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Aon Energy Course

Wednesday 6th July 2011

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AIM

Introduction

Underwriter & Underwriting

Underwriting – Tools

Conclusion

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Introduction

Chris Walker – Who?

Berkley – Who?

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Underwriters & Underwriting

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Underwriting

What is it?

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Underwriting

What is it?

Banking :the process of analyzing and structuring a proposed loan?

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Underwriting

What is it?

Banking :the process of analyzing and structuring a proposed loan?

Insurance :the process of pooling of funds from many insured entities in order to pay

for relatively uncommon but severely devastating losses which can occur to these entities

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Underwriters

Define?

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Underwriters

Define?People who take bets on something not happening?

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Underwriters

Define?People who take bets on something not happening?People who collect premium and avoid paying

claims?

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Underwriters

Define?People who take bets on something not happening?People who collect premium and avoid paying

claims?People who argue with brokers as to why they

should not do something and then agree to do it?

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Underwriters

My definition?

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Underwriters

My definition?A person who is charged with exposing capital to

risk with the aim of making a return on that capital.

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Underwriters

My definition?A person who is charged with exposing capital to

risk with the aim of making a return on that capital.

This is done by :

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Underwriters

My definition?A person who is charged with exposing capital to

risk with the aim of making a return on that capital.

This is done by :Profit = earned premium + investment income -

incurred loss - underwriting expenses

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Underwriting Tools

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Underwriting Tools

Risk Identification / Selection :Client types – analysis of types of clients in the risk pool.Hazard – analysis of the types of hazards associatedLocation – focus on region

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Underwriting Tools

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Underwriting Tools

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Underwriting Tools

Product Offering :

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Underwriting Tools

Product Offering :Cover offered – Property

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Underwriting Tools

Product Offering :Cover offered – OEE,

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Underwriting Tools

Product Offering :Cover offered – Construction

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Underwriting Tools

Product Offering :Cover offered – Construction

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Underwriting Tools

Product Offering :Cover offered – Construction

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Underwriting Tools

Product Offering :Cover offered – Property, OEE, Construction etc.

Point of attachment :Primary or excess.

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Underwriting Tools

Point of attachment :Primary or excess.

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Underwriting Tools

Line size choice:Underwriters perception of risk – how attractive?

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Underwriting Tools

Line size choice:Underwriters perception of risk – how attractive?

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Underwriting Tools

Line size choice:Underwriters perception of risk – how attractive?Capacity:

NetReinsuranceClash / Aggregations

Note : Relative size to other similar risks in portfolio.

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Underwriting Tools

External tools:Reinsurance

Treaty• Reduce retention = opportunistic• Increased retention = volatility reduction(Relative size of capacity is not a good indicator of the size or health of the

insurance company ) Facultative Reinsurance

• Opportunistic• Enables larger lines to be written on the original• Remove unacceptable parts of risk.

Broker Leverage on & by brokers

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Underwriting Tools

Internal tools:Benchmarking against:

Similar risksLong term averageActuarial average – set to allow adequate ROC.

Actuarial capital allocation – pricing.Claims management :

TimelyAccurateUnderstanding

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CONCLUSION

Underwriter & UnderwritingNo longer a past time but a profession

Underwriting – ToolsMany and complex :

• Risk identification and selection• Attachment point• Product offered• Line size• Risk lay off and retention

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THANK YOU