What is Doctrine of Subrogation?

The doctrine of subrogation refers to the right of the insurer to stand in the place of the insured, after settlement of a claim, in so far as the insured’s right of recovery from an alternative source is involved. If the insured is in a position to recover the loss in full or in part from a third party due to whose negligence the loss may have been precipitated, his right of recovery is subrogated to the insurer on settlement of the claim. The insurers, therefore, recover the claim from the third party. The right of subrogation may be exercised by the insurer before payment of loss.

ESSENTIALS OF DOCTRINE OF SUBROGATION

1. Corollary to the principle of indemnity: The doctrine of subrogation is the supplementary principle of indemnity. The latter doctrine says that only the actual value of the loss of the property is compensated, so the former follows that if the damaged property has any value left, or any right against a third party the insurer can subrogate the left property or right of the property because in the insured is allowed to retain, he shall have realized more than the actual loss, which is contrary to principle of indemnity.

2. Subrogation is the Substitution: The insurer, according to this principle, becomes entitled to all the rights of insured subject matter after payment because he has paid the actual loss of the property. He is substituted in place of other persons who act on the right and claim of the property insured.

3. Subrogation only up to the amount of payment: The insurer is subrogated all the rights, claims, remedies and securities of the damaged insured property after indemnification, but he is entitled to get these benefits only to the extent of his payment. The insurer is thus, subrogated to the alternative rights and remedies of the insured, only up to amount of his payment to the insured. In the same way if the insured is compensated for his loss from another party after he has been indemnified by his insurer he is liable to part with the compensation up to the extent that insurer is entitled to. In one USA case is was made clear “If the insurer having paid the claim to the insured, recovers from the defaulting third party in excess of the amount paid under the policy, he has to pay this excess to the insured through he may charge the insured his share of reasonable expenses incurred in collecting.”

4. The Subrogation may be applied before payment: If the assured got certain compensation from third party before being fully indemnified by insurer, the insurer can pay only the balance of the loss.

5. Personal insurance: The doctrine of subrogation does not apply to personal insurance because the doctrine of indemnity is not applicable to such insurance. The insurers have no right of action against the third party in respect of the damages. For example, if an insured dies due to negligence of a third party his dependent has right to recover the amount of the loss from the third party along with insurance policy amount. No amount of the policy would be subrogated by the insurer.

Insurance Info Evolution of Insurance – Know the best

The origin of insurance is lost in antiquity. The earliest traces of insurance in the ancient world are found in the form of marine trade loans or carriers’ contracts which included an element of insurance. Evidence is on record that arrangements embodying the idea of insurance were made in Babylonia, India and Sindhu at quite an early period. In Rigveda, the most sacred book of India and written behind the Indus river, references were made to the concept “Yogakshema” more or less akin to the wellbeing and security of the people. The codes of “Hummurabi” and “Manu” had recognized the advisability of provision for sharing the future losses. However, there is no evidence that insurance in its present form was practiced prior to the twelfth century.

Marine Insurance:

The Marine insurance is the oldest form of insurance. Under Bottomry bond, the system of credit and the law of interest were well developed and were based on a clear appreciation of the hazard involved and the means of safeguarding against it. If the ship was lost, the loan and interest were fortified. The contract of insurance was made a part of contract of carriage, and Manu shows that Indians had even anticipated the doctrine of average and contribution. Freight was fixed according to season and was expected to be reasonable in the case of marine transport which was then very much at the mercy of winds and elements. Travelling by sea and land were very much exposed to the risk of losing their vessels and merchandise because the piracy on the open seas and highway robbery of caravans were very common. Besides there were several risks, many times, it might have been captured by the king’s enemies or robbed by pirates or got sunk in the deep waters. The risk to owners of such ships were enormous and therefore, to safeguard them the marine traders devised a method of spreading over them the financial loss which could not be conveniently borne by the unfortunate individual victims. The cooperative device was quite voluntary in the beginning, but now in modern it has been converted in to modified shape of premium.

The marine insurance policies of the present forms were sold in the beginning of fourteenth century by the Brugians. On the demand of inhabitants of Burges, the Court of Flanders permitted in the year 1310, the establishment in this Town of charter of Assurance, by means of which the merchants could insure their goods, exposed to the risks of the sea. The insurance development was not confirmed to the Lambards and to the Hansa merchants, it spread throughout Spain, Portugal, France, Holland and England. The marine form land lending prominence of Lombards merchants got a prominent section of the London city. They built homes there and took the name of Lombards Street. Later on, this street became famous in insurance history. The Lloyd’s Coffee House gave an impetus to develop the marine insurance.

