Forex & Insurance Info

پاکستانی insurnace

2011-10-10T05:43:00.001-07:00

پاکستان ایک غریب ملک بھاری آبادی ہے ، داخلی سیاسی تنازعات ، غیر ملکی سرمایہ کاری کی کمی ، اور ہمسایہ ملک بھارت کے ساتھ ایک مہنگا محاذ آرائی سے دمہ. ہے کہ پاکستان کی اقتصادی نقطہ نظر اس کے کمزور غیر ملکی کرنسی کی حیثیت ، جو مشکل کرنسی میں اضافے کی کے لئے بین الاقوامی قرض دہندگان پر انحصار کرتا ہے ہے کی طرف سے marred جاری ہے. حکومت کے ایک اندازے کے مطابق 21 ارب ڈالر غیر ملکی قرض میں 2000 ء میں 2003 تک کی وجہ سے چہرے. غیر ملکی قرضوں اور گرانٹ کی حکومت کی آمدنی کا تقریبا 25 فیصد فراہم کرتے ہیں ، لیکن قرض کی خدمت کی ذمہ داریوں کو حکومت کی جانب سے اخراجات کا تقریبا 50 فیصد کل. مستقبل میں قرض قسطوں اگر پاکستان کے پاس آمدنی کا اکٹھا اور مالی خسارہ پر اہم معیار رکھنے کا حکم خطرے میں پڑ جائے گا. پرویز مشرف کے پاس آئی ایم ایف پیٹرولیم کی قیمتوں میں اضافہ کرنا ، ٹیکس کے دائرے کو وسیع کرنے کے لئے ، عوامی علاقے کے اثاثوں نجیکرن ، اور تجارت کے توازن کو بہتر بنانے کی سفارشات کے ساتھ بڑی حد تک عمل ہے. تاہم ، پاکستان کی اقتصادی امکانات غیر یقینی رہیں ، نئی انتظامیہ کے ارادوں کے باوجود بھی تھوڑا بدل گیا ہے. زرمبادلہ کے ذخائر میں تقریبا 1 ارب ڈالر کی ہوور ، جی ڈی پی کی فصل کی کارکردگی پر ترقی ٹکا ہے ، درآمدی بل اعلی تیل کی قیمتوں کی طرف سے درج کیا گیا ہے ، اور دونوں غیر ملکی اور ملکی سرمایہ کار پاکستان میں منصوبوں کے ارتکاب کا ہوشیار رہیں.
پاکستان کے علاقہ مغرب میں مشرق میں ، شمال اور شمال مغرب میں پہاڑوں ، plateaus میں بنیادی طور پر فلیٹ ، انڈس سادہ ، اور عرب جنوب میں بحیرہ ہے.بھارتی ٹیکٹونک ایشیائی پلیٹ کے خلاف زور دے رہے ہیں ، ہمالی سمیت ایک ؤبڑ پہاڑی سلسلہ پیدا پلیٹ میں پاکستان کی جسمانی پہاڑی حالات کی وجہ سے ہے. اس وقت پاکستان دنیا میں دسویں سب سے زیادہ آبادی والا ملک ہے ، اور شرح یہ جا رہا ہے ، اس کو سال 2010 تک آٹھویں ہو جائے گا. پاکستان میں امریکہ کے مقابلے میں آدھے سے زیادہ آبادی کے ہے ، اور پاکستان کا سائز ٹیکساس کے سائز سے زیادہ ہے.علاقائی ، پاکستان اور بھارت ، جس کی آبادی ایک ارب سے تجاوز کر اور سائز وار تقریبا 3 اوقات پاکستان کے کہ کے مقابلے میں کہیں نہیں ہے. پاکستان کی آبادی کی کثافت جو بھی اس کے پڑوسی ملک ہے ، جس کے 26،000 ppk ہے ، پاکستان 1،900 ، جو 400 پر امریکہ کے زیادہ سے زیادہ چار مرتبہ ہے کہ مقابلے میں نزدیک کہیں بھی نہیں ہے. GNP کے لئے پاکستان کے ساتھ امریکی uncomparable ہے ، لیکن پاکستان اور بھارت کے GNP 40 ڈالر کے اندر اندر ایک دوسرے کے ہے. اسی طرح ، بھارت اور پاکستان کی لمبی عمر دونوں کے قریب 60 ، جبکہ اوسط امریکی لمبی عمر 75 کے ارد گرد ہے.
گلوبلائزیشن علاقائی contrasts کے بتدریج کمی کو عالمی پیمانے پر توجہ مرکوز کرنے کے لئے ہے ، بین الاقوامی ثقافتی ، اقتصادی ، اور سیاسی تبدیلیوں میں ایک اضافہ کے نتیجے میں. گلوبلائزیشن نے دنیا بھر کے لوگوں کے اربوں کے لئے بہتر زندگی کے حالات کے لئے کارفرما ہے ، لیکن یہ خطرات اور اخراجات کا سامنا کرنے کی ضرورت ہے لاتی ہے. یہ ترقی کو فروغ دیتی ہے اور لوگوں کو مال ، خدمات ، دارالحکومت ، اور قومی سرحدوں سے بھر میں صدیوں کے لئے معلومات ٹریڈنگ. گزشتہ پچاس سال میں عالمی خوشحالی کی اشیاء اور خدمات میں بین الاقوامی تجارت کے تیزی سے توسیع ، جو سال کے بعد سال کی پیداوار کے مقابلے میں زیادہ تیزی سے اضافہ ہوا ہے پر بڑے بڑے حصے میں مبنی ہے. پاکستان منفی اور مثبت ثبوت ہے کہ عالمگیریت لوگوں میں غربت کی وجہ سے پیش کرتا ہے. 1990s کے دوران غربت کی لکیر کے تحت کی آبادی کا فیصد بتدریج اضافہ ہوا ہے جب پاکستان نے عالمی معیشت کو اپنی سرحدوں کے کھولی. اضافہ بنیادی طور پر وجہ سے بڑے پیمانے پر قرض ہے کہ ملک میں عوامی سرمایہ کاری پر نیچے پریس 1990s میں کمی کرنے کے لئے شروع کیا. مزید encouragingly ، آزادی کے بعد سے پاکستان کے 55 سالہ ریکارڈ سے ظاہر ہوتا ہے کہ غریب لوگوں کے رہنے والے کے معیار میں تین گنا اضافہ کے ہاتھ میں برآمد اور درآمد کی بڑھتی ہوئی اہمیت کے ساتھ ہاتھ چلے گئے. پاکستانی عوام کے لئے سب سے اہم مسائل کو ملازمتوں اور ان کے بڑے خاندانوں کے لئے دیکھ بھال کر رہے ہیں. اگرچہ مردوں کے لئے مواقع ہیں ، خواتین کے لئے کچھ بھی کر رہے ہیں ، لیکن کئی کے طور پر نہیں. گلوبلائزیشن کیونکہ وہ اعلی ٹیکنالوجی کے دور ابھی تک نہیں پہنچ گئے ہیں ، اور نئی کمپنیاں اور پاکستانی عوام پر منفی اثر پڑے گا

