Page 327 - M97TB9_2018-19_[low-res]_F2F_Neat2

Chapter 11 Casualty reinsurance 11/37

Products liability
• Products liability is the legal liability of a producer towards third parties who have sustained bodily injury or
property damage caused by a defective product.
• Unlike public liability policies, products liability policies are subject to an annual aggregate.
• Underwriting considerations include concerns about exports to North America, whether original coverage is
provided on an aggregate basis, whether defective design cover is provided, and exclusions contained in original
policies.
• Accumulations can arise out of a series of losses caused by the same product due to a common active ingredient.
• Reinsurance cover may be arranged along similar lines to public liability cover.

Professional indemnity
• Special types of cover exist in the form of D&O, EPL and PI insurance.
• This type of business can be reinsured on a facultative and treaty basis, and both proportional and
non-proportional.
Medical malpractice
• Causes of claims arise from negligence on the part of doctors, auxiliary and nursing staff, shortcomings and
mistakes in the operation and maintenance of technical plant and equipment, and problems in the actions,
organisation and administration of the medical institution.
• Reinsurance cover can be written on both proportional and non-proportional basis and facultative and excess of
loss, although generally excess of loss reinsurance is preferred.
Trade credit, surety, political risks, fidelity insurance and bonds
• Trade credit insurance covers the risk of non-payment to a seller by a buyer in respect of sums due arising out of a
trade-related contract for goods or services.
• Trade credit reinsurance can be written as quota share, excess of loss or facultative.
• Surety risk is concerned with the failure to perform contractual obligations.
• Reinsurers will be concerned to know that the insurer does not take risk on for applicants with low, non-investment
grade, credit ratings and will specify acceptable risk categories. Reference copy for CII Face to Face Training
• Political risks can be covered under comprehensive credit risk insurance or pure political risk covers.
• Fidelity guarantee covers the dishonesty of persons holding positions of trust and may relate to named persons or
the position or office itself.
• Bonds are also a form of surety insurance that applies when one party guarantees performance of an undertaking
or obligation by another party.
• An underwriter would want to determine what the obligee wants guaranteed and on what terms, evaluate the
contractor’s qualifications, and assess if it is reasonable to expect the contractor to perform their obligations.
Miscellaneous risks
• Livestock and bloodstock covers relate to animals used for breeding or for working purposes.
• Reinsurers would be interested in:
– the split in premium income between livestock and bloodstock risks;
– the different types of livestock within the account;
– the territories from which the livestock is accepted;
– veterinary expertise available to the reinsured;
– how accumulations of risk are controlled; and
– the susceptibility of the account to epidemics.
• Contingency insurance embraces a broad spectrum of risks, which includes: missing document indemnities, event
cancellation, non-appearance indemnities, film producers’ indemnities, prize indemnities, loss of performance
through industrial actions and performance guarantee.
• Extended warranty insurance can be purchased to cover domestic electrical goods. The scheme operates by
extending the original manufacturer’s guarantee and usually covers the cost of repairs or replacement in the event
of breakdown due to faulty workmanship. Chapter

11