Fire Insurance:

After marine insurance, fir insurance developed in present form. It had observed in Anglo-Section Guild form for the first time where the victims of fire hazards were given personal assistance by providing necessaries of life. It had been originated in Germany in the beginning of sixteenth century. The fire insurance got momentum in England after the Great Fire in 1666 when the fire losses were tremendous. About 85% of the houses were burnt to ashes and property worth of sterling hundred millions were completely burnt off. Fire Insurance Office was established in 1681 in England. With colonial development of England, the fire insurance spread all over the world in present form ‘Sun Fire Office’ was successful fire insurance institution.

Life insurance:

Life insurance made its first appearance in England in sixteenth century, the first recorded evidence in England being the policy on life of “William Gybbons” on June 18, 1653. Even before this date annuities had become quite common in England, and marine insurance had in fact, made it first appearance three thousand years ago. The life insurance developed at “Exchange Alley”. The first registered life office in England was the Hand-in-Hand Society established in 1696. The famous “Amicable Society” for a Perpetual Assurance Office started its operation since 1706. Life insurance did not prosper in the United States during the 18^th century, because of serious fluctuations in death-rate, but soon after 1800 some active interest began to be shown in this enterprise because of the application of level premium plan which had by then been in operation in UK for more than generation.

Miscellaneous Insurances:

The miscellaneous insurance took the present shape at the later part of nineteenth century with the industrial revolution in England. Accident insurance, fidelity insurance, liability insurance and theft insurance were the important form of insurance at that time. Lloyd’s Association was the main functioning institution. Now insurances such as cattle insurance, crop insurance, profit insurance and after the disintegration of USSR the changes in world’s politics the new form of terrorism insurance or even the natural disasters insurance are taking place. The scope of general insurance is increasing with the advancement of the society.

Bancassurance - Strengthens the economy of India

Insurance and Banking are coexisting financial institution while complementing and supplementing each other. The Insurance Regulatory and Development Authority (IRDA) Act, 1999 have created more opportunities to them for expansion of their markets. They can serve the society in a very effective manner. Banking institutions have got the opportunities to enter in insurance business while insurance institutions have already under the autonomy of starting their banking business. Many non-banking institutions have been opened, acquired funds and dissolved with public money at their stakes. Since they were totally in the hands of private persons, the Government control became ineffective. Banking institutions in India are mainly under the control of Reserve Bank of India. People need insurance but they prefer investment over risk coverage although latter is more important.

Indian mentally for insurance is very bleak people do not feel need of insurance although they have dire necessity for that. Insurance institutions in India have considered forced insurance. The voluntary purchasing of insurance policies is rare phenomena. They prefer to go to bank offices rather than going to insurance for getting risk coverage. The insurance institutions procure the business through their agents who are the main link between the people and the company. Agent’s attitude and environment may work against the free will environment of insurance.

The IRDA, Act is expected to mobiles insurance coverage and resources for investment in the economy. The government has assured that there would not be any disinvestment in the LIC, GIC and their subsidiaries. Insurance Act, 1938, has not been sufficient to regulate the insurance business in India. Foreign companies would not be allowed to hike their equity in the country through their Indian subsidiaries. It has opened a great opportunities for the banking and insurance institutions. They can perform both the functions.

General Insurance Fidelity Guarantee Insurance

Fidelity guarantee insurance was devised in United Kingdom, during Victorian times to replace the age old system of private surety. Formerly anyone who sought to position of trust, such a post in the civil service, a bank, or a commercial firm was required to furnish the names of one or more guarantors or sureties who would the names of one or more guarantors or sureties who would undertake to make good monetary loss, arising from dishonesty on the part of the employee. The old system worked badly because every honest man had to provide sureties and the sureties themselves, whose circumstances might worsen over a period, could easily find themselves financially embarrassed by being called on to perform their bond. Further the employees, when they sought to recover from a surety, may find that he had died or disappeared or had not been the means to meet this liability. Deflations were fairly frequent in times when accounting practice was far from water fight and when amateur auditors were the rule rather than the exception. Indeed, one large insurance company in mid Victorian time lost over 50,000 by the peevilations of a subordinate clerk in its own office. Even with modern accounting practices large losses are not un-known. For example, in 1956, a woman in the USA was charged with converting to her own use of sum of more than a million dollars from her employers.

Since 1840 a number of insurance companies have granted commercial fidelity guarantee insurances. In consideration of a premium the insurers undertake to reimburse to the employers, loss caused by the dishonesty of one or more employees up to stated amounts. Where the guarantee is given in respect of several employees, it is known as collective. The amount of the guarantee may be stated either with a separate limit for each employed name, or else as a single sum for all concerned, it is described as a floating guarantee.