انشورنس Eassy پاکستان

2011-10-10T05:35:00.000-07:00

مسلم دنیا کے جنوبی مغربی افریقہ سے دور پیسیفک میں فلپائن کے لئے وسیع زمین کےایک وسیع اور بہت زیادہ بڑے پیمانے پر ہے. جہاں تک روس میں دریائے وولگا کےطور پر اس کی شمالی حدود تک پہنچنے ہے جبکہ جنوبی سرحدوں کو جنوب مشرقیافریقہ میں موزنبیق میں بحر ہند میں چلائے. چین میں، مسلمانوں نے برما کی سرحد سے ملحق صوبوں میں کافی تعداد میں اور پیکنگ کے ارد گرد اضلاع میں ہیں. دنیا میں مسلمانوں کی کل آبادی ایک ارب کا اندازہ لگایا گیا ہے. اس اخبار نے ایک ایسے خطے میں ملاقات کی پاکستان میں اس وسیع دنیا کے ایک چھوٹے طبقہ کے ساتھ ڈیل کرتا ہے،.مختلف حالتوں میں اور مختلف پس منظر میں پاکستان نے ان علاقوں میں کئی بار شائع کیاہے اور اب سہا، ایشیائی برصغیر کے دیگر آزاد ریاستوں کے مقابلے میں تہذیب کے لئےبہت بڑا شراکت بنا. ، شاید یہ ہے دنیا کے کسی دوسرے حصے کے مقابلے میں مزیدحملوں کا مشاہدہ، کسی دوسرے خطے سے زیادہ نسلی اپبھیدوں جذب اور زیادہ سےزیادہ اس زمین کو کسی اور جگہ سے زیادہ کے دل میں خیالات جنم لے لیا ہے.

