| Problem | Covered By | Detail | Imports | What we can do |
|---|---|---|---|---|
| Poor analysis of claims data | Step I. Your Past | Failure to understand how predictable large claims are, despite their rarity | Policy excesses too low, hence low competition, for even good risks | Thorough assessment of frequency and severity of historic large claims; typically they are predictable: 1 every N years. Leads to more realistic XS levels |
| Insurance Manager does not talk to Asset Manager |
Step II. Your Future |
Failure to understand existing asset volatility usually far exceeds insurable risk volatility |
Excessive cover bought (XS/AGGs/limits) | Thorough assessment of existing balance sheet volatility. Insurable risks are usually less volatile than previously thought Leads to more realistic AGG levels |
| Off-the-shelf EL (&PL) policies | Step III.Your Custom Made Product | Failure to understand precise meaning of “event” limits | Excessive cover limits bought (per claim) | Thorough decomposition of policy wording into limits per claim, per event and per year Leads to split limit policies |
| Opaque broker insurer security committee | Step IV. Your Best Providers | “Black box”/lack of visibility of all published information available | Not knowing actual insurer solvency margin / risk of failure | Access to all published insurer information Helps to negotiate with weak insurers |
| Where does my money go? | Step V. Your Money | Premiums often flow through third parties (i.e. neither the broker nor the insurer) | Who is your actual insurer? Did you carry out sufficient AML (Anti-Money Laundering) checks on all of the brokers (retail and wholesale) in the broking chain? | Clear communication of who your insurer is / what their solvency margin is Clear understanding of premium flow |
| Should we buy run-off cover? | Step VI. The Review Process | Insurer has offered to buy out our excesses/tail risks | Excessive cover bought (XS/AGGs/limits) | Thorough consideration of likely cash-flows, investment income and balance sheet materiality of self-insurance alternative |
Charities
Insurance Inspect
Public Sector
Insurance Inspect
Companies
Insurance Inspect
