Chapter 11 Flashcards
What is a hard market?
Less capacity, higher prices and higher profits
What is a soft market?
Lower prices, lower profits, capacity withdrawn
How can the market cycle be shortened?
- Legislation
- Weather related incidents
- Major disasters eg terrorism
- Covid lengthened already hardening market
- Economic issues
Explain loss exposure from a single risk in Property and BI insurance
Calculate estimated maximum loss, decide desirability accepting risk within gross account and how it would influence when added to other accumulations at that risk - too high exposure?
Reinsure to write 100% or co-insurance
Explain loss exposure from a single risk in Liability insurance
Cover is based on a limit of liability - purchase excess of loss
Explain loss exposure from a single event
Threat of catastrophe - obtain reinsurance
What is reinsurance?
Extension of sharing risk, insurer insurers risk again
Give an example of a reason for reinsurance
Protection against a large risk or claim, entering a new market
What is proportional insurance?
Reinsurer accepts agreed share to be ceded and pay any loss occurred on same basis
- Quote share and surplus
What is quote share reinsurance?
Agreed proportion of all insurances written falls within treaty eg 60% motor portfolio then reinsurers accepts liability for 60% of every policy written
What is surplus reinsurance?
Insurer only reinsures risks where sum insured exceeds own retention limit, insurer purchases addition lines equal to line able to write (maximum retained line)What is non
What is non-proportional reinsurance?
Reinsurer agrees to contribute to losses exceeding a specified figure for a premium negotiated by insurer
- Excess of loss and stop loss
What is excess of loss reinsurance?
Written on per risk or per event basis
What is stop loss reinsurance?
Insurer concerned with protecting LR eg exceeding 80% then obtain reinsurance for claims in excess of this
Limit maximum liability and insurer shares in reinsured loss
