C5 - Underwriting management Flashcards
(14 cards)
Why are binders more suited to homogenous risks
The eating and consideration of the risks can be standardised more easily and the risk profile more easily understood and analysed
Why would heterogeneous risks be written under a binder
The CH-MGA might have knowledge and experience of dealing with unusual risks in the region
It makes more sense to place these risks on a lineslip or conortia where the authority doesn’t sit with a third party
What would be some examples of heterogeneous and homogeneous risks
Homogeneous risks:
- small retail and commercial property
- travel type
- small recreational vessels
Heterogeneous risks:
- construction
- super yacht
- kidnap and ransom
What type of model fits delegated underwriting the best
Small value/high volume
High volume of policies without operationally having to underwrite each one on a risk by risk basis
What is a trend that has emerged recently to do with binders
Underwriters leaving the insurers and setting up MGAs to underwrite larger non-homogenous risks
What are CH-MGA considerations when setting up a binder
- Who will hold the underwriting authority - as well as the tools and resources they need to carry out their job
- Mix of business - the binder may put provisions in place for the ratio between the classes of business written. To ensure a balanced book it must also consider the type and size of risks being written as solely writing one type of risk might suffer from one type of loss (I.e writing a mixture of retail units with office type risks)
- Marketing and acquisition of risks - a marketing strategy should be part of the business plan with expectations and the likely conduits through which it will receive business. Conduct risk needs to be considered as it cannot mis-sell products to customers.
- Premium - for prior submit or pre-agreed rates this is less important. But for binders that give the CH-MGA more authority it is important to write profitable business. There may be many requirements relating to premium (e.g min. rates or min. premiums) so it is just as important to achieve these.
- Locations - risk of aggregation of exposures should be considered, especially for risks where the location is static (I.e property). How are inspections/surveys carried out for particularly risky areas.
- Profitability - LRs need to be closely monitored and action to be taken as problems may arise whilst staying in contact with the insurers.
What should a CH-MGA consider when placing a risk when they have multiple binders
- maximum limit (any one risk or aggregate)
- premium requirements
- coding requirements
- reporting requirements
What is central to good portfolio management
Good data and good reporting in order to analyse the portfolio. As well as is being an obligation to the insurers.
They need to spot trends early and deal with them, ideally before an insurer does during an audit.
What data points would be considered relevant management information to evidence meeting the outcomes of the FCA Consumer Duty
- customer satisfaction data
- telephone/communication response times
- document production
- customer outcomes (e.g # of claims, types of claims, cancellation rates, complaints)
How would a CH-MGA prevent errors in their operation
A good peer review process, where a 2nd pair of eyes checks the practices and ensures no levels of authority are breached
What would the underwriting process look like for an MGA
- Consideration of the risk - does it fit within the binder
- Checking of authority to quote
- Considering the rating of the risk - are they allowed to credit/debit the rating
- Considering the share of the risk to accept - do they want to spread the risk across multiple binders, are there any limits limiting it from taking 100%
- Considering what terms and conditions to apply - any jurisdictional or binding authority limitations apply
- Considering whether to refer to insurer - even if inside authority limits
What is exposure management
The activity performed by an insurer to enable it to accurately measure how severely it could be affected should any particular event occur
Why are aggregate limits important in a delegated underwriting agreement
As risks will only be found 30-60 days after they were bound so an insurer will be monitoring exposures to ensure they do not build an accumulation that exceeds their tolerance either as part of its business plan or reinsurance protection
What is vital for any loss modelling
That data is captured relating to any risk written on the binder
The data needs to be accurate and reporting in a timely manner at the end of each reporting period
