Lloyd's of London ***

MR. WATSON: Lloyd's of London . This is not an insurance company. It is a "market-place" where unusual types of risks are insured. It is "place", where many groups of syndicates operate. These groups, or syndicates, insure very odd and unusual risks. It began in the late 1600s.

MR. WATSON: Lloyds of London does not sell insurance. They provide the people that do the insuring. It is the arena where it all happens. Lloyd’s gathers & disseminates underwriting information, helps it's associates with claims disputes and settles claims.

MR. WATSON: A famous performing artist's posterior was insured for $3 million. Astronauts; Actresses’ legs; Triple Crown winning horses; Dutch wine producer Ilja Gort's nose.

 

Risk Retention Group ***

MR. WATSON: A mutual company formed to insure people in the same business, occupation, or profession like dentists, engineers, or pharmacists. Because it is a mutual company the insureds are also the owners.

 

Reinsurers ***

MR. WATSON: Now, reinsurance . Tell me what you think a re-insurer does.

STUDENTS: Re-insurers the insurance company.

MR. WATSON: It's an insurance company that insures insurance companies. It limits the loss on any one insurer.

MR. WATSON: Let's try this. Swiss Re -- where do you think they are from? Switzerland. And what do you think they do? Insure insurance companies.

MR. WATSON: Example: New York Life -- Let's say New York Life is insuring a person for a very large amount. New York Life goes to a reinsurance company like Swiss Re, and they say, "look, we are insuring Jim's life for $5 million. We want you to take part of this risk, it is too much for us." So New York Life will insure 3 million of it and they want Swiss Re to insure for everything above that. Does that make sense?

STUDENTS: Yes.

MR. WATSON: So a reinsurance company is a company that would insure insurance companies. So if Jim was to die, New York Life would pay his beneficiary $5 million, but they are going to get $2 million of that from where? Swiss Re.

MR. WATSON: Very,very important. The company that is transferring the risk is called the ceding company. Johnny Appleseed walked around seeding the land, throwing out the seeds. So the company throwing out the risk would be the ceding company. In this case it is c-e-d-i-n-g. Does that make sense? So the company insuring the insurance company is called the what?

STUDENTS: The reinsurer.

MR. WATSON: And the company transferring the risk is it the what?

STUDENTS: Ceding company. ***

MR. WATSON: I use Johnny Appleseed so you can make up some kind of picture in your head. Everybody have it?

STUDENTS: Yes.