Property and Casualty Large Insurance Exposures and Investment Concentration

Question 1

Define what Grosse Underwriting Limit Policy is

Answer 1

It’s a policy on the maximum amount of risk (exposure) an insurer is willing to undertake.

The GUWP should:
1. Define what constitutes a single insurance exposure
2. Establish limits by class of insurance
3. Be reviewed by Senior management

Question 2

What is the limit for the occurence of a maximum loss on a Single Insurance Exposure for an insurance company? A foreign Branch?

Answer 2

100% of total capital available for a widely held company of regulated financial institution, 25% otherwise. A foreign branch shouldn’t see a maximum loss over 100% of net assets available.

Question 3

How can you calculate the exposure limit?

Answer 3

Exposure Limit = Net Retention + Unregistered Reinsurance Exposure

Question 4

Determination of the maximum loss on a Single Insurance exposure shouldn’t be made with regards to …

Answer 4

the likelihood of the event.

Question 5

What is the limit of investment concentration for an insurance company? A foreign branch?

Answer 5

5% of a company’s assets for an insurance company and 5% of the branch’s assets in Canada.