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Chapter 11 Casualty reinsurance 11/7

These categories, therefore, cover:
• racing, rallies or speed trials;
• motor coaches, omnibuses, tramways and vehicles on rails, sea or in the air;
• loss, damage or liability for goods conveyed in connection with any trade on any vehicle insured by
the reinsured;
• ownership, operation, maintenance or use of any vehicle the principal use of which is:
– transport of high explosives,
– transport of any inflammable liquid,
– carrying of passengers for hire and reward,
– self-drive hire,
– contractor’s plant and equipment not on a public highway;
• airport service vehicles; and
• vehicles for use of military or law enforcement or emergency services.

Question 11.2

What is a reinsurer’s justification for excluding vehicles whose main purpose is not use on a public highway?

Refer to appendix 11.2, on RevisionMate, to see a list of common exclusions that may appear in a
reinsurance protecting a motor account.

B3 Underwriting considerations
Motor business is generally characterised by attritional claims where the results are influenced primarily
Motor business
by developments in the small and mid-sized claims range and are characterised by high frequency rather is generally
than high severity losses. characterised by
attritional claims
For example, in recent years, claims for whiplash – a neck injury caused by sudden movement of the Reference copy for CII Face to Face Training
head forwards, backwards or sideways – have increased. According to the National Health Service,
injuries have soared despite improvements in vehicle safety and a sharp reduction in the number of
reported accidents involving other personal injury.
Nevertheless, the possibility remains that a serious accident can occur that creates the risk of a major
loss in terms of personal injury and/or property damage.

B4 Underwriting information requirements

B4A General
General enquiries a reinsurer would make about a potential cedant’s business would include:
• Premium volume of motor business in the client’s overall portfolio.
• Checking the composition of the portfolio including third party liability, own-damage, passenger
personal accident, sums insured and vehicle categories.
• The limits being written by the reinsured in respect of bodily injury and property damage.
• The extent of ‘overseas’ exposure being written.
• The extent of any exposure to losses from natural perils.
• The attitude and management philosophy of the reinsured to high-risk vehicles such as sports cars
and other specialised vehicles.
• The attitude and management philosophy of the reinsured to high-risk drivers such as young or
inexperienced drivers or drivers with serious driving-related convictions.
• The reinsured’s exclusion list.

Example 11.3
In the event that buses, coaches and petrol tankers are not excluded, reinsurers could be expected to reconsider the
reinsured’s criteria with regard to the selection and rating of its original risks. There could be concerns over the
number of third party and comprehensive liability, including passenger liability, policies that the reinsured is issuing. Chapter

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