Managing exposure in insurance

Question 1

Define exposure.

Answer 1

The state of being subject to the possibility of loss.

Question 2

What factors influence the insurance market cycle?

Answer 2

• higher profits
• higher capacity for that class
• lower prices
• lower profits
• capacity withdrawn
• higher prices

Question 3

True / False -

Rates in the market for different lines of business will go ‘hard’ and ‘soft’ at the same time.

Answer 3

FALSE.

Different lines of business change their status at various times.

Question 4

In what ways can the market cycle be shortened?

Answer 4

• Amendments to legislation
• Weather-related incidents
• Major disasters
• Economic issues

Question 5

Name 5 reasons for buying reinsurance.

Answer 5

1. Security
2. Stability
3. Capacity
4. Catastrophe cover
5. ‘Macro’ benefits