LO7: Underwriting

Question 1

reasons for taking less than 100% of a risk

Answer 1

• 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)

Question 2

standard operating costs in the london market

Answer 2

30-40%

Question 3

placing platform limited (ppl) uses

Answer 3

handles to whole process and provides an audit trail and ties in with back office systems
- quote
- binding
- endorsements

Question 4

compulsory broker use

Answer 4

lloyds = yes
london market = no

Question 5

top 4 rating agencies

Answer 5

a m best
fitch
standard and poors
moodys
kroll bond

Question 6

what do rating agencies rate

Answer 6

financial position
management and operation
comparison to peer group (similar size and structure)

Question 7

why do brokers care about ratings

Answer 7

avoid future claims of negligence if the insurer cant pay up in the future

Question 8

Lloyds business principal 3
- what?
- effect on leading and following markets

Answer 8

• underwriting profitability

lead = pre bind analysis on all risks
following = sample will be done

Question 9

aim of fca consumer conduct

Answer 9

ensure clients have positive outcomes:
- the product and services being provided
- price and value
- consumer understanding
- consumer support

Question 10

rds assessment

Answer 10

• which risks are exposed
• any reinsurance available
• cost of reinsurance and the cover it provides
• calculate gross financial exposure and the net

Question 11

new madrid fault line states

Answer 11

illinois
indiana
missouri
arkansas
kentucky
tennessee
mississippi

Question 12

de minimis level
- relates to?

Answer 12

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

Question 13

cat modelling is concerned with?

Answer 13

claims volume

Question 14

rate “loading” and “discounting”

Answer 14

adjusting standard rate to reflect the risk introduced into the pool

Question 15

premium rate

Answer 15

hazard of a particular risk and/or insured

Question 16

premium base

Answer 16

a measure of exposure, rated on:
- sum insured
- insureds payroll (employers liability)
- turnover (product/public liability)
- fees earned (professional indemnity insurance)

Question 17

open cover

Answer 17

used in marine, and stock throughput

premium is paid in stages as cargo is shipped, done through regular declarations

Question 18

BIPAR

Answer 18

european federation of insurance intermediaries

Question 19

other premium components

Answer 19

• operational costs
• reinsurance costs
• profit margins
• claim reserves
• taxes

Question 20

reserving

Answer 20

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

Question 21

ibnr vs ibner

Answer 21

ibnr = relates to claims not at all reported to the insurer
ibner = claims that are known but the current reserve is inadequate

Question 22

trust fund

Answer 22

aka situs fund

• funds/reserves kept in a countries borders for regulatory purposes
• proportional to the risks written there