When an individual employee is proposed for guarantee insurance, the insurance company customarily makes full inquiries in to his reputation and past employment record, requiring him to show, how he has been occupied over a number of year. Bitter experience has taught that once a man has defaulted, it is much more hazardous to guarantee his fidelity in the future. For this reasons companies require that all default discovered by an employer should be notified to them, even where the employee makes restitution, or the employer decides to give the man another chance.

In considering whether to grant insurance, the company usually requires full details of the system of check operated by the employer, and can often suggest means of improving this system. No system can be entirely proof against dishonesty, but a good system should ensures that too much responsibility for monetary transactions is not left without counter check, in the hands of one employee and that if default, occurs, they are to be discovered within a short time. Dishonest employees usually start by taking money in a small way, after they have found a loophole in the system of check. Their success encourages them to increase step by step , the size of sums they take, trusted employees may be surprised if an employer is wise to be without such cover, as the largest defaults are perpetrated by employees, because they have shown themselves trustworthy over years, are given important responsibilities. A high amount of guarantee is desirable, because it is the large losses for which insurance is particularly necessary.

Triple Benefit Insurance Policy

This policy is combination of a whole life limited payment and a pure endowment (without return of premium) with a guaranteed annual bonus / valued units payable on death during the endowment term. This policy is granted for a fixed terms of 15, 20 and 25 years. Premiums are payable throughout the term or till prior death of the life assured.

The special feature of this plan is that there is a guaranteed and steadily increasing family provision during the selected period along with the old age benefit. The provision for the family does not terminate when the old age benefit is paid at the end of the period and no further premiums are payable thereafter; but a sum equal to the original sum assured still remains to be paid on the death of the life assured thereafter.

The following benefits are guaranteed provided the policy remains in force for the original sum assured.

If death occurs within the stipulated period:

The benefits payable to the dependents, in this case are:

(I)            The basic sum assured

(II)            A guaranteed bonus / valued units per-annum for each full year’s premium paid excluding the first year’s premium.

This is non-participating plan where under the sum assured increases by fixed amounts during the term. The amount of guaranteed bonus / unit values is fixed and does not defend on the profits of the insurance company.

On survival to the Selected Term:

The following amounts are paid at the survival of the life insured at the selected term:

(I)            The basic sum assured in cash

(II)            Actually paid-up whole life assurance for a like amount payable at death thereafter.

However, the life assured is given the following options in lieu of these two benefits:

An increased cash payment

OR

Fully ‘paid-up whole life insurance policy for increased sum assured.

The alternative benefit of an increased paid-up assurance will be allowed without medical examination subject to the exercise of this option not less than three years before expiry of the selected term. Paid-up values are also given in this case. The benefits available under the policy on maturity will also be reduced in the same proportion. The policy so reduced will thereafter by free from all liability for payments of premiums but shall lose all rights to the guaranteed additions assured in the event of death subsequent to the date of conversion into a reduced paid-up value. Guaranteed surrender value is applicable to this policy.

This plan is useful to a person who, in addition to providing cover for his family, wants to make some provision for his old age. It overcomes the main drawback of the whole life insurance policy, i.e, the assured is permitted to get the policy amount. The other advantage is that the insurance element is greater than an ordinary endowment assurance policy.

Life Insurance Zong Insurance, virtue for the users or Cheap Marketing in Pakistan

Recently a subsidiary of China Mobile in Pakistan called China Mobile Pakistan (CMPak) has introduced a typical form of accidental insurance to the users of their product Zong® cellular service. The insurance is launched in collaboration with Adamjee Life Assurance Company Pakistan. It is said that users can get their accidental insurance in daily charges Rs: 2, 4 and 5 against the sum assured Rs: 100,000, 200,000 and 300,000 respectively. Following terms and conditions have been advertised for the information.

• To purchase the insurance policy the customer should be 18-59 years of age with a valid CNIC.
• To receive the benefits of the insurance policy the customer should be 18-60 years of age.
• One beneficiary who be at least 18 years of age with a valid CNIC.
• The ZONG mobile connection should be in the name & CNIC of the policy purchaser.
• Validity of the Insurance policy is for 1 year.
• Insurance premium (deducted on a daily basis) is non-refundable
• Tax is applicable on telecom services only.
• By subscribing to Zong Insurance service, the customer entitles Zong to share the personal information of the customer and his/her beneficiary with Adamjee Life Assurance Company.

The sound is seemed a revolution in insurance industry in whole world, but will it be the milestone for the rest of world? This question is naturally buzzing in the mind. So before the understanding this strange insurance we must look over all glance of the teledensity in Pakistan.

