Risks (Insurer) Flashcards
Main insurance risks
Combe
1. Credit
2. Operational
3. Market
4. Business
5. External
Credit risk
Defn: risk of failure of third parties to repay debt
*bonds
*settlement risk
*goods and services
–BAR– (insurer and general)
1. Broker
2. Asset default
2. Reinsurer
Market risk
Defn: risk of changes in investment market values or other features correlated with investment markets
*volatile assets -> mismatch
*volatile liabilities -> unit linked
*interest and inflation->provisions
–C VoLuMe–
1. Currency (general)
2. Volatility of assets
3. Lack of liquidity
4. Mismatch A&L
Business risks
Defn: risk specific to business undertaken
UW for ideal exposure
1. UW risk - inadequate uw standards and mispricing of risk
2. Financing risk - investment in business or project that fails to be successful
3. Insurance risk- more claims than anticipated
4. Exposure - greater exposure than planned to particular events
Business risks - insurer
- Related to business risks
*mortality
*longevity
*morbidity
*withdrawal - Related to UW
*anti-selection
* moral hazard
*business volumes - Related to investments
*inflation
*investment return
*expenses
*unit-linked (expenses vs charges)
*with profits (PRE)
4 legal
Loose policy wording
Business risk - general
- Claim risks
*amount
*frequency
*inflation
*volatility
*delay
*accumulations and catastrophe - Legal
*Court awards
*loose policy wording - Market
*investment return
*expenses
*expense inflation - Uw
*moral hazard
*anti selection
*lack of data
*business mix and size
*renewals
*lapses
*finding appropriate insurance
*latent claims
Operational risk
Defn: risk of loss due to fraud, mismanagement in the organisation
1. Mismanagement
2. Fraud
3. system failure
*internal process, people, systems
*dominance/person risk
* third-party risk
*failure of plans to recover from external event
External risk
Defn arises from external events
1. Natural disaster (weather)
2. War and terrorism (war)
3. Government/tax (world power)
