.


Critical Illness Insurance (Credit Insurance)

Coverage that provides a lump-sum payment should you become seriously ill with a specified illness. The payment is made to your creditors to pay off your debt owing.


Dead Peasants Insurance

Also known as "Dead Janitors insurance", this is the practice, where allowed, in several U.S. states, of numerous well known large American Corporations taking out corporate owned Life insurance policies on millions of their regular employees, often without the knowledge or consent of those employees. Corporations profiting from the deaths of their employees [and sometimes ex-employees] have attracted adverse publicity because ultimate death benefits are seldom, even partially passed down to surviving families.


Debt (Credit Insurance)

MOney, goods or services that someOne is obligated to pay someOne else in accordance with an expressed or implied agreement. Debt may or may not be secured.


decision making

the process of choosing among the alternative
solutions available to a course of action or a problem
situation


Decision tree

Method of representing alternative sequential decisions and the possible outcomes from these decisions.


decision tree

Diagram of sequential decisions and possible outcomes.


decision variable

an unknown item for which a linear programming
problem is being solved


Deferred nominal life annuity

A monthly fixed-dollar payment beginning at retirement age. It is nominal
because the payment is fixed in dollar amount at any particular time, up to and including retirement.


Depository Trust Company (DTC)

DTC is a user-owned securities depository which accepts deposits of
eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in
its custody, and provides for withdrawals of securities from its custody.


Disability Insurance

insurance that pays you an ongoing income if you become disabled and are unable to pursue employment or business activities. There are limits to how much you can receive based on your pre-disability earnings. Rates will vary based on occupational duties and length of time in a particular industry. This kind of coverage has a waiting period before you can begin collecting benefits, usually 30, 60 or 90 days. The benefit paying period also varies from 2 years to age 65. A short waiting period will cost more that a longer waiting period. As well, a long benefit paying period will cost more than a short benefit paying period.


Disability Insurance (Credit Insurance)

Group insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury.


Dow Jones industrial average

This is the best known U.S.index of stocks. It contains 30 stocks that trade on
the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest
U.S.companies are performing. There are thousands of investment indexes around the world for stocks,
bonds, currencies and commodities.


Dow Jones Industrial Average

Index of the investment performance of a portfolio of 30 “blue-chip” stocks.


economic components model

Abrams’ model for calculating DLOM based on the interaction of discounts from four economic compOnents.
This model consists of four compOnents: the measure of the economic impact of the delay-to-sale, monopsony power to buyers, and incremental transactions costs to both buyers and sellers.


Economic life

The period over which a company expects to be able to use an asset.


Equity-based insurance

Life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio.


Errors and Omissions Insurance

insurance coverage purchased by the agent/broker which provides protection against loss incurred by a client because of some negligent act, error, oversight, or omission by the agent/broker.


European Monetary System (EMS)

An exchange arrangement formed in 1979 that involves the currencies
of European Union member countries.


Expected return-beta relationship

Implication of the CAPM that security risk premiums will be
proportional to beta.


Export Credit Insurance

The granting of insurance to cover the commercial and political risks of selling in foreign markets.


Federal Deposit Insurance Corporation (FDIC)

A federal institution that insures bank deposits.


Federal Insurance Contributions Act of 1935 (FICA)

A federal Act authorizing the government to collect Social Security and Medicare payroll taxes.


Fiat Money

Fiat MOney is paper currency made legal tender by law or fiat. It is not backed by gold or silver and is not necessarily redeemable in coin. This practice has had widespread use for about the last 70 years. If governments produce too much of it, there is a loss of confidence. Even so, governments print it routinely when they need it. The value of fiat mOney is dependent upon the performance of the economy of the country which issued it. Canada's currency falls into this category.


Finance Company

company engaged in making loans to individuals or businesses. Unlike a bank, it does not receive deposits from the public.


financing decision

a judgment made regarding the method
of raising funds that will be used to make acquisitions; it
is based on an entity’s ability to issue and service debt and
equity securities


financing decision

decision as to how to raise the mOney to pay for investments in real assets.


Financing decisions

decisions concerning the liabilities and stockholders' equity side of the firm's balance
sheet, such as the decision to issue bonds.


Generally Accepted Accounting Principals (GAAP)

A technical accounting term that encompasses the
conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.


Group Life Insurance

This is a very common form of Life insurance which is found in employee benefit plans and bank mortgage insurance. In employee benefit plans the form of this insurance is usually One year renewable term insurance. The cost of this coverage is based on the average age of everyOne in the group. Therefore a group of young people would have inexpensive rates and an older group would have more expensive rates.
Some people rely on this kind of insurance as their primary coverage forgetting that group Life insurance is a condition of employment with their employer. The coverage is not portable and cannot be taken with you if you change jobs. If you have a change in health, you may not qualify for new coverage at your new place of employment.
Bank mortgage insurance is also usually group insurance and you can tell this by virtue of the fact that you only receive a certificate of insurance, and not a complete policy. The only form in which bank mortgage insurance is sold is reducing term insurance, matching the declining mortgage balance. The only beneficiary that can be chosen for this kind of insurance is the bank. In both cases, employee benefit plan group insurance and bank mortgage insurance, the coverage is not guaranteed. This means that coverage can be cancelled by the insurance company underwriting that particular plan, if they are experiencing excessive claims.