According to the recent report which shows the teledensity in Pakistan the trend of mobile users is growing in daily basis. In the fiscal year 2010-11 the report shows that the teledensity in Pakistan is reached 69% in the current year and cellular users are now 108.9 million from the total population 180 million. And cellular operator wise the following data has been produced:

1. Mobilink             (3,33,78,000 users)
2. Telenor              (2,66,67,000 users)
3. Ufone                (2,05,33,000 users)
4. Warid                (1,73,87,000 users)
5. Zong                 (1,09,27,000 users)

This report is issued by the competent authority. But ground reality differ the situation. It doesn’t mean that every second person of Pakistan is using mobile, but it is well noticeable that more than 80% users have multiple connections and time to time they switch over the services from one network to another one. Moreover, day by day the cheap marketing methodologies of the advertisements by the above companies have also created a rough competition scenario in Pakistan mobile networks.

Another bitter truth is more than 60% of mobile users have don’t sufficient knowing about the proper usage of the mobile even. They make a call, receive a call and text messaging. Recently a survey was conducted by a newspaper in which it had shocked to the readers when the result shown. In the result it was explore that 95% text messages in the mobiles are forwarded. Just only 5% messages were shown that these messages were typed by the users.

In this culture Zong is introducing the accidental insurance to their users. Now look the subscription of the Zong users, it is lower subscription in the Pakistan, where users don’t care about the insurance but the cheap call rates and fascination SMS packages.

If this sort of insurance is seemed good then it is better to initiate by the Pakistan Telecommunication Authority (PTA) rather than a mobile operator. Then may be the aim will be furnished.

Motorcycle insurance-How to get it along with discount

 

Motorcycle or bike riding is considered a symbol of style among youngsters. You put a lot of your time to buy the best motorcycle which suits your style as well as meet the needs of your life without putting a lot of burden on your pocket. Surely you don’t want to risk the security of your motorcycle in case of any mis-happening that might occur. Don’t under estimate the need of insurance for your bike as it not only protects your bike but it also protects you if any accident happens.

Buying insurance is similar to buying motorcycle as you look for the same that it meet the needs of your life and at the same time does not put burden on your pocket. Once you decide to buy motorcycle insurance then you should know that there are some factors that determine motorcycle insurance rates. Motorcycle type and age plays an important role in determining insurance costs. A small scooter will cost less as compare to sports motorcycle as it costs more to repair after accident. A brand new motorcycle cost more to repair in comparison to the old one. Driver’s age also do matter in this regards as younger driver has less experience driving on road as compare to older person. If a driver has history full of accidents and tickets than it’s more likely to raise his insurance premium.

There are also some other factors like locality and safe parking of the vehicle. If you live where there is high traffic and has significant risk of accidents than it will affect insurance premium. Safety of the vehicle is also important such as where you park your motorcycle inside or outside of garage. Mileage of motorcycle also plays an important role.

Before buying motorcycle insurance compare quotes from different insurance provider companies and choose one which protects your motorcycle to the maximum as well as don’t over burden your pocket. Look for the following thing.

Insurance coverage in case of theft

Insurance coverage if your motorcycle is damage in fire

Insurance coverage in cause of accident

Third party damage coverage’s if they or their property is damage because of you whether third party is insured or not.

Make sure that your insurance policy not only cover the damage of your motorcycle but also covers you as motorcycles don’t crash alone in case of accidents. So it should also protect you as well as your motorcycle and cover medical expenses.

Look for any possible discount on your insurance policy if it is available get it. Paying a higher deductible amount which you agree to pay before your insurance takes effect also reduces your insurance premium. Having multiple insurance from same company also reduce your insurance rates such as if you also own a car then insuring both your motorcycle and car will defiantly save some bucks for you. Doing a little research will won’t hurt you so compare quotes from top insurance companies which are easily accessible through internet today. Keep each and every detail in mind and then choose. One most important thing that cheapest doesn’t mean that it will protects you completely. Find one which do both not only provide complete protection but also don’t put a huge burden on your pocket.

Motorcycle Insurance

Okay!  You’re finally ready to go get that sexy cruiser you’ve had your eye on for months.  You’ve done all your research (on Motorcycle.com, obviously), found the best price at a reputable dealership, you’ve even checked out helmets and found a riding jacket that perfectly matches your new bad-ass image.  Whew!  You’re shopping is officially done, right?
Wrong!  It’s just the start if you have yet to check out your Insurance options.  Know this: motorcyclists cannot operate their bikes on public roads or highways without insurance.  There are penalties for riding un-insured, not the least of which is getting ticketed for not having liability insurance.  In certain states, such as California, you can’t even purchase a new bike without your insurance lined up.
Let the Insurance Shopping Marathon begin.
Just like Loans, the more you shop around, the better your chances of getting the best insurance rate.  There are a billion insurance companies out there, so start by asking your home and auto insurance agent about motorcycle insurance.  If the company doesn’t offer it, ask your neighbor with the shiny new Kawi Ninja what company he uses.  Search motorcycle websites and forums for rider recommendations.  Finally, with your list of ‘A’ and ‘B’ companies on hand, dedicate a day to call as many insurance agents as you can.
But wait!!  There are some answers you’ll want to have ready once you’re talking insurance plans and rates with an agent.  Here, a little preparation goes a long way in making the best impression (which results in an ideal rate) on an insurance agent.  Know what they’ll ask before you pick up the phone.

