How Our Underwriting Expertise Can Help Minimize Severity Losses in a Volatile Book [Video]
A client who writes auto liability was challenged by a volatile segment in their book. Since we are also an underwriter of auto liability, they came to us for our input. We worked closely with them to identify levers that would minimize the chance of a severity loss to their book. Based on the insights that we were able to share, they made various adjustments to their selection criteria, the classifications they used, their rating approach and their underwriting guidelines and procedures. As a result, the overall quality and complexion of the book improved and it certainly showed in the experience that they had on this book.
In addition to seeking to collaborate on a severity exposure in their book, they wanted to transfer some of the excess exposure using reinsurance. Buying reinsurance on each risk individually would be too cumbersome, but there were too few risks to support a treaty solution with its associated minimum premium We worked with them to develop what we call a “bundled” facultative program, a hybrid of individual risk facultative and treaty reinsurance.
Ultimately, this client was able to accomplish two things…
First, by collaborating with us they improved the overall profitability of the business they retained net.
And second, we were able to provide a solution that minimizes the negative impact of those shock losses that can inevitably occur on well-priced, well-underwritten risks.