Chapter 9 - Underwriters Flashcards
What is an underwriter in simple terms?
The person who makes the decision on behalf of an insurer whether to accept any risk presented, the term originating from the historic system whereby supporters would write their names under the details of any risk being presented.
What does ‘scratch’ mean?
often used for the combination of initials and a date that underwriters (and claims personnel) use to indicate that they have seen the presentation made.
What are the main functions of an underwriter?
assess the risks being presented to the pool
decide whether or not to accept the risk and if so - how much of the risk to accept
determine the terms and conditions to be offered
calculate an appropriate premium
What is a subscription market?
One where more than one insurer participates in the same risk, each taking a fixed percentage of the risk
Why might an underwriter only take a proportion of the risk?
Size of risk and authority levels - each underwriter has a maximum level of authority
Balancing the portfolio - ensure balance across such areas as geographical exposure
Insurance broker input
New class of business
What is the role of a leader (the one who the broker identifies as the best underwriter to approach first) in a subscription market?
Review the risk presentation being made by the broker
consider whether or not to accept it
decide the T&C upon which to accept the proposal
Quote a premium
What is a following market underwriter?
One which is not deemed to be the leader, standard practice is that they agree with and support the leader’s position, it is entirely possible that a following market underwriter might request more premium before accepting the risk.
What is competition law and what does it do?
The law prohibits behaviour whereby the normal competitive nature of the insurance market is removed, while also trying to prevent a situation where the market acts together to the detriment of the client
What are the principles set out by the European Federation of Insurance Intermediaries (BIPAR) regarding the placement of business within subscription markets?
Intermediary shall based on info provided specify the demands and needs of the client as well as the underlying reasons for any advice
Before placing a risk an intermediary will review and advise a client on market structures available to meet its needs and relative merits of a single insurer or a multiple insurer placement
If the client instructs the intermediary to place the risk with multiple insurers the intermediary will review, explain the relative merits and advise client on a range of options
The intermediary should not accept any condition whereby an insurer seeks to reserve to itself the right to increase premiums charged, just because someone else has done so
During risk placement, the intermediary will keep the client informed of progress
What is the overall leader?
The overall leader of a risk may in fact be overseas and when the broker presents the risk to the LM underwriters they will tell them the terms that the overall leader has set, the leader’s credibility in the London Market is critical
What is the slip leader?
The broker may have gone to see a LM leader in either the Lloyd’s or company market. If that UW is happy to lead the broker’s LM slip, they become the slip leader
What is a bureau leader?
If the slip leader is from a company then the first Lloyd’s underwriter on the slip is the bureau leader for Lloyd’s and the slip leader is also the bureau leader for the company market, and vice versa if the slip leader is from Lloyd’s
What does the General Underwriters agreement (GUA) mechanism divide changes into?
3 categories:
Part 1 - non-material changes which will be agreed leader only
Part 2 - anything not in part 1 or 3 generally which is leader and some agreement parties
Part 3 - material changes which should be agreed by all underwriters
What does the Single Claims Agreement Party introduced in Feb 2018 do?
Allowed the subscribing insurers to agree at the time of placing that claims that were eligible could be agreed by a single insurer only. This insurer would be called the slip leader, but they must be a Lloyd’s syndicate or a UK authorised insurer