1. Your Personal Liabilities

Just like with Auto insurance, your age and your driving record are key factors.  Auto accidents do count when buying motorcycle insurance.  If you’re older but a first-time rider, you will likely have a higher rate.  However, you might be able to offset that by investing in special DMV or motorcycle classes – just be sure to hang on to your certification for proof.

2. They know where you live

Working or living in a high crime/ high accident area can affect your rate.  Have a plan for how you’ll store the bike.  A garage, an alarm, or any other form of security for your parked bike is necessary no matter where you live.  A bike that spends most of it’s time in an open, unsecured area is clearly a risk for any insurance company to take on. 

3. The Bike

Just like in auto insurance, that glitzy, brand-spankin’ new model is going to cost more to insure that an older stock bike.

4. How much you ride

If you live in the part of the country that has a definite riding ‘season’, make this apparent to your agent.  By only using your bike for half the year, your mileage stays low and your rate usually will follow suit.

5. Lastly, avoid over-insuring, since you’ll never get more than the market value of your bike in the event of an accident.

Bear in mind that the rate is not based solely on your bike, but also your lifestyle, your riding habits, and your history.   Once that is out of the way, you need to pick an insurance plan. 
3^rd Party Liability: Insurance that covers other people and their property in the event of an accident that is your fault.  Instead of you personally paying for the damage to the other party’s property, your insurance pays the bill.  It doesn’t cover damage to you or your property.  Most states require you to have at least liability insurance on your bike.
Full Coverage Insurance: (also called “comprehensive”) is available in different amounts, and will cover you and your property in an accident, whether the event was your fault, someone else’s, or “no-fault”.  Full coverage also extends to any passengers on your bike present in the accident.
Look into a combination of liability insurance and comprehensive insurance. 

This will provide you with the most coverage overall in the event of a mishap.
Essentially, know your basics, know what to expect, and make sure that you understand the details of any insurance package you are purchasing.  Although no one wants to get in an accident, they happen to the best of us, and the whole experience can be a lot less painful if you’ve got a good insurance plan to back you up.

Bicycle Insurance Canada

Finding the right  Bicycle Insurance in Canada can be tricky depending on your requirements. Some home insurers cater for this niche in the market, and do also offer Travel insurance for bicycles; but you need to look around. Below is a list of providers we are aware of , that will provide bicycle insurance cover. You will need to ring them because their websites don’t offer a standard option online for bicycle insurance.

If you’ve had experience with an insurer for your bicycle, be it good or bad we’d like to hear about it. We can’t possibly review all insurers around the world and your opinion might assist others. Any Comments can be made at the bottom of the page.

The list is in no particular order, and you need to enquire as to what a policy will actually cover to ensure your requirements are met.

Bicycle Insurance UK

Fortunately if you live in the UK (including Northern Ireland), finding insurance for bicycles is a lot easier than other parts of the world. It seems to be one niche within the insurance market which is taken more seriously than many other places around the world. Insurance coverage is comparatively cheap and cheap bicycle insurance can readily be had from a number of providers. Below is a list of insurers (in no particular order) who offer information online about their bicycle insurance offerings. As stated elsewhere in our site we don’t offer recommendations of one insurer over another, because everyone has different needs and requirements.
If you’ve had experience with an insurer for your bicycle, be it good or bad we’d like to hear about it. We can’t possibly review all insurers around the world and your opinion might assist others. Any Comments can be made at the bottom of the page.  The links below are directly to the relevant pages.

Typical Forex Trading Session

FOREX (the foreign exchange market, FX, or currency market) is a worldwide financial market for the trading of currencies and the largest financial market in the world. It is a unique market and has no physical location or any central exchange unlike other markets. It is a true 24-hour market with buyers and sellers conducting business with a daily average turnover of 1 trillion US dollars.

Forex is an ideal market for active traders who want to take advantage of economic, social and political fluctuations in the world and the inability of governments to control the direction of the market.

The foreign exchange market is also unique due to its geographical dispersion: Forex trading starts in Sydney, and as the business day begins in other financial centers, moves around the globe to Tokyo, London, New York.

