The Underwriting Cycle

Question 1

Profit cycle

Answer 1

A recurring increase and decrease in profits, usually regarding a single organization or industry

Question 2

Structural change

Answer 2

Gradual, long-term, and fundamental change involving institutional arrangements, products, services, roles, and regulation

Question 3

Operating ratio

Answer 3

A ratio that measures an insurer’s overall pretax operation profitability from underwriting and investment activities and is calculated by subtracting the investment income ratio from the combined ratio

Question 4

Nonadmitted insurer

Answer 4

An insurer not authorized by the state insurance department to do business within that state

Question 5

Reunderwriting

Answer 5

The process of analyzing the characteristics of policies within a portfolio and the trends of those characteristics

Question 6

Capital

Answer 6

The accumulated assets of a business or an owner’s equity in a business

Question 7

Cash flow

Answer 7

Cash inflow minus cash outflow

Question 8

Supply

Answer 8

In insurance, the aggregate willingness of all insurers to assume risk at a given time

Question 9

Surplus relief

Answer 9

A flow of funds into an insurer’s policyholders’ surplus when policyholders’ surplus has been reduced by the insurer’s rapid growth in written premiums

Question 10

Elastic demand

Answer 10

Willingness to purchase a product that varies significantly with price

Question 11

Inelastic demand

Answer 11

Willingness to purchase a product that does not tend to respond to a change in price