Acronyms Flashcards
(38 cards)
Desirable features of an exposure measure:
VENOM ADA 1-3
* Verifiable
* Easy to obtain
* Not open to manipulation
* Objective
* Measurable
- Acceptable to the market
- Defines the risk
- Acceptable to the PH
Reasons for using reinsurance
DASS LIFE 5-7
* Diversification
* Avoid single large losses
* Smooth results
* Solvency improvement
* Limit exposure to single events or accumulations
* Increase capacity to accept risk
* Financial assistance
* Expertise
Regulatory influences on assets held
TECH SCAM 9
* Types of assets that provider can invest in
* Extent to which mismatching allowed
* Currency matching requirements
* Hold certain proportion of total assets in specific class, eg government bonds.
* …
* Single counterparty maximum exposure
* Custodianship of assets
* Amount of any one asset used to demonstrate solvency restricted
* Mismatching reserve
Objectives of regulation
HEMP CREAM 9
* Help growth and competition
* Economies of scale in investment
* Mobilise long-term savings
* Protect PHs
- Create liquidity
- Reduce transition costs
- Efficiency of the financial system
- Allocate resources efficiently
- Manage risk
Disadvantages of regulation
EPIC BLOC 9
* Economies of scale fewer
* Premiums increased
* Investment return lower
* Costs
- Barriers of entry
- Less insurance coverage
- Opportunity cost
- Complex capital calculations
Reasons UW cycle exist
CREED(D)S 9
* Chasing hard rates
* Reduced insurance capacity after large losses
* Ease for new entrants
* Economics of scale maintained at all costs
* Deliberate under-pricing b key players to drive comp out
* Delays between selling and assessing profitability
* Simplistic capital regimes which encourage writing more business when rates are falling and vice versa
Uncertainty of claims experience:
JC CASTLED REPLICA 10
* Judicial decisions
* Crime rates
- CATs
- Attitude of PHs to claiming
- Sizes of claims volatility
- Types of cover provided
- Latent claims
- Escalation of claims
- Delays -> incidents/reporting/settlement
- RI risks
- Economic conditions -> external environment
- PH’s characteristics incl possible anti-selection
- Legislation/regulation
- Interpretation of wording
- Currency risks
- Accumulation risks
Quality and quantity of data:
: SEMI COMA 11
* Size of company
* Existence of legacy systems
* Management and staff
* Integrity of data systems
* Class of business
* Organisation’s nature
* Method of sale
* Age
* (RI vs DW)
IWD adv
PECS 11
* Pricing if no internal data
* Experience compared
* Credible
* Strategy (business)
IWD disadv
HOOD C 11
* Heterogeneity
* Opt out
* Out of date
* Detail and flexibility
* Crap in crap out contributors
Sources of data
TRAINERS GC 11
* Tables
* RI
* Abroad contracts
* Industry wide data
* National statistics
* Experience own
* Reporting and published accounts
* Similar contracts
- Government reports
- CRESTA
Data problems (historical)
QUERIED BEST ARCHER 11
Quality proposal form:
CURVED AAI 11
* Comprehensive (all UW info and rating factor info)
* Unambiguous, well designed questions
* Relevant and Reliable information produced
* Verify key policyholder information
* Easy Coding
* Data checks before inputted into a model
* Additional information dependent on claim size
* All information on proposal, endorsement, claim form must be held
* Interpretation must be limited
Features of good quality data:
COACH LUCID 11
* Completeness
* Objective and quantifiable as far as possible
* Accurate
* Consistent with previous data
* Homogonous grouping into model points
* Lowest level
o Such as date of birth rather than age at entry
* Up to date
* Checks should be able to be performed
* Integrated into one system
* Detail level and documentation appropriate
o Audit trail
Rating analyses: for existing class
REP REAP 12
* Recent periods: estimate ultimate cost claims
* Existing rates: estimate profitability (referebce to recent claims experience, removing abnormal features), compare actual vs expected
* Project forward to a new rating period, make assumptionns about future claims trends and inflation
- Review existing rating structure (relative levels of premiums charged for diff PHs), in-depth requires sophisticated models
- External data: compare final rates
- Adjust for lifetime value
- Profitability of old years on new rates, to assess profitability of business on the new rates if claims exp was to be the same as previous years
Expense analysis items:
COSMIC 12
* Computer costs
* One-off capital costs
* Salaries and related expenses
* Maintenance costs (heating, rent etc)
* Investment costs
* Claims handling costs
Reinsurance analyses:
CRAVE CAPES 12
* CAT RI
* Reinstatements
* Amount of risk to retain
* Value for money
* Extent of accumulations
- Cost of commutation
- Appropriateness of cover
- Profitability of layers
- Effects on capital
- Solvency of RI (credit risk)
Main reasons for monitoring business written:
DIAGRAM 12
* Double check assumptions (ACC)
* Influence the market
* Assess performance vs goals
* Gain market intelligence
* Regulators satisfy
* Assist with reserving
* Manage risk
Key policy experience items monitored:
CALMNESS Q 12
* Cancellations
* Alterations in premium rates
* Lapses
* Mix of business
* New business volumes
* Endorsements
* Strike rate (Quotes resulting in written business)
* Source (persistency/profitability)
- Quotation volumes
Features of a good system for monitoring business
ACCREDIT DOT 12
* Allow for key drivers
* Calculations not overly complex
* Clear results
* Results validated
* Easy to collect data
* Documented
* Inputs consistent
* Tailored output
- Data validated
- Output consistent over time and with other analyses
- Timely production of results
Investment and capital analyses:
RICE AD 12
* Risk assessment
* Investment policy
* Capital requirements
* Evaluate existing portfolio
* Allocate capital between classes
* Determine return on capital
Analysis of experience: Experience analyses
REP PEACE 12
* Risk exposure and aggregations
* Estimation of claim trends
* PH behaviour
- Pricing and sales of policies
- Environmental changes
- Anything else management require
- Claims reserve estimation/claims experience
- Expense analysis and allocation
Claims analysis: main claims analyses are
INNER CRAP 12
* Impact/incidence of large claims
* New claim types
* Nill claims
* Expenses vs indemnity cost
* Re-opened claims
- Changing frequency and severity
- Recoveries on gross claims
- Assessing accumulations
- Partial payments
Problems with inwards RI reserving:
SIGH CLUB 17
* Sparse data
* IT constraints
* Grouping of data
* Hetergoenous exposure
- Cedants use different reserving bases
- Longer reporting delays
- Upwards developments of claims
- Benchmarks less relevant
Grouping of data difficult:
Type of contract -treaty/fac
Type of cover- prop/non
Basis for cover
Line of business
Attachment point(XS)
Territory
Type of cedant
