Fire Insurance Underwriting
• The term underwriting is broadly used to denote
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the principles and practices concerning the fixing of rates,
the acceptance or rejection of the risks,
the total amount of acceptance,
the amount of retention for insurer’s own account and
treatment of the balance through reinsurance.
• Factors enter into underwriting
– The production of well spread and large volume of
business
– Selection of the risk
– Limits to be retained
– Reinsurance of surplus
• Features of risk, influencing the underwriting decisions
– The physical nature of the risk
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Construction
Size of risk
Processes and occupancy
Goods-class
– The probable effects of fire on stocks
• Stock procurement
• Stock susceptibility
– Fire Protection arrangements
• Fire extinguishing appliances
• Fire brigade facilities
• Sprinkler installations
– The situation of the risk
• Degree of hazard from adjacent properties
• Geographic locations
– Retention is arrived with
• Probable maximum loss (PML) for a class of risk &
• Maximum amount of loss (MAL) the insurer is prepared to incur
Total loss
– Reinsurance arrangements
• Facultative reinsurance
• Treaty reinsurance