2011-08-14T08:52:00.000-07:00

Insurance in emerging markets: overview and prospects for Islamic insurance

2011-08-14T08:49:00.001-07:00

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.

FOREX: Fundamental Analysis

2011-08-14T08:28:00.003-07:00

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.

Trading Strategies on the Forex Market

2011-08-14T08:28:00.001-07:00

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

Forex Fixing

2011-08-14T08:27:00.001-07:00

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.

Typical Forex Trading Session

2011-08-14T08:26:00.002-07:00

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 Trading

2011-08-14T08:26:00.000-07:00

Is it possible to earn much money on the forex trading online?

The answer is YES. As a matter of fact it is not the money made by magic. Forex is a serious business. As any kind of business forex requires much time, financial and mental efforts as well as high qualification. The purpose of our website is to help you understand if this business suits you, provide you with all the necessary knowledge needed for the successful online trading on forex, save you from certain pitfalls which every trader comes across.

So, what is online forex trading?

Forex is an international currency market which was established in 1971 when the world trading changed the fixed rates for the volatile ones. Since that the value of a currency is purely determined by the market and economic conditions of a country.

Nowadays the foreign exchange market is open on a 24-hour basis on weekdays from 2 am on Monday till 2 am on Saturday. Everyday purchase and sell of different currencies like GBP (Great British Pound), EUR (European Euro), USD (US Dollar), JPY (Japanese YEN), CHF (Swiss Franc), CAD (Canadian Dollar), AUD (Australian Dollar) are conducted on the market by banks, market makers, investors, speculators or just ordinary traders. The investments in trading operations with currencies dispose the biggest potential of generating profits. The total volume of transactions closed on forex daily is estimated in 1-3 billion dollars which is 4-5 times higher than the stock market indicators. Once forex trading was handled with the help of massive terminal equipment. At present online forex trading is available to traders via the special computer programs. Online forex trading provides various opportunities to traders without leaving home.

The trading is aimed at buying a currency at the lowest price and selling a currency at the highest price possible at that very particular moment of the trading process. The purpose of a trader is to try to determine the direction of price changes and to buy a currency at an increasing price or to sell a currency at a falling price, then, having made a reverse transaction, to receive a profit.

While trading on forex it is essential to understand the quoted prices especially for beginners. As a rule, quotations are expressed by a five-digit number. For example, USD/JPY=114.90 means that 1 US dollar is estimated at 114.90 Japanese Yen. GBP/USD=2.0252 signifies that 1 British pound is equal to 2.0252 US dollars. When the quotations change, for example, from USD/JPY=114.92 to USD/JPY=114.93 or from GBP/USD=2.0254 to GBP/USD=2.0255 they say that the price had changed by 1 point. So, the yen has cheapened by 1 point but the pound had risen by 1 point.

Each forex participant plays a role of a buyer or a seller of a particular currency in a particular transaction. A seller offers a higher price of a currency like GBP/USD=2.0254 while a buyer will look for a lower price of a currency like GBP/USD=2.0250. The price of supply is called ASK while the price of demand is called BID. That is why if you suppose that GBP/USD price will be rising you will decide to buy the pound so far it is at a low price in order to sell it later at a higher price. When you buy GBP/USD you OPEN your position, when you are going to sell your pounds you CLOSE your position. OPEN and CLOSE positions are also referred to as LONG and SHORT positions. Sometimes the quotations are displayed in pairs like USD/JPY=114.88/92. This denotes a BID/ASK pair.

The difference between the bid and ask rates is called SPREAD. The spread is a means of profit to a person who exposes the quotation. Let us consider a pair USD/JPY=104.75/85 with the spread in 10 points. You sell 100 US dollars and get 100x104.75=10475 Japanese Yen. If someone is willing to buy 100 US dollars they will have to pay 100x104.85=10485 Japanese Yen. The bureau de change will earn 10485-10475=10 Japanese Yen. This is how brokers make profits on the forex market. The spread value varies for different market participants. The spread for those who make transactions in million dollars is minimal, just a few points but it can guarantee a weighty profit. For minor forex participants the spread value is much higher. So, bid rates, ask rates and spread are the key notions to comprehend for a trader when working on the forex market.

