Chapter 11: Managing Exposure Flashcards
Define ‘soft market’
When rates are reducing
Define ‘hard market’
When rates are increasing
What can lead to a shorterning of the market cycle?
Changes in legislation which lead to new liabilities, or extension of liabilities, weather related incidents, or major disasters like hurricanes or terrorism
How do you identify the loss exposure from a single risk?
For a property or BI risk, it is best to look at the estimated maximum loss. In liability, it is best to examine the limit of liability offered
How do you idnetify the loss exposure from a single event?
CAT modelling
Define ‘reinsurance’
Insurance for insurers
Define ‘proportional reinsurance’
Reinsurance where a certain share of the risk is ceded, and the reinsurer pays on that basis
What is quota share reinsurance?
An agreed proportion of all insurances written by the insurer will fall into the treaty
What is surplus reinsurance?
The insurer only reinsurers the risks where the sum insured exceeds its own retention limit
Define ‘non-proportional reinsurance’
A reinsurer agrees to contribute to losses exceeding a specified figure
Define ‘excess of loss’
Layers of reinsurance, written on a per risk or per event basis
Define ‘stop loss insurance’
Insurance to maintain a loss ratio
