Chapter 7 - Underwriting Flashcards
What is a subscription market? Is London a subscription market?
More than one insurer participating in risks
Yes
What does an insurer’s share of a risk depend on?
Capacity in any one year - agreed by regulator or company
Appetite - exposure of diff risks to reduce losses
Aggregation - of any one location could increase losses so monitor/spread lines
Broker influence
Insured’s influence - preference
Is the London market the only market used on a risk?
No may be company too on any one risk
When did electronic placing come into play?
2020 due to COVID-19
Should brokers use rating agencies for guidance in their consideration of which insurers to use?
Yes
What happens if brokers recommend insurers that are not financially secure?
Claims for professional negligence
Can there be >1 leader on an overall risk? What are they called?
Yes - 1 for London, 1 for Lloyd’s, 1 for Company
Bureau leads
Are all market cycles the same for each class of business?
No
What happens when profits are high in the market cycle?
New insurers enter the market
What happens following significant losses in the market?
Insurers leave the market and premiums increase due to less competition
Why might an insurer leave a market?
Cannot obtain regulatory permission to continue to operate
What does loss and exposure modelling do?
Helps insurer to know where the concentration of its risks are
Analysis for reinsurance purchase
Informs regulators
Does calculating probable maximum losses (PML) allow a more realistic analysis of potential losses than the sum insured?
Yes - how much reinsurance is needed
Whats are RDSs? What do they do? What analysis?
Realistic Disaster Scenarios (RDSs) allow insurers to see their exposure to certain combinations of events
Managing agent works out what risks are exposed and max claim
Reinsurance to cover the risks? How much does it cost and how much original claim they would cover
Result is gross financial exposure to the insurer of the RDS (i.e. without the impact of any reinsurance)
Secondly the net result (reinsurance as well as any reinsurance reinstatement costs)
What should a premium calculation represent?
The exposure being presented to the ‘common pool’ by the particular risk
How are premiums generally calculated?
Premium rate - the hazards that are being faced with a particular risk or particular insured
Premium base - a measure of the exposure
Does a premium rate deal with the hazards being faced?
Yes