There are certain trading instruments which prevent a trader from unforeseen losses and help fix a planned profit. They are STOP and LIMIT orders. An opened position can be closed at any time when a currency rate has reached a particular value. In order to ensure yourself from significant losses while the downward movement of a currency, especially in a situation when you do not control the market or can lose the control over it, you apply to the STOP order. Thus, you indicate the price value lower than the current value under which your position must be closed without any other additional indications. In case the STOP order will be set too close to the current price value a random price change can close the position at a loss, if too far then the losses will be unnecessarily huge. LIMIT is a quotation indicated by a trader which ensures closing of the position with a profit.

How to become a trader and start an online trading on your own on forex?

One should take into consideration three steps.

1.To choose a suitable broker (forex trading is handled through the intermediary of a broker)
2.To open a personal bank account (the account will be used for the trading transactions)
3.To install a special computer program (it will help to carry out the trading)

Let us now take a closer look at each of these points.

First of all, it is necessary to choose a reliable brokerage company

which will offer high-quality brokerage services to conduct trading operations on the forex market via the Internet or the phone. Buy and sell transactions are made on behalf of a client of the brokerage company. Besides, the brokerage services include providing a trader with analytical information, trading strategies of high-qualified specialists, analysts’ consultation, a free access to the trading platform and so on. The client and the brokerage company shoulder a mutual responsibility and provide guarantees which are stipulated in the contract of rendering the brokerage services. One should bear in mind that the larger a brokerage company the more qualitative services it renders but to cooperate with such a company one needs to dispose a larger amount of money.

The next issue concerns account opening for the online forex trading.

That can be done in two ways.

1.Via the Internet following the instructions in the website of the broker. Later the broker will send all the documents to the client via the post for the written confirmation of the contract.
2.The account can be activated in the broker’s office so that all the documents will be immediately signed.

The account is opened in one of the common currencies. As a rule they are dollars, euro, rubles. The trading can be made in other currencies. The currency conversion will be performed automatically with the help of the software according to the current exchange rates. The amount of money to open the account varies in different brokerage companies ranging from 1 US dollar to 100-200 US dollars.

The final item is software

provided by the broker to install in the computer and the access to the internet. The software represents a trading terminal which activates the online forex trading. The software enables a trader to receive all the forex news in due time. Each trading platform is equipped with a set of necessary functions useful for an active trader.

All of them have a similar structure and value. They are easy and fast to operate and ensure security and effectiveness. When the software is installed in the computer the trading terminal is displayed on the screen. The main purpose of the trading platform is to show the major currency pairs and exchange rates online for forex trading. Moreover, the platform gives you an opportunity for an effective buy and sell of assets, currencies and for realizing various transactions. The platform allows you to see the indicators of your personal accounts’ status, to receive the information about transactions, open positions, profits and losses. The program displays diagrams online, enables you to perform different calculations and execute buy and sell deals in no time.

Brokers offer different trading platforms, for example, MetaTrader 4, TradeMaster, Ninja Trader,DevlaniTrader 4 and many others.

An appropriate trading platform is a half way to the success. Forex traders distinguish technical andfundamental analysis which they apply to in order to predict the exchange rates directions. The technical analysis is a statistic and mathematic analysis of the previous quotation prices which enables prediction of the following prices. The initial data for the technical analysis are the highest and the lowest prices, the prices of the opened and closed positions at a particular period of time, the volume of the operations. The analysis represents itself in a number of diagrams which are displayed on the trading platform. The diagrams exactly show the direction of the prices’ movement or a so- called trend online.

The fundamental analysis is another type of analysis widely practiced on forex. Fundamental factors are the key macroeconomic indicators of a national economics state which have an impact on the forex participants and on the level of currency rates. These factors fall under the consideration of the fundamental analysis. It assesses the political, economic, financial and credit policies of countries. The analysis incorporates refinancing rates by central banks, economic policies of governments, potential political changes, all sorts of prognoses and expectations. The technical analysis is suitable to exploit for short time intervals or, on the contrary, for long terms to research the global trends. The fundamental analysis allows estimating the factors influencing the exchange rates dynamics for a period of several days till several weeks.

