Chapter 2 - Risks Written in the LM

Question 1

What types of Agricultural insurance is written?

Answer 1

Agricultural crop and forestry/hail insurance
Bloodstock (racehorses and showjumpers)/livestock insurance (any animal which can be sold for commercial value, includes fish)

Question 2

What type of contingency insurance is written?

Answer 2

Contingency insurance: Concert or event cancellation/abandonment; Over redemption(too many people claim promotions); Prize indemnity (Covers during the case of winning a tournament etc)

Question 3

What personal accident and health insurance is written?

Answer 3

Personal Accident - covers insured against accidental injury, benefits paid weekly or monthly

Personal accident and illness/sickness - adds illness cover to the above mentioned

Kidnap and ransom - main cover is the payment of the ransom itself, but many policies include costs of medical and psychological treatment.

Question 4

What is construction insurance?

Answer 4

Construction insurance - includes loss or damage to building works, BI, machinery movement, public and employers’ liability and damage to plant equipment used. Some policies include a maintenance period if the contractor maintains any contractual liability after works completion.
Extensions include ‘expediting expenses’, providing cover to pay for extra costs such as overtime or air freight changes. Exclusions to this normally include defective design, existing property, breakdown or explosion
wear and tear or deterioration

Erection all risks (EAR): Provides cover for loss or damage to own equipment, as well as liability cover should the equipment cause any incident on site

Question 5

What are the 3 general categories of property insurance?

Answer 5

Buildings
Machinery
Stock

Question 6

What are the typical heads of cover in an all risks property policy?

Answer 6

Fire (including underground fire)
Lightning
Explosion
Earthquake
Aircraft - includes any objects dropped by aircraft
Riots/strikes
Malicious Acts - extends riot cover to things such as footy hooligans
Storm, flood or escape of water
Impact damage - by third party road vehicle or even animal
Sprinkler damage
Subsidence

Question 7

What are some exclusions to property insurance?

Answer 7

Inherent vice - normal behaviour such as iron rusting
Trade risks - i.e. creditor failing to pay bills
War risks
radioactive contamination
anything insured elsewhere or for marine perils

Question 8

What cover is usually on a buy-back basis (the insured can pay an additional premium to buy back elements of cover which is excluded)?

Answer 8

Fraud + Employee dishonesty
Theft
Subsidence
Jewellery
Goods in transit
Fixed glass
sanitary ware
money
land, bridges and civil engineering works
crops and trees

Question 9

What are the considerations for onshore energy insurance cover?

Answer 9

Onshore energy - UW considerations include Location (prox to towns/cities), Activity (is it petrol, oil etc) and The risks being created by the nature of activity

Question 10

What are some other property insurance types?

Answer 10

Glass insurance
Stock insurance
Theft insurance (collusion and entry gained by tricks or keys are exclusions); Pecuniary insurance (Loss suffered is financial in its origin or monetary); Money insurance (covers all risks to loss of money in transportation, storage and distribution. Money also includes cheques, stamps, gift vouchers, lottery tickets and travel tickets)

Question 11

What crime - related property insurances are available?

Answer 11

Theft insurance (collusion and entry gained by tricks or keys are exclusions)
Pecuniary insurance (Loss suffered is financial in its origin or monetary)
Money insurance (covers all risks to loss of money in transportation, storage and distribution. Money also includes cheques, stamps, gift vouchers, lottery tickets and travel tickets)
Fidelity Guarantee Insurance (covers loss of property as a direct result of a fraudulent act committed during insurance period, even if discovered after policy expiration)

Question 12

What is the different between business interruption and contingent business interruption (CBI)?

Answer 12

Standard BI requires some physical loss or damage to occur to the insured’s property so they cannot conduct business
CBI - Insured’s business has been interrupted but their own property has not suffered physical damage, i.e. loss in supply chain (supply chain insurance) or power outage at a power station

Question 13

What does directors’ and officers’ (D&O) liability cover?

Answer 13

Protect D&O from claims made by shareholders and other investors because their behaviour has caused them financial loss

Question 14

What does E&O/professional Indemnity/professional negligence and medical malpractice cover?

Answer 14

Interchangeable terms and cover professionals from all types against claims being made against them for breach of their professional duty of care, negligence, E&O in the performance of their professional obligations

Question 15

What does Public Liability Insurance cover?

Answer 15

Covers legal liability for damages in respect of:
Accidental injury to any person (third party)
Accidental loss or damage to property belonging to 3rd party
Nuisance, trespass to land or goods or interference with any 3rd party’s right to air, light or water.

exclusions for paying for legal costs of the insured usually include:
Liability arising out of the use of mechanical vehicles (motor vehicles)
liability out of ownership possession or use of aircraft or other aerial device
Anything covered under employers’ liability
War
Any damage to property owned, in their care, custody or control of the insured
Product recall/defect
Pollution + Asbestos
Professional risks

Question 16

What is products liability?