In simple terms, Forex is about simultaneous purchase and sale of the currency or the exchange of one country’s currency for the one of another country. As you know, the world currencies are always fluctuating being traded in the currency pairs like, for example, Euro/Dollar, Dollar/Yen etc.

Now let us look at a typical Forex transaction, and try to work out how it all works. In a typical foreign exchange transaction, currencies are always priced in pairs: a party purchases a quantity of one currency by paying a quantity of another currency. The purpose of trading is to exchange one currency for another in the expectation that the price will change so that the currency you bought has increased its value if we compare it to the one you sold. The first currency in the pair is called the base currency, and the second currency is the quote or counter currency.

The foreign exchange market is divided into levels of access. The inter-bank market is made up of the largest commercial banks and securities dealers. Central banks are also active participants in the foreign exchange market, and try to control the money supply, inflation, and interest rates and usually have official or unofficial target rates for their currencies. Central banks control currency reserves and adjust the interest investment rate in the national currency. The national central banks attempt to bring some stability to the market by using available foreign exchange reserve currencies.

Commercial companies typically trade fairly small amounts compared to those of banks or speculators. However, some multinational companies can have a great impact in case very large positions are covered.

Retail traders have an increasing influence on foreign exchange market. At present, they participate indirectly through brokers or banks. There are two main types of retail brokers offering the opportunity for speculative currency trading: brokers and dealers or market makers.

Brokers serve as an agent of the customer in the broader Forex market. They look for the best price in the market for a retail order and deal on behalf of the retail customer. They charge a commission or mark-up in addition to the price obtained in the market.

Dealers or market makers normally act as principal in the transaction versus the retail customer, and quote a price they are willing to deal at, and the customer has the choice whether or not to trade at that price. The broker firms also have their fee by charging the percent out of the operation sum.

Forex market makers provide a platform for foreign currency exchange for the customer: they buy and sell to people who want to enter the market. Market makers know the current cost of investing in the market and stand ready, every second of the trading day with a firm bid and ask price. Therefore, they help customers to reduce the chances of losing money in the market. Normally, the Forex market maker is a bank or brokerage company, which ensures that the market is always functional and that the currencies in it will always fetch the market rate.

Forex trading includes a “bid” and “ask”. The “bid” is the price at which a market maker wants to buy the base currency in exchange for the counter currency. The “ask” is the price at which a market maker is willing to sell the base currency in exchange for the counter currency. The difference between the bid and the ask price is called the spread.

There are a number of different techniques market participants use to predict the changes and grasp the future course of a currency. About 70-to-90 percent of the foreign exchange transactions are speculative. The person or institution that bought or sold the currency is speculating on the movement of that particular currency.

Forex Fixing

Forex fixing is a phenomenon which takes place daily on the open auction providing an access for all the players regardless of their significance and the amount of money offered by them to trade. There is no anonymity as all the prices of buyers and sellers are available on screens.

The essence of fixing manifests itself in determining rates by normally finding a rate that balances buyers to sellers. So, the equilibrium is determined by the law of offer and demand between participants. Such a process occurs either once or twice daily at defined times. The monetary exchange rate fixing is carried out by the national banks of each country participant which use the fixing time and exchange rate to evaluate behavior of their currency. The first and most important fixing takes place at 8:55 pm Tokyo time. Another fixing occurs at 4 pm London time. As far as the European Central Bank is concerned, it sets currency fixing in Frankfurt at 2:15 pm Frankfurt time. The ECB observes the spot rates in the interbank market in which it also participates. After the observation the traders of the ECB put their heads together to decide how to set the fixing.

Fixing provides reference levels which have great importance for Europe. Monetary fixings done in Frankfurt are applied to as a starting point for the daily revaluations of positions at the end of each day. Besides, they have validity and are used as the basis for the monetary agreement between banks and customers. These agreements are executed by banks in the following ways:

1)According to the fixing. This way gives the best price and is used in the interbank transactions

2)When there is a spread in 20 pips. This is an improved corporate spread designed especially for major customers.

3)When there is a spread in 40 pips. This method is taken into account while dealing with minor customers.

Customers, as a matter of fact, try to agree upon the best suitable spread with their banks.

Countries peg their currencies on Forex on various reasons. Pegging controls inflationary tendencies, creates demand because of stability, encourages foreign investors. Among pegging strategies we can distinguish

1)Hard pegs – the currency is bound by agreement.

2)Intermediate – from soft pegging to tightly managed “floats”

3)Floating – freely managed or freely floating against other currencies driven by supply and demand.