Any trader who engages in the online forex trading should not only be guided by the technical or fundamental analysis but also should find a trading strategy. A trading strategy is a set of rules to follow when making a transaction. Some traders work out their own strategies while others prefer already ready ones. There are 3 types of strategies depending on the time characteristics: long term, medium term and short term strategies. Those who cannot devote much time to forex should choose long or medium term strategies. Those who have much free time can rely on short term trading strategies which are more beneficial but risky as well. That is why those who once took to them change for medium or long term strategies.

The next criterion is a currency pair as for each time limited strategy there is a particular currency pair. For working out an own strategy a trader should find a particular consistent pattern, then learn it thoroughly, try to analyze it with the reference to historical data (previous exchange rates) and after that test it. In any case before putting in practice any strategy a trader should not be in a hurry and invest all his money in one strategy. Practically every broker offers to open a demo account gratis which can be used by a trader to test a strategy. When the results of testing are favorable, a trader can start employing the strategy on the real forex account.

What is Forex?

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FOREX — the foreign exchange market or currency market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world.

Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates.

In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.

Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.

Unlike stocks and futures exchange, foreign exchange is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for specific currency pair. The foreign exchange market operates 24 hours per day throughout the week between individuals with Forex brokers, brokers with banks, and banks with banks. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets.

Average daily international foreign exchange trading volume was $4.0 trillion in April 2010 according to the BIS triennial report.

Like any market there is a bid/offer spread (difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ("ask", or "offer") to a wholesale customer and the price at which the same market-maker will buy ("bid") from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EUR/USD price of 1.4238 a pip would be the '8' at the end. So the bid/ask quote of EUR/USD might be 1.4238/1.4239.

This, of course, does not apply to retail customers. Most individual currency speculators will trade using a broker which will typically have a spread marked up to say 3-20 pips (so in our example 1.4237/1.4239 or 1.423/1.425). The broker will give their clients often huge amounts of margin, thereby facilitating clients spending more money on the bid/ask spread. The brokers are not regulated by the U.S. Securities and Exchange Commission (since they do not sell securities), so they are not bound by the same margin limits as stock brokerages. They do not typically charge margin interest, however since currency trades must be settled in 2 days, they will "resettle" open positions (again collecting the bid/ask spread).

Individual currency speculators can work during the day and trade in the evenings, taking advantage of the market's 24 hours long trading day.

If you want to know more about how to start trading in Forex, please, proceed to our Forex for dummies article.

What is Forex Trading?

2011-07-24T23:19:00.000-07:00

How Does Forex Trading Work?

Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency pair that you expect to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euro’s value vs. the U.S. Dollar’s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to end your trade at that point, you would have a $100 gain.
Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.

Yen Weakens as Economic Recovery Progresses

2011-07-24T23:14:00.000-07:00

The Japanese yen dropped today as the signs of the accelerating economic recovery decreased the attractiveness of the currency as a safe haven.

The good economic data from all around the world reinforces optimism of traders, prompting them to leave safer assets in favor of higher-yielding ones. The forecasts, like the one predicting that the ADP Employer Services report will show an employment growth by 140,000 jobs, also support the good outlook. The MSCI Asia Pacific Index of regional shares advanced 1.3 percent, the biggest gain in two months, and the Stoxx Europe 600 Index rose 0.3 percent.

USD/JPY traded near 81.45 today as of 12:21 GMT after it opened at 81.33 and reached the intraday high of 81.60. GBP/JPY traded at about 131.96 after opening at 131.29 and rising to 132.31.

Forex Glossary Terms

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American-style option An option contract that may be exercised at any time before it expires.

Ask The quoted price at which a customer can buy a currency pair. Also referred to as the 'offer', 'ask price', or 'ask rate'.

Base Currency For foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. For example, in a USD/JPY currency pair, the US dollar is the base currency. Also may be referred to as the primary currency.

Bid The quoted price where a customer can sell a currency pair. Also known as the 'bid price' or 'bid rate'.

Bid/Ask Spread The point difference between the bid and ask (offer) price.

Call A call option gives the option buyer the right to purchase a particular currency pair at a stated exchange rate.

Counterparty The counterparty is the person who is on the other side of an OTC trade. For retail customers, the dealer will always be the counterparty.

Cross-rate The exchange rate between two currencies where neither of the currencies are the US dollar.

Currency pair The two currencies that make up a foreign exchange rate. For example, USD/YEN is a currency pair.