Answer 16

Can be purchased by any entity which has the potential to be sued as part of a manufacturing, distribution, wholesale or retail chain, or if they are involved in repairing, maintaining and servicing items.
Main issue with claims is working out whether the insured or any other parties are held accountable

Question 17

What is employers’ liability insurance?

Answer 17

Compulsory in the UK, Basic coverage is the legal liability of the insured firm for injuries to employees/persons employed during any period of insurance. Legal costs of defending any claims are also covered. Employers’ liability trading office (ELTO) keeps track and traces insurance applying to employers in previous years.

Question 18

What is financial Guarantee (FG) insurance?

Answer 18

can be written in Lloyd’s, who define it as being any contract of insurance, where the insurer agrees on the occurrence of an event specified in the contract that will pay out as agreed in the contract. These events include:
Financial failures of companies
Lack of response or support from financial supporters
Changes in interest rates
Changes in rates of exchange
Changes in property values

Question 19

What are other non-marine insurances?

Answer 19

Financial Guarantee
Product recall
Extortion/malicious product tamper/contamination insurance
War insurance
Terrorism and political violence (typically covers terrorism, sabotage, mutiny, civil unrest/riots, revolution/rebellion, malicious damage, war/civil war)
Cyber insurance
Mergers and acquisitions insurance/warranty and indemnity

Question 20

What physical damage can be covered in aviation classes?

Answer 20

Physical damage to aircraft insurance (can cover commercial fixed wing aircraft, helicopters and similar, private aircraft, microlights and hot air balloons)

Property insurance for airport buildings
Drone/unmanned aerial vehicle insurance

Question 21

What does aviation liability insurance cover?

Answer 21

Third parties other than passengers (exclusions include employees, operational crew, passengers, owned property and noise/pollution)

Passenger liability
Airport Operator’s liabilities (premises, hangar-keepers’ liability which covers damage to non-owned aircraft while on ground and in their care, Products liability)

Question 22

What other aviation insurances are available?

Answer 22

Aviation war insurance
loss of licence insurance
loss of use insurance - aircraft is damaged or being repaired
Aviation repossession insurance - banks taking them as they are security
Contingent hull, liability or war insurance
Space insurance - e.g. liability risks for satellites

Question 23

What physical damage is part of marine?

Answer 23

Vessels - Construction, physical damage to vessels, Collision liability, General Average (principle where if someone makes a sacrifice to incur cost to save everybody else, everybody else will chip in to pay them back), Salvage and sue and labour

Question 24

What are perils in marine cargo insurance which can be covered?

Answer 24

Fire/explosion
Stranding/grounding/sinking
Overturning
Collision
Discharge at a port of distress
Earthquake/volcano/lightning
General Average
Jettison/washing overboard
Entry of sea/lake or river water
Total loss of any package overboard

Question 25

What is covered in exploration offshore energy insurance?

Answer 25

Exploration - Going and finding and locating the natural resources needed, covers any well when being drilled, while producing, while closed-off and while plugged and abandoned

Control of well (COW) - covers cost of regaining or attempting to regain control of the well once out of control including costs of putting out fires
Re-drilling - covers the cost of creating a new well, generally to the point it was before the incident
Seepage and contamination/pollution

Additions insured can purchase:
Making the well safe
Underground control of well
Removal of wreck
Care custody and control

Question 26

What do construction policies cover (Offshore energy)?

Answer 26

Building the rig
Getting it on site
Putting it together
Has 2 sections:
Section 1 - physical damage and all elements covered should be advised to insurers
Section 2 - liability

Question 27

What is operational policies? (offshore energy)

Answer 27

equivalent of business as usual and covers the day-to-day operations and risks involved i.e. BI, kidnap and war

Question 28

What marine liabilities are there?

Answer 28

Shipowners’ liability insurance - risks covered are crew, collision, third party liability, pollution, wreck removal, fines

Professional Negligence insurance

Ports liability insurance

Question 29

What are the other types of cover in the marine insurance market?

Answer 29

Loss of hire/loss of earnings insurance
Specie/jewellers’ block insurance
Fine art insurance
Cash in transit insurance
Political risks - confiscation, expropriation or deprivation of assets
Contract frustration or trade credit/credit risk insurance - performance of a contract cannot be fulfilled
Bond risks insurance

Question 30

What does international motor insurance for Lloyd’s have to be split into to satisfy regulatory requirements?

Answer 30

EU/EEA (excluding UK)
USA and Canada
ROW

Question 31

What is portfolio management?

Answer 31

making choices in terms of the business written, which makes sure that the long term financial objectives of the investors are met.

Question 32

What is diversification?

Answer 32

That of spreading risk and reward across a number of classes of business.

Question 33

How does the investment strategy change depending on investors?

Answer 33

Those with lower risk appetites should be considered when the company is selecting its strategy, particularly relevant for Lloyd’s names and any other individual investors.

Question 34

How do ESG issues affect the market?

Answer 34

Both insurers and intermediaries have to set out their own agendas and to remain mindful of how their actions are perceived by their client base.
Also have to manage and ESG has to factor into their risk appetite and how to move away from any existing business which is no longer aligned with the current strategy (e.g. movement from coal risks).