Pegging of an individual country’s exchange rate or fixing is usually done to control the country’s inflation. But it can also exert an adversive effect of slowing growth or even curbing the country’s productivity. Moreover, Forex fixing by individual countries can lead to serious financial crisis in their economics which proves its unsustainability in the long term. Devaluing or revaluing a currency shows a disability of a government to support the high value it has pegged its currency.

When applying to Forex trading one should have a clear cut idea how the rate changes influence the market. Every trader should be aware of turbulence times before the fixing of rates which lasts for about 15 to 30 minutes. During these minutes there can appear sharp turning of the market direction for a particular currency pair. That is why it is not preferable to trade at this very time because it is next to impossible to predict where the market will trend after these rate changes have occurred.

Trading Strategies on the Forex Market

Every trader who embarks upon trading on the forex market is concerned about the stable income that can be received on the market. In order to generate profits on forex one should work out a trading system or a trading strategy which would include a set of rules to follow while trading on the forex market. There are a lot of trading strategies devised by forex players which guarantee profits in a particular market situation. Successful traders dispose their own forex strategies which they do not share with others as these strategies serve as the instrument of their earning for a long period of time.

As far as beginners are concerned, they should not dream of millions at the very start even employing the most sure-fire method of trading. There is a huge risk of losses as the market is constantly changing and the newcomers cannot get adjusted to the new market conditions at once. In fact, forex strategies are developed under the influence of the state of disappointment or, vice versa, rejoicing.

There are several universal trading strategies on forex which enable a trader to keep his head above water for a certain period of time without facing losses. Generally speaking, it is essential to practice a forex strategy on the market because any occasional methods of trading do not lead to a positive outcome. That has been multiply proved. Moreover, they cannot ensure a stable profit.

Experienced traders claim that a personal forex trading strategy is maximally effective and convenient for a particular trader. In fact, an active and risky person would not use the same strategy as his more careful and meticulous market colleague. Only relying on the trading experience one can adopt an own convenient way of trading otherwise the rules which do not coincide with your opinion or position will not work efficiently.

Preparing a trading strategy is a complicated process which consists of several interconnected steps. Besides, a trader should also take into account his character and preferences while designing a trading strategy. Undoubtedly a trader should be well informed and acquainted with the process of trading and the common risks typical of the forex market.

Composing a trading strategy may include the following steps:

• - Formulating a trading strategy
• - Writing down the rules of the strategy in a particular form
• - Testing the strategy
• - Optimizing the strategy on historical data
• - Trading on forex exploiting the strategy
• - Keeping track of the trade effectiveness when using the strategy
• - Improving and advancing the strategy

Fundamental Analysis Fundamental Analysis

A fundamental analysis is one of the most difficult but at the same time the key analysis on the forex market. To carry out the fundamental analysis is much more complicated as one and the same factors can either exert irregular importance under different circumstances or can turn into absolutely insignificant after their being of much value. The success of the fundamental analysis lies in the clear determination of the interrelation and the influence of two different currencies on each other. Consequently it is essential to know and to understand certain political events, the relations of different countries, their development, the history of currencies’ development. Besides, it is important to be able to predict the cumulative result of different economic programs and to establish a link between the events which may seem to be absolutely unrelated.

Within the framework of the fundamental analysis specialists familiarize with various reports on the world monetary and financial development. They learn about political and economic life of not only separate countries but also the world community as a whole.

The main purpose of the fundamental analysis is to define which events can influence the development of forex and what kind of changes in the currency rates these events can lead to. The information about the work of exchange houses and large companies, discount rates by central banks, economic policies of governments, potential changes in political regimes as well as all sorts of expectations and rumors may turn out to be crucial when conducting the fundamental analysis.

The main difference between the fundamental and the technical analysis consists in the statement the fundamental analysis is based on. It implies that forex prices are the reflection of the supply and demand which, in their turn, depend on the fundamental economic factors. Those who admit the technical analysis claim that there is no need to seek the reasons for the exchange rates changes. It is enough to analyze the prices themselves. The technical analysis engages in making short term prognoses (from 1 minute to 1 week) on the forex market while the fundamental analysis deals with medium term or long term predictions. In order to be able to launch long term prognoses it is necessary to research the internal reasons for the exchange rates changes which will enable the specialists to estimate the dynamics of currencies supply and demand.

The fundamental analysis has its disadvantages. It is rather complicated and time-consuming to track the changes of all the fundamental indicators with their own causative-consecutive relations in each country which fall under observation. The other disadvantage is that the fundamental analysis is useless to practice for short term trades because it may turn out that a trader does not have enough money for current losses on open positions in several figures which are applicable while exploiting medium term trading.

Insurance in emerging markets: overview and prospects for Islamic insurance

Swiss Re’s new sigma study explores the latest developments in the insurance sector of the emerging market economies, with a special focus on the growing market for takaful, a form of Islamic insurance. 