Dealer A firm in the business of acting as a counterparty to foreign currency transactions.

Euro The common currency adopted by eleven European nations (i.e., Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) on January 1, 1999.

European-style option An option contract that can be exercised only on or near its expiration date.

Expiration This is the last day on which an option may either be exercised or offset.

Forward transaction A true forward transaction is an agreement that expects actual delivery of and full payment for the currency to occur on a future date. This term may also be used to refer to transactions that the parties expect to offset at some time in the future, but these transactions are not true forward transactions and are governed by the federal Commodity Exchange Act.

Interbank market A loose network of currency transactions negotiated between financial institutions and other large companies.

Leverage The ability to control large dollar amount of a commodity with a comparatively small amount of capital. Also known as 'gearing'.

Margin See Security Deposit.

Offer See ask.

Open position Any transaction that has not been closed out by a corresponding opposite transaction.

Pip The smallest unit of trading in a foreign currency price.

Premium The price an option buyer pays for the option, not including commissions.

Put A put option gives the option buyer the right to sell a particular currency pair at a stated exchange rate.

Quote currency The second currency in a currency pair is referred to as the quote currency. For example, in a USD/JPY currency pair, the Japanese yen is the quote currency. Also referred to as the secondary currency or the counter currency.

Rollover The process of extending the settlement date on an open position by rolling it over to the next settlement date.

Retail customer Any party to a forex trade who is not an eligible contract participant as defined under the Commodity Exchange Act. This includes individuals with assets of less than $10 million and most small businesses.

Security deposit The amount of money needed to open or maintain a position. Also known as 'margin'.

Settlement The actual delivery of currencies made on the maturity date of a trade.

Spot market A market of immediate delivery of and payment for the product, in this case, currency.

Spot transaction A true spot transaction is a transaction requiring prompt delivery of and full payment for the currency. In the interbank market, spot transactions are usually settled in two business days. This term may also be used to refer to transactions that the parties expect to offset or roll over within two business days, but these transactions are not true spot transactions and are governed by the federal Commodity Exchange Act.

Spread The point or pip difference between the ask and bid price of a currency pair.

Sterling Another term for British currency, the pound.

Strike price The exchange rate at which the buyer of a call has the right to purchase a specific currency pair or at which the buyer of a put has the right to sell a specific currency pair. Also known as the 'exercise price'.

Simple Moving Average (SMA)

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Simple Moving Average (SMA) is one of the easiest indicators to use as Technical Analysis for Forex trading. SMA indicates the average price (closing/opening) of a given time period, where each of the chosen periods carries the same weight for the average.
The maths behind SMA is simple. For example, let's say that you are developing an SMA chart for the USD/JPY closing price in a 5-day time frame. The first 5 days USD/JPY closing prices are 125.0, 124.0, 126.0, 123.0, 127.0 -- thus the first dots of your SMA graph will be 125.0 (average of the first 5 days USD/JPY closing price). Assume the USD/JPY closing price is 126.0 for day sixth, your second SMA point will be (124.0 + 126.0 + 123.0 + 127.0 + 126.0)/5= 125.2. The calculation goes on for the following dots and SMA chart is defined by joining these SMA dots.

Relative Strength Index (RSI) - Forex Trading

2011-07-24T23:09:00.001-07:00

The Relative Strength Index (RSI) is one of the most popular Technical Indicators in oscillator charting methods. RSI is normally used to compare the currency strength and to predict currency price movements.

The RSI, developed by J. Wilder, contrasts the downtrend and uptrend prices over a period of time. The RSI gives more emphasis to the latest data and provides a better indication than what is provided by other oscillators. As the RSI is less sensitive to sharp price fluctuations, it helps to sift unwanted “noise” in the Forex market.

Mathematics calculations behind RSI charting:

RSI= 100 - 100/(1+RS) where RS = sum of positive closing prices divide by sum of negative closing prices. RSI helps traders to predict price movements and to identify market turning points. A rise in RSI will normally be followed by a rise in the currency price; and vise versa, a downtrend RSI indicates that the currency price is more likely dropping.

In addition to being a momentum indicator, Forex traders also use the RSI as a volume indicator. Because of the nature of the Forex market as an ”Over the Counter” market (OTC), real time volume reporting is not possible. The RSI has a scale from 0 to 100. Any reading that is below 30 denotes an oversold market condition while any reading above 70 denotes an overbought market condition.

