B - Dibra and Leadbetter

Question 1

DIBRA AND LEADBETTER

4 company characteristics playing a role in most insolvencies

Answer 1

1) SIZE
smaller insurers have less capital and less diversified (concentration of risk)

2) AGE
new firms lack experienced management and face strong competition

3) RAPID GROWTH
usually associated with loss reserve deterioration and under-pricing

4) POOR GOVERNANCE AND CONTROLS
unable to identify and act on threats

Question 2

DIBRA AND LEADBETTER

4 external factors that may exacerbate vulnerability to insolvency

Answer 2

1) UW CYCLE
In cycle of poor profitability, decreased capital may increase the risk of insolvency
2) CAT LOSSES
such as severe whether and industrial disaster
3) VOLATILITY IN FINANCIAL MARKETS
interest rate risk contributes to failure
4) INTERNATIONAL EXPOSURE
multinational more likely to exit