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Chapter 11 Casualty reinsurance 11/3

To allow reasonable business analysis and control of the results, the statements of account for
proportional reinsurance treaties are generally rendered on an underwriting year basis.

Activity
Before you move on, can you recall what is meant by the underwriting year basis of accounting? Write a brief
summary below:

A1 Types of loss

In liability insurance loss can be categorised into three main types:
Liability insurance
loss can be
categorised into three
main types
Types of loss

bodily pure
injury financial loss

property
damage

Consider this…
When we talk about pure financial losses we are referring to a loss where there is no prerequisite for bodily injury or
property damage to have occurred. A monetary loss sustained as a result of acting on negligent professional advice
would qualify.

When differentiating between these types of loss, especially between material damage and pure
financial loss, the differences between the laws and court practice in the various markets need to be Reference copy for CII Face to Face Training
taken into account.

A2 Underwriting information requirements

A reinsurance underwriter would have the following requirements when considering a liability
reinsurance contract:
• Gross written premium (GWP) for the past five to ten years.
• Information on the reinsured’s underwriting policy and principles, the way it manages claims, and the
measures it has in place to maintain and improve underwriting performance.
• Determination of portfolio structure in terms of risk composition, limits of indemnity, and extent and
definition of any US exposures in the portfolio.
• Check whether annuity payments are customary or not in the market in question.
• Check whether interest payments, including court interest, are also customary in the markets in which
it operates.
If the application for cover relates to a proportional treaty, the following information would be needed:

• Run-off triangles on underwriting year or accident year basis over the same period, showing both paid
and outstanding claims.
• Detailed presentation of gross cost structure, such as the average agent commission, internal costs
and charges.
• Reinsurance brokers’ commission.
• Costs of any excess of loss cover for the common account.
• Loss ratio of past years; forecast of claims development for at least the next two years.
• Reinsured’s business plan.
• Analysis of reinsured’s balance sheet in order to check solvency. Chapter

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