Banks

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The interbank market caters for both the majority of commercial turnover and large amounts of speculative trading every day. A large bank may trade billions of dollars daily. Some of this trading is undertaken on behalf of customers, but much is conducted by proprietary desks, trading for the bank's own account. Until recently, foreign exchange brokers did large amounts of business, facilitating interbank trading and matching anonymous counterparts for large fees. Today, however, much of this business has moved on to more efficient electronic systems. The broker squawk box lets traders listen in on ongoing interbank trading and is heard in most trading rooms, but turnover is noticeably smaller than just a few years ago.

Market participants

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Unlike a stock market, the foreign exchange market is divided into levels of access. At the top is the inter-bank market, which is made up of the largest commercial banks and securities dealers. Within the inter-bank market, spreads, which are the difference between the bid and ask prices, are razor sharp and not known to players outside the inner circle. The difference between the bid and ask prices widens (for example from 0-1 pipto 1-2 pips for a currencies such as the EUR) as you go down the levels of access. This is due to volume. If a trader can guarantee large numbers of transactions for large amounts, they can demand a smaller difference between the bid and ask price, which is referred to as a better spread. The levels of access that make up the foreign exchange market are determined by the size of the "line" (the amount of money with which they are trading). The top-tier interbank market accounts for 53% of all transactions. After that there are usually smaller banks, followed by large multi-national corporations (which need to hedge risk and pay employees in different countries), large hedge funds, and even some of the retail FX market makers. According to Galati and Melvin, “Pension funds, insurance companies, mutual funds, and other institutional investors have played an increasingly important role in financial markets in general, and in FX markets in particular, since the early 2000s.” (2004) In addition, he notes, “Hedge funds have grown markedly over the 2001–2004 period in terms of both number and overall size”.^[8] Central banks also participate in the foreign exchange market to align currencies to their economic needs.

Market size and liquidity

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The foreign exchange market is the largest and most liquid financial market in the world. Traders include large banks, central banks, institutional investors, currencyspeculators, corporations, governments, other financial institutions, and retail investors. The average daily turnover in the global foreign exchange and related markets is continuously growing. According to the 2010 Triennial Central Bank Survey, coordinated by the Bank for International Settlements, average daily turnover was US$3.98 trillion in April 2010 (vs $1.7 trillion in 1998).^[3] Of this $3.98 trillion, $1.5 trillion was spot foreign exchange transactions and $2.5 trillion was traded in outright forwards, FX swaps and other currency derivatives.

Trading in London accounted for 36.7% of the total, making London by far the most important global center for foreign exchange trading. In second and third places respectively, trading in New York City accounted for 17.9%, and Tokyo accounted for 6.2%.^[4]

Turnover of exchange-traded foreign exchange futures and options have grown rapidly in recent years, reaching $166 billion in April 2010 (double the turnover recorded in April 2007). Exchange-traded currency derivatives represent 4% of OTC foreign exchange turnover. FX futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts.

Most developed countries permit the trading of FX derivative products (like currency futures and options on currency futures) on their exchanges. All these developed countries already have fully convertible capital accounts. A number of emerging countries do not permit FX derivative products on their exchanges in view of controls on the capital accounts. The use of foreign exchange derivatives is growing in many emerging economies.^[5] Countries such as Korea, South Africa, and India have established currency futures exchanges, despite having some controls on the capital account.

Foreign exchange market

2011-07-24T23:05:00.000-07:00

The foreign exchange market (forex, FX, or currency market) is a worldwide decentralized over-the-counter financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies.^[1]

The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend (invest in) high-yielding currencies, and which (it has been claimed) may lead to loss of competitiveness in some countries.^[2]

In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market began forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.

The foreign exchange market is unique because of

its huge trading volume, leading to high liquidity;
its geographical dispersion;
its continuous operation: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday;
the variety of factors that affect exchange rates;
the low margins of relative profit compared with other markets of fixed income; and
the use of leverage to enhance profit margins with respect to account size.

As such, it has been referred to as the market closest to the ideal of perfect competition, notwithstandingcurrency intervention by central banks. According to the Bank for International Settlements,^[3] as of April 2010, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion, a growth of approximately 20% over the $3.21 trillion daily volume as of April 2007.

