2016 Intern OrientationJune 1 – 2, 2017

Underwriting 101

Nick Abraham

Markel

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Goal

Overview of the Fundamentals!

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Underwriter Job Qualifications

• Analytical skills

• Decision-making

• Personality (dynamic and likability)

• Bachelor’s Degree and insurance designations

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Underwriter Responsibilities

• Profit and growth for your individual portfolio

• Know and understand the underwriting guidelines, policies and procedures

• Individual risk assessment and loss analysis

• Cross sell with other product lines and underwriters

• Marketing and building relationships with brokers

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Profitability

• Individual Risk Underwriting

• Portfolio Management

• Training & Professional Development

• Forms & Endorsements

• Flexibility without sacrificing profitability

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Portfolio Management

• Accident Year

• Loss Triangles

• Frequency / Severity

• Class Segmentation

• Rate Changes

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Property Underwriting

• COPE Analysis

• Primary Buffer Excess Deductible Buy Backs

• Cat vs. Non Cat

• All Risks vs. Named Perils

• TIVs, Limits, Amount Subject, PMLs

• Know the properties and areas you write

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Case Study #1• Property Case Study• Which account would you rather write and why?

• #1 – Brady Lumber Yard is located in Warrensburg, MO. Brady Lumber has a 20,000 sqft wood frame building that contains there office, inventory, cutting, and treating operations. The requested replacement cost value of the frame building is $400,000. Inventory is $5mm. This building is located in an ISO protection class 3, and has fire hydrants and smoke alarms on site. Building materials dealers maintain a Best’s hazard index of 8/10 for fire exposure due to the presence of highly combustible stock.

• #2 – Justin’s Bakery is located in Kansas City, MO. Justin’s 5,000 sq ft masonry building contains a kitchen, register, display and seating for thirty people. The requested replacement cost of the building is $375,000 and business income limit of $500,000. The building is located in an ISO protection class 2, and has smoke alarms and automatic sprinklers. Bakeries maintain a Best’s hazard index of 6/10 due to multiple ignition sources and heavy fire load.

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Casualty Underwriting – Loss Exposures

• Bodily Injury vs. Property Damage

• Single Person vs. Multiple Person

• Horizontal vs. Vertical

• Residential GC in California

• Roofing Subcontractor

• Tree Chipper Manufacturing

• Restaurant

• Pharmaceutical Manufacturing

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Case Study #2

• Frequency vs. Severity/Multiple Person vs. Single Person/Light PD vs. Heavy PD

• Ski resorts • Foundation contractor• Medical implants Mfg• Nutraceuticals• Helmets• Toy Mfg• Nightclub• Bar with a deck• Machinery installation/industrial contractor

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Loss Analysis

• Loss Reserves – Case (Loss & Expense) + IBNR

• Not all loss history is created equal

• Analyze the details of large losses

• Coverage, Liability, Damages, Venue all play critical factors in claims

• Loss Rating – Currently valued losses X Trend X Development

• Trend – Inflation

• Development – Loss Development Factors

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Questions so far?

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Mad Skills

• Mathematical• Analytical• Decisiveness• Solutions• Knowledge• Innovative• Likable• Leverage• Selling

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Mathematical

• ISO Rating• Rate Making• Loss Rating• Loss Triangles• Exposure Rating• Judgement Rating• Rate Chance• Risk Modeling• Reinsurance

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Analytical

• Selection– Underwriting the risk

– Vertical/Horizontal

– Multiple/Single Person

– COPE

• Attachment Point

• Price

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Decisiveness

• Paralysis by analysis

• Rational Thought

• Fundamentals

• Not being afraid to make mistakes

• Having conviction

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Solution Provider

• Identify problems

• Out of the Box

• Value Added

• Save the Day

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Knowledge

• Policy Forms• CPCU & ASLI• Learning from

Mistakes• Expertise• Classes of Business• Trade Journals• Seminars• Network• Competitors/Earnings

Calls

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Innovation

• Finding a better way to do things

• Technology

• Efficiencies –working smarter

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Likable

• People like doing business with people they like

• Common interests• Sporting events• Spa Days• Golf• Concerts• Happy Hours

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Leverage

• Putting everything together

• Building relationships

• More expertise gets top accounts

• Top Performers get Top Brokers

• Snowball effect

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Sales

• Solution Selling

• Image

• Professionalism

• Knowing how to say no

• Reputation

• Impact & Influence

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The It Factor

• Fire in the Belly

• Maniac with a Mission

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Questions?