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Chapter 11 Casualty reinsurance 11/17

• Occupational diseases:
– Devote special attention to the effects of long-term exposure.
– Agree an occupational disease clause appropriate to the specific market in order to avoid
occupational disease accumulations, and stipulate a maximum cover for sudden and accidental
occupational disease accumulations or events within a maximum of 72 hours.
• Natural hazards exposure: especially when accumulation covers are involved and depending on the
market, special attention should be devoted to heightened natural hazards exposure, such as
earthquakes. Where appropriate, a detailed analysis that produces separate workers’ compensation
loss scenarios for such events should be prepared.

E3C Accumulations
Most of the issues discussed in section D2A apply here too, including the effect of unknown
A single event can
accumulations. Since 9/11 there has been an acceptance that workers’ compensation exposure was lead to substantial
much greater than many realised. A single event, either natural or man-made, can lead to substantial insured workers’
compensation losses
insured workers’ compensation losses and so models have been developed and are beginning to be
used to address the risks associated with more complex known accumulations.

Reinforce
Ensure that you understand how accumulation patterns work in practice by studying the following scenario. Reflect
on the accumulation patterns that might apply in your own workplace and that of a business that operates 24 hours
a day and employs shift-workers.
An office contains workers who may arrive at 09.00 and leave by 18.00. This creates a gathering of people during a
clearly defined time frame and so the number of people accumulating at the workplace can be estimated at various
times throughout the day. This pattern may be affected by shift-work distributing the presence of employees
throughout the day and night. Outside contractors could push the accumulation higher for temporary periods of time,
and sales staff may or may not be away on business.
Using this information it is possible to picture accumulation patterns for an office building and model scenarios can
be devised based on this information. If it can be calculated that on average 75% of workers are in the office Reference copy for CII Face to Face Training
between 09.00 and 18.00, it is possible to understand the implications of a terrorist attack or explosion on a
particular office block. Using modelling software and workers’ compensation databases, a familiarity can be
established with exposure to known accumulations and risk transfer strategies can be put in place.

E4 Types of reinsurance purchased

Similar considerations apply to those found in EL insurance.
Facultative workers’ compensation business is usually limited to supporting existing treaty
relationships.
Surplus reinsurance can be used for known accumulations, while a quota share treaty or per risk excess
Surplus reinsurance
of loss treaties are also used provided the exposure is carefully monitored. The most common is excess can be used for
of loss where accumulations can be limited by a strict event definition. known accumulations
Due to the generally imbalanced ratio between premiums and liability and to the high risk of change in
workers’ compensation, stop loss workers’ compensation business is considered to be unattractive to
the reinsurance market, although there are still some underwriters that will consider this type of
business.

Reinforce
Before you move on, ensure that you understand the different reinsurance issues that apply to EL and workers’
compensation insurances.

F Public liability
Public liability insurance covers a company’s legal liability in the event of injury, illness or disease to
any member of the public and/or loss of or damage to their property.
In the UK, it is estimated that up to one million public liability insurance claims are made each year and
the trend is growing rapidly as more people become increasingly aware of their right to seek Chapter
compensation. 11