CHP 8: General Insurance Flashcards
What are the key risks under general insurance contracts
claim frequency, amount, volatility and delays
accumulations of risk (geographical and by class of business) and catastrophes
investment risks, eg poor or volatile returns, falls in asset values, default risk
expenses being higher than expected
poor persistency, ie high lapses and low renewals
new business volumes too high and hence new business strain, or too low and not enough
business over which to spread the overheads
credit risk, ie failure of a counterparty such as a reinsurer or a broker
operational risks, eg fraud, systems failure, regulatory changes.
Why would a general insurer monitor experience?
to set assumptions for premium rating
to set assumptions for provisioning and to monitor the run-off of claims against
expectations
to assess the profitability of its business and the key components of profitability
to assess reinsurance requirements and to monitor the adequacy of reinsurance
to determine an appropriate investment strategy
to determine capital requirements
to assist with financial planning and strategy
to provide management information
to help with marketing new contracts.