Guaranteed insurance contract

A contract promising a stated nominal interest rate over some specific time
period, usually several years.


Health Insurance Portability and Accountability Act of 1996 (HIPAA)

A federal Act expanding upon many of the insurance reforms created by
COBRA. In particular, it ensures that small businesses will have access to
health insurance, despite the special health status of any employees.


High-Powered Money

See mOney base.


Holding company

A corporation that owns enough voting stock in another firm to control management and
operations by influencing or electing its board of directors.


Hot money

MOney that moves across country borders in response to interest rate differences and that moves
away when the interest rate differential disappears.


In-the-money

A put option that has a strike price higher than the underlying futures price, or a call option
with a strike price lower than the underlying futures price. For example, if the March COMEX silver futures
contract is trading at $6 an ounce, a March call with a strike price of $5.50 would be considered in-the-mOney
by $0.50 an ounce.
Related: put.


Individual Insurance

insurance that is offered to individuals rather than groups.


Information services

Organizations that furnish investment and other types of information, such as
information that helps a firm monitor its cash position.


Insurance Act

In Canada, a general statute that contains most of the insurance law of a common law province, and regulates the conduct of insurers and insurance agents within the province.


Insurance Company

A firm licensed to sell insurance to the public.


Insurance Policy (Credit Insurance)

A policy under which the insurance company promises to pay a benefit of the person who is insured.


Insurance principle

The law of averages. The average outcome for many independent trials of an experiment
will approach the expected value of the experiment.


Intercompany loan

Loan made by One unit of a corporation to another unit of the same corporation.


Intercompany transaction

Transaction carried out between two units of the same corporation.


Interest-only strip (IO)

A security based solely on the interest payments form a pool of mortgages, Treasury
bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop
and the value of the IO falls to zero.


International Monetary Fund

An organization founded in 1944 to oversee exchange arrangements of
member countries and to lend foreign currency reserves to members with short-term balance of payment
problems.


International Monetary Fund (IMF)

Organization originally established to manage the postwar fixed exchange rate system.


International Monetary Market (IMM)

A division of the CME established in 1972 for trading financial
futures. Related: Chicago Mercantile Exchange (CME).


investment decision

a judgment about which assets will be
acquired by an entity to achieve its stated objectives


Investment decisions

decisions concerning the asset side of a firm's balance sheet, such as the decision to
offer a new product.


Job Loss Insurance (Credit Insurance)

Coverage that can pay down your debt should you become involuntarily unemployed. The payment is made to your creditors to reduce your debt owing.


Joint Policy Life

One insurance policy that covers two lives, and generally provides for payment at the time of the first insured's death. It could also be structured to pay on second death basis for estate planning purposes.


Law of one price

An economic rule stating that a given security must have the same price regardless of the
means by which One goes about creating that security. This implies that if the payoff of a security can be
synthetically created by a package of other securities, the price of the package and the price of the security
whose payoff it replicates must be equal.


law of one price

Theory that prices of goods in all countries should be equal when translated to a common currency.


Lease (Credit Insurance)

Contract granting use of real estate, equipment or other fixed assets for a specified period of time in exchange for payment. The owner or a leased property is the lessor and the user the lessee.


Lender (Credit Insurance)

Individual or firm that extends mOney to a borrower with the expectation of being repaid, usually with interest. Lenders create debt in the form of loans. Lenders include financial institutions, leasing companies government lending agencies and automobile dealers.


Level Premium Life Insurance

This is a type of insurance for which the cost is distributed evenly over the premium payment period. The premium remains the same from year to year and is more than actual cost of protection in the earlier years of the policy and less than the actual cost of protection in the later years. The excess paid in the early years builds up a reserve to cover the higher cost in the later years.


life cycle costing

the accumulation of costs for activities that
occur over the entire Life cycle of a product from inception
to abandonment by the manufacturer and consumer


Life Expectancy

The average number of years of Life remaining for a group of people of a given age and gender according to a particular mortality table.


Life Income Fund

Commonly known as a LIF, this is One of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement Income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.


Life Insurance

insurance that provides protection against an economic loss caused by death of the person insured.


Life Insurance (Credit Insurance)

Group Term Life insurance that pays or reduces the balance due on a loan if the borrower dies before the loan is repaid.


Life Insured

The person who's Life is protected by an individual policy.


Life Underwriter

insurance agent.


Lifecycle costing

An approach to costing that estimates and accumulates the costs of a product/service over
its entire Lifecycle, i.e. from inception to abandonment.


limited liability company

an organizational form that is a hybrid of the corporate and partnership organizational
forms and used to limit the personal liability of the owners;
it is typically used by small professional (such as accounting) firms


make-or-buy decision

a decision that compares the cost of
internally manufacturing a compOnent of a final product
(or providing a service function) with the cost of purchasing
it from outside suppliers (outsourcing) or from another
division of the company at a specified transfer price


Managerial decisions

decisions concerning the operation of the firm, such as the choice of firm size, firm
growth rates, and employee compensation.



 

 

 

 

 

 

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