The $3.98 trillion break-down is as follows:

$1.490 trillion in spot transactions
$475 billion in outright forwards
$1.765 trillion in foreign exchange swaps
$43 billion currency swaps
$207 billion in options and other products

DEFINATION OF INSURANCE

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In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; an insured, or policyholder, is the person or entity buying the insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy.

HISTORY OF INSURANCE

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History of insurance refers to the development of a modern business in insurance against risks, especially regarding ships, cargo, and buildings ("property" and "fire"), death ("life" insurance), automobile accidents ("auto"), and the cost of medical treatment (health insurance). The industry has been profitable and has provided attractive employment opportunities for white collar workers. It helps eliminate risks (as when fire insurance companies demand safe practices and the availability of fire stations and hydrants), spreads risks from the individual or single company to the larger community, and provides an important source of long-term finance for both the public and private sectors.

PRINCIPLES OF INSURANCE

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Principles

Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be insurable, the risk insured against must meet certain characteristics in order to be an insurable risk. Insurance is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses.

Insurability

Main article: Insurability

Risk which can be insured by private companies typically share seven common characteristics:

Large number of similar exposure units: Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from the law of large numbers in which predicted losses are similar to the actual losses. Exceptions include Lloyd's of London, which is famous for insuring the life or health of actors, sports figures and other famous individuals. However, all exposures will have particular differences, which may lead to different premium rates.
Definite loss: The loss takes place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
Accidental loss: The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks or even purchasing a lottery ticket, are generally not considered insurable.
Large loss: The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to a buyer.
Affordable premium: If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that the insurance will be purchased, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance.
Calculable loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
Limited risk of catastrophically large losses: Insurable losses are ideally independent and non-catastrophic, meaning that the losses do not happen all at once and individual losses are not severe enough to bankrupt the insurer; insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base. Capital constrains insurers' ability to sell earthquake insurance as well as wind insurance in hurricane zones. In the U.S., flood risk is insured by the federal government. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer's capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.

TYPES OF INSURANCE

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Life Insurance

Term Life Insurance
More about Life Insurance
Policies Life Insurance
Whole Life Insurance

Health Insurance

Dental Insurance
Health Insurance Plans
Family Health Insurance
Long Term Care Insurance
Individual Health Insurance
Short Term Health Insurance
Medical Insurance

Property Insurance

Home Insurance
Renters Insurance
Private Mortgage Insurance
Flood Insurance

Automobile Insurance

Car Insurance
Motorcycle Insurance
Vehicle Insurance

Credit Insurance

Travel Insurance
Disability Insurance
Business Insurance
Personal Insurance
More about Automobile Insurance

LIFE INSURANCE

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Is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (a "premium") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. In return, the policy holder agrees to pay a stipulated amount (at regular intervals or in lump sums). In some countries, death expenses such as funerals are included in the premium; however, in the United States the predominant form simply specifies a lump sum to be paid on the insured's demise.
The value for the policy owner is the 'peace of mind' in knowing that the death of the insured person will not result in financial hardship.
Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot and civil commotion.
Life-based contracts tend to fall into two major categories:

Protection policies – designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
Investment policies – where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US) are whole life, universal life and variable life policies.

GENERAL INSURANCE

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General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance. It is called property and casualty insurance in the U.S. and Non-Life Insurance in Continental Europe.
In the UK, General insurance is broadly divided into three areas: personal lines, commercial lines and London market.
The London market insures large commercial risks such as supermarkets, football players and other very specific risks. It consists of a number of insurers, reinsurers, [P&I Clubs], brokers and other companies that are typically physically located in the City of London. The Lloyd's of London is a big participant in this market. The London Market also participates in personal lines and commercial lines, domestic and foreign, through reinsurance.

Commercial lines products are usually designed for relatively small legal entities. These would include workers' comp (employers liability), public liability, product liability, commercial fleet and other general insurance products sold in a relatively standard fashion to many organisations. There are many companies that supply comprehensive commercial insurance packages for a wide range of different industries, including shops, restaurants and hotels.
Personal lines products are designed to be sold in large quantities. This would include autos (private car), homeowners (household), pet insurance, creditor insurance and others.
ACORD which is the insurance industry global standards organisation. ACORD has standards for personal and commercial lines and has been working with the Australian General Insurers to develop those XML standards, standard applications for insurance, and certificates of currency.