LO7: Underwriting Flashcards
reasons for taking less than 100% of a risk
- capacity
- appetite
- aggregation (exposure to 1 event)
- broker influence (may want to share a good risk or only approach a few insurers)
- insured influence (may have insurer preferences)
standard operating costs in the london market
30-40%
placing platform limited (ppl) uses
handles to whole process and provides an audit trail and ties in with back office systems
- quote
- binding
- endorsements
compulsory broker use
lloyds = yes
london market = no
top 4 rating agencies
a m best
fitch
standard and poors
moodys
kroll bond
what do rating agencies rate
financial position
management and operation
comparison to peer group (similar size and structure)
why do brokers care about ratings
avoid future claims of negligence if the insurer cant pay up in the future
Lloyds business principal 3
- what?
- effect on leading and following markets
- underwriting profitability
lead = pre bind analysis on all risks
following = sample will be done
aim of fca consumer conduct
ensure clients have positive outcomes:
- the product and services being provided
- price and value
- consumer understanding
- consumer support
rds assessment
- which risks are exposed
- any reinsurance available
- cost of reinsurance and the cover it provides
- calculate gross financial exposure and the net
new madrid fault line states
illinois
indiana
missouri
arkansas
kentucky
tennessee
mississippi
de minimis level
- relates to?
rds, if syndicate exposure exceeds this level extra scenarios need be considered above the 11 stated and the 2 of their choice
classes
- marine
- aviation
- space
- energy
- liability
- political risk
cat modelling is concerned with?
claims volume
rate “loading” and “discounting”
adjusting standard rate to reflect the risk introduced into the pool
premium rate
hazard of a particular risk and/or insured
premium base
a measure of exposure, rated on:
- sum insured
- insureds payroll (employers liability)
- turnover (product/public liability)
- fees earned (professional indemnity insurance)
open cover
used in marine, and stock throughput
premium is paid in stages as cargo is shipped, done through regular declarations
BIPAR
european federation of insurance intermediaries
other premium components
- operational costs
- reinsurance costs
- profit margins
- claim reserves
- taxes
reserving
making sure there are funds available to pay for future claims including expert costs
- done on a case by case basis for larger claims
- blanket reserves are for high frequency low value claims
- classed as a liability
ibnr vs ibner
ibnr = relates to claims not at all reported to the insurer
ibner = claims that are known but the current reserve is inadequate
trust fund
aka situs fund
- funds/reserves kept in a countries borders for regulatory purposes
- proportional to the risks written there
