New scheduled completion of the insurance contract
Direction: The Chicago Board of Trade, said today he would try, Federal Trading authorization to begin term in the contracts of health insurance and automobile insurance. The contract would allow insurance companies a mechanism for locking in the price they must pay for reinsurance, the risk of spread through the sale of policies in other insurers.
The Chicago Board of Trade, said today he would try, Federal Trading authorization to begin term in the contracts of health insurance and automobile insurance. The contract would allow insurance companies a mechanism for locking in the price they must pay for reinsurance, the risk of spread through the sale of policies in other insurers.
”The new contracts are the costs of health care and reducing costs for auto insurance and health insurance to the public,’’said Leslie Rosenthal, chairman of the Board of Trade Commission understands that the new contracts.
One of the designers of the new contract, Richard Sandor, said:”The new contracts may be regarded as a major innovation in terms of interest rates.”It is also considered as one of the architects of the Futures rate interest with banks, insurance companies and other institutions at the investor protection against fluctuations in interest rates.
“The time is right”
”The time is right, because the risks to which insurers are more than ever, because the capital is necessary to write these kinds of insurance, Monsieur,’’said Sandor.
Insofar as the new futures contracts would allow insurance companies should know, before writing policies, how much they should pay for reinsurance, supporters, said that consumers could enjoy a big way.
Christian Milton, the head of the reinsurance purchase of American International Group, a large New York-based insurers, said:”If I could freeze in the price of reinsurance for my property and accident portfolio This would be a good thing. ”
But Mr. Milton and two other insurance leaders interviewed today whether the Governing Council of standard design, could actually agree on reinsurance companies as a basis for trade. They found that the reinsurance agreements are usually every year negotiating with insurance companies to change the amount of insurance by the reinsurance agreement and exchange risks are excluded from reinsurance.
”Every time we will negotiate again, our customers can have an appetite for risk higher or lower,’’said Robert Faber, a reinsurance company in the executive, Allstate Insurance Company. ”It is not just default each reinsurance agreement.”
Other Skeptical
Some analysts were also sceptical. Michael Sutton, Shearson Lehman Hutton analysts, Reuters said,”The insurance industry is seeking security in their reinsurance business relations, and this is not regarded as safe.”He expected the new product would have a difficult time to win approval of the State Insurance Commissioners. “Who Backs It Up?”There are clearly many issues that led to ask,”Myron Picoult, an analyst at Oppenheimer & Company, told the News Service.”The question is obvious, in the back. Who would In the case of a payment of insurance contract for the future? What is the balance?”
The answers to these questions were not immediately available. Citing competition with other exchanges, Mark Prout, a spokesman for the Board of Trade, the world’s largest futures market, fell for all the details, how the new future.
Mr. Sandor said that, like other futures contracts, it would hedge against price fluctuations. An insurance company, who are in the reinsurance would be against future increases in rates for reinsurance, he said, because such an increase would be even a profit of the insurance company’s position in the long run.
Réassureurs, he added, would be in a similar position: Any increase or decrease the amount of premium income they earned for entry into the reinsurance agreements would be a gain or loss on their futures contracts.
Futures contracts include the provision of goods - a physical product, such as cereals, or as a financial instrument for cash or Treasury Securities. Mr. Sandor, a former economist Board of Trade, it is now president of the Banque Indosuez International Capital Markets, would not disclose what would have occurred if the reinsurance future. Probably, if the Board of Trade, try a standard convention of reinsurance, and as the price to pay for changes of this agreement in normal market conditions ,”” cash, the Future prices will change.
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