ASIC's Underwriting Model
Updated: Oct 12, 2022
At ASIC, our underwriting approach is based on technical excellence in terms of:
1. Understanding the intricacies of each portfolio; and
2. Exposures presented by each risk.
This underwriting model was created by Shevawn and Simon Barder, and has evolved from the Barders’ London Insurance training with the traditional leader in the excess and surplus market (Lloyd’s of London).
Central to this model is the constant monitoring of the portfolio by experienced primary and reinsurance underwriters and specialist analysts.
Each portfolio is stress tested for frequency, severity and rate adequacy to ensure a ‘best in class’ account with optimum performance and returns - and this model has been tried and tested since 2000.
The step-by-step process is as follows:
Surplus lines brokers approach ASIC with a proposal. Once received, the proposal is picked up by the analytics team, followed by the underwriting department, as discussed below.
Analytics
The team performs due diligence on the submission in line with AM Holding Company guidelines, which are set by current appetite to risk in the specific class of business.
A comprehensive review of the submission is undertaken to ensure the profile is complete for underwriting review. This includes checking information such as risk type and policy count, together with historical information such as claims and loss count.
Complete triangulations are then reviewed on a 5 year minimum, which provides the rational for income and claims evolution.
Once we have all the necessary information, we update our own records and benchmark the current proposal against historic submissions we have received and against the market in general. We can then account for any deviations relating to previously submitted targets, frequency projections and other relevant patterns in the line of business.
A full risk profile is created to benchmark value, rate, and long-term success of the submission. This includes NAT-CAT scenario modeling to accurately limit such exposure as part of the geographic considerations.
The content of each submission is reviewed thoroughly, pulling together all our existing resources, market knowledge and diverse experience.
Data profile checks are completed efficiently, and triangulations are projected to finality.
In addition, annual bordereaux check ensures premium, and settlement of claims are up to date and received promptly. At all times, market conditions, terms and conditions and overall participation is reviewed.
Underwriting
Once the analytic department has concluded their analysis, the underwriting team reviews the program strategy and operational details, taking account of all the analysis undertaken with reference to the current market.
Underwriters then report to management. If further data analysis is needed, they revert to analytics. If the proposal is not viable, it is declined, subsequent to a meeting with management. If the proposal is viable, then a client meeting is proposed to negotiate final wordings.
Once the contracts have been executed, the portfolio is monitored regularly against the preset performance criteria established by our analytical and underwriting teams during the above processes.
We measure the number of policies and risks that incur a claim each year. The average severity of each claim is multiplied by the expected number of claims to create a gross loss ratio.
Pricing & Strategy
ASIC uses a consistent pricing and monitoring process across its lines of business. This is a key component of cycle management, capital management and risk management processes. It allows for an assessment to be made between the companies view of technical pricing (expiring business or new) versus the underlying market pricing for the class of business involved. The latter will be specifically captured, documented, and assessed on a regular basis in order to monitor and where necessary adjust underwriting activity.
At a high level, the following steps outline the pricing process that ASIC reviews:
Analysis of historical experience and current exposure.
Modeled view of adequacy levels in the context of estimated loss activity.
Models designed and parameterized by the business and utilized by underwriters to assess risks, both on exposure and an experienced based approach, as appropriate.
Comparison of risk-rating results against Business Plan:
Highlighting where benchmark price has been materially deviated from.
All business bound checked against appetite and plan.
Details of the model used to be maintained and underwriting rationale documented accordingly.
Regular Review:
Model parameters and methods to be reviewed frequently.
Rate Monitoring:
The following steps outline the intended underlying rate monitoring process:
On a regular basis, seek to measure risk-adjusted rate change on all business.
Regular review to ensure that all requirements are satisfied in terms of methodology and reporting.
Consideration of the impact of non-renewed and new business; and
Based on market dynamic and trading metrics (underlying renewal rates, new business, quote volumes vs bind volumes), underwriters will have the ability to track technical rate movements under each contract and by class of risk and territory.
ASIC will undertake an internal audit together with external audit and review processes as required.