The first half of the study covers the latest developments in the insurance industry in the emerging markets. The second half is devoted to a discussion of takaful, a form of financial protection based on mutual assistance and joint risk bearing that is widely accepted by Islamic scholars.

Non-life insurance in the emerging markets
In real terms, emerging market premiums in the non-life sector grew by 11.6% in 2007. Premium volume in 2007 amounted to USD 199bn. South and East Asia (+13%), Eastern Europe (+12%) and the Middle East (+12%) grew the fastest. According to Daniel Staib, one of the study’s co-authors, “The non-life sector benefited from the strong economic environment and the introduction of new compulsory lines in the Middle East.” Staib adds, “The motor and property businesses continued to dominate the emerging markets insurance landscape in 2007, with motor insurance outperforming the non-life market as a whole.”

Life insurance in the emerging markets
Growth in the life market slowed from 18% to 14% in 2007. Premium volume in 2007 amounted to USD 223bn. Co-author Prudence Ho notes, “The strong performance of the stock markets in the first three quarters of 2007 led to increased sales of investment-linked life products. The launch of new products and the increasing market share of bancassurance, the provision of insurance services by banks, also contributed significantly to the sector’s results.”

Most of the regions decelerated only marginally from their record high levels of the previous year. In South and East Asia, Indonesia (+57%) grew the fastest in 2007. In India, the second-largest market, growth of new business fell from 145.7% in 2006 to just 9.6% in 2007.

Insurance trends and the outlook for the emerging markets
One of the recent developments in the insurance sector of emerging markets is the decision by some regulators to push for the introduction of more stringent capital requirements. Another development is the expansion of microinsurance, which extends coverage to low-income individuals. Finally, bancassurance has continued to grow in importance as a distribution channel.

The financial crisis in industrialised countries has clouded the near-term economic outlook. Demand for products exported from emerging economies will shrink. Commodity prices have already fallen significantly and are expected to continue their slide, leading to lower inflation. Daniel Staib notes, “Insurance in the emerging markets is expected to grow at a slower pace in 2008 and 2009, but its longer term growth prospects remain positive.” He adds, “Factoring in these considerations, average annual growth is likely to drop from the 2002 to 2007 levels of 11.4% in life and 10.6% in non-life to 7-10% in life and 3-8% in non-life between 2008 and 2013.”

Islamic insurance – the growth of takaful as a solution
Various Islamic insurance models that comply with the shariah, the body of Islamic religious law, have been adopted in Muslim countries. Takaful, the focus of the sigma study, is the most accepted model.

Takaful is a system based on the principle of mutual assistance (ta’awun) and voluntary contribution (tabarru), where risk is shared collectively and voluntarily by a group of participants. Through payment of a voluntary donation and the clear definition of the type of loss, impermissible elements such as uncertainty (gharar) and excessive risk taking (maisir) are removed from the contract.

Takaful involves:

• the creation of a shariah supervisory board that oversees insurance operations and compliance with the shariah;
• the separation of shareholder funds from policyholder funds;
• the commitment to distribute technical profits to policyholders;
• the avoidance of investment in non-shariah-compliant assets.

Islamic insurance – future prospects
Between 2004 and 2007, the average annual growth rate for takaful was estimated at 25% (adjusted for inflation) versus 10.2% of that in the conventional market. Although takaful premiums of approximately USD 1.7bn were written in 2007, the global takaful market could reach USD 7bn by 2015. The 1.5bn Muslims around the world represent a growing client segment for the insurance sector.

For this sigma, five markets were analysed in detail: Bahrain, Indonesia, Malaysia, Saudi Arabia and the United Arab Emirates. The two takaful markets with the largest growth potential are Saudi Arabia and Malaysia.

According to Prudence Ho, “Takaful is set to grow because populations of Muslim countries are rapidly growing and because shariah scholars agree that Muslims should refrain from buying conventional insurance if a takaful operator is selling the same product and offering similar benefits and services.” She adds, “Many companies – global, regional and local – have set up new takaful operations over the past five years and retakaful capacity is also expanding continuously.”

Regarding the challenges facing takaful, Daniel Staib explains, “For takaful to prosper, staff with insurance and shariah expertise, shariah scholars, and solutions for coping with large risks are needed.” He adds, “Further standardisation of the operating models and regulations are required. Improving the general public’s awareness of takaful products is also key. ”

Both authors agree that if companies – with the support of regulators – rise to this challenge, the international takaful industry is well positioned to realise its full potential and attract customers from over the world, regardless of their religious affiliation.

This publication can be downloaded in English, German, French, Italian and Spanish. Japanese and Chinese (simplified) will follow shortly.