Chapter 5 - Distribution Flashcards
Why might a syndicate not write 100% of the risk?
- managing capacity
- branch office controls
- managing aggregates
- managing geographical exposure
- price
What would make a particular insurer appealing?
- accessible
- knowledge
- offering solutions if original not acceptable
- explain if not possible
- proactive in turnaround (cat modelling)
- claims and service
What is the minimum standard on exposure management?
Managing agent must have clear process for recording accumumlations of underwriting exposures and loss potential and ensure representation within internal model
What is fronting?
Arrangements set up by original insured and reinsured, direct insurer slotted in to satisfy regulations
Evaluate fronting
+ access to business otherwise not accessible
+ reinsurer controls policy wording
+ reinsurer controls claims
- original insurer may ignore contract wording and settle claims
- fronting commissions
- reinsurer exposed to overseas litigation
What is a bordereaux?
Groups of data like premiums payed / claims presented to reinsurers
Which layers should be cheaper and why?
Layers higher up the tower as they will be used less
What are the downsides to layering?
If higher layers are wider than lower layers or vice versa
What controls should insurers maintain?
acceptance over a risk, in terms of who can do what and what risks can be accepted in line with the business plan
What is the minimum standard on underwriting authorities?
Managing agents shall ensure underwriters authorities are in writing and inline with business plan, and risks outside an underwriters authority appropriately referred
How can issues be detected with a risk written?
Peer review on bound risks can flag issues, at worst fac ri can be bought to protect if completley intolerable risk
What are prevention controls?
written authorisation and management of authorities
What are detection controls?
Peer review, audit reviews, independent reviews
What is a group / affinity programme?
takes customers of an organisation and allows it to offer add-ons to core products
e.g a bank that could provide travel insurance
What is a master policy?
One policyholder, cover provided to its members
e.g company buying private healthcare for all its employees
What is a lineslip?
All insurers set out level of authority to the lineslip leader, set up by broker
What are the benefits of a lineslip?
- broker: ease of placement, large amount written in single visit
- followers: access to risks without having to agree on an individual basis
- all insurers: ability to compete against larger insurers
What is a consortium?
Insurers setting up group and giving lead authority to one of themselves, free to do business with any broker
What are the benefits of a consortium?
- broker: large amount of security in one visit
- leader: compete for business its line size may not allow it to
- followers: access to business they may not otherwise see
What are the different types of organisation that can have delegated authority?
- MGA, one principal which is insurer
- broker, two principals so has to manage conflict
- MGU, sits between MGA and insurer, insurer provides capacity
What are the benefits of partnering for an insurer?
- access business without having to go to customer
- more cost effective for smaller risks
- mga may have good knowledge and reputation in field
What are the benefits of partnering for an mga?
- high quality security
- reputational benefits
What is the equation for product risk?
customer risk + product complexity + sales risk + service risk
What types of business have high product risk?
- motor insurance
- pet insurance
- travel insurance etc
What system is used to store documents and manage approvals?
ATLAS
What are the main principles of business?
- act with due diligence, skill and care
- organise and controls affairs effectively, with adequate risk management systems
- pay due regard to customers
- amange conflicts of interests
What were the key changes to the Lloyd’s framework?
- risk-based approached to approval of applications
- TP administrators subject to Lloyd’s approval and oversight
- flexible discretion to allow sub delegation of authority
- flexible discretion to allow firms to be given delegated authority without Lloyd’s approval
What should the exec summary in a delegated authority strategy contain?
overview of managing agent’s current position on binding authorities, lineslip and consortium arangements, and objectives for year ahead
What is the lowest level of authority in delegated underwriting?
Prior submit, no decision making authority
What is the second level of authority in delegated underwriting?
Pre-agreed rating matrix, authority to say yes or no to risk but pricing governed by matrix
What is the highest level of authority in delegated underwriting?
Full decision making and price freedom within confines of agreement they have with insurers
What are the levels of authority in delegating claims?
- no authority at all
- limited financial and factual authority
What is the difference between contact of insurance and the contract for insurance?
Contract of insurance is for delegated underwriting, contract for insurance is for insured client
What should contractual documentation issued by a Lloyd’s coverholder include?
- jacket / wrapper cover
- schedule or declarations page
- full product wording
