960 Coursework 1: Analysis of Reinsurance and Marine Underwriting

This coursework assignment analyzes reinsurance and marine insurance, focusing on key concepts such as cargo insurance, underwriting, and the principles governing insurance contracts. The assignment begins with an overview of reinsurance, explaining its role in providing security and reducing financial risks for insurance companies. It then delves into the classes of marine business, specifically cargo insurance, detailing its coverage and importance. The core of the assignment explores marine reinsurance policies, drawing from the Marine Insurance Act 1963, and examines the fundamental principles of indemnity, insurable interest, utmost good faith, and proximate cause. The discussion extends to underwriting, emphasizing its subjective nature and the importance of sound judgment. The assignment also touches on the competitive aspects of the insurance market, highlighting the interplay between underwriters and the broader market dynamics.

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960Coursework assignment 1 answer template
REINSURANCE
Reinsurance is a security form. A reinsurance agreement is a protective agreement.
The back-up scheme allows the cedant security network supplier to reimburse a predefined
bid of a specified class of protective demands awarded by the cedant to be lonely protection
or a predefined strategic agreement. The text used is that the reinsurer accepts the danger
posed by the approaches in question. Cases payable by the reinsurer may be transferred or
offered at a respective bid location or a basis of surplus1 (the part of each situation or the
total of transactions in some pre-defined USD) (the basis of each situation).
The essence and motive behind privacy are to reduce budget expenses for
individuals, businesses and various components arising from the prospective incidents of
unexpected circumstances. An insurance agency sells cover strategies, which guarantee
that the support scheme reimburses policyholders for some of these unpredictable
occasions in the budget. The consolidation of liabilities under the backup plan makes all the
misfortunes more unexpected than the situation is for every protected person, thus reducing
the risk to the whole person. Protection enables individuals, companies and various
components to carry out more risky operations. In a free business core, this creates growth,
competition and efficiency.
Reinsurance based on nature and incentive to reduce monetising costs for insurance
companies arising from the possible case of the privacy allegations, thus further enhancing
business centre growth, competition and efficiency. The transfer of binding deals further
extends the risk to the entire privacy structure. Likewise, an insurance company can
purchase truly comprehensive reinsurance from at least one reinsurance company as a
protective strategy comes from a backup scheme. A reinsurance company may also reduce
its agreed reinsurance opportunity by purchasing reinsurance coverage from various
reinsurers, both local and international. Reinsurance organisations have two basic classes:
direct experts that have their very used record managers who manufacture businesses and
1 Balbás, Alejandro, Beatriz Balbás, Raquel Balbás, and Antonio Heras. "Optimal reinsurance under
risk and uncertainty." Insurance: Mathematics and Economics 60 (2015): 61-74.
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specialist organisations or reinsurance traders that do business. Some writers get a piece of
their work by officials, and some representative reinsurers expect a firm from the
surrendering organisations immediately. The majority of US reinsurances are assessed by
mediators assessed. The composition and formulation of reinsurance agreements are not as
strictly regulated as security agreements, and there is no reinsurance policy between private
companies. A reinsurance agreement is often an initial duplicate agreement, and the
agreement between the two meetings is noteworthy. Given the many unusual instances and
exemptions, reinsurance speculation is difficult to create2.
A) CLASS OF BUSINESS UNDERWRITTEN:
According to Carolan et al. (2017), there are various classes of Marine business
showing different characteristics3: —
Cargo
This is one of the earliest marine protective types. Ship, products or ship/commodity in
the 1600s were the strategies.
Payload protection typically pays the policyholder against products or products loss
while being transported from one goal to the next. Since the most punctual
long interchange periods, Payload has encased a natural piece of marine
protection. Protection normally covers cargo while on the coast. "Marine"
Cargo cannot, without a doubt, draw near any water.
Regular payload protection gives repayment against loss of or damage to the stock
caused by flame or explosion, crash, sink, invert, edge washing and normal
penance.
Normally, the intentional penalty is the punishment of property in sea voyages in order
to foresee the loss of both ship and freight (see section 4e for additional
subtleties) In this case, the penalty may be fractional so that a payload is
2 Balbás et al., 2015
3 Carolan, M., Mullan, B., & Sackett, E. C. (2017). Recent Developments In Excess Insurance And
Reinsurance. Tort Trial & Insurance Practice Law Journal, 52(2), 369.
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saved or the entire relegation may be lost in extreme cases. Penalty
proceedings shall be:
i. Goods cast off to help a stranded ship with the purpose of refloating them;
ii. sound damage caused by the water used to make a flaming fire;
iii. Goods cast away from keeping a vessel in danger of inking above water.
Load protection mostly connects to the time when products leave the dispensary centre
or capacity location, keeps in the middle of the traditional travel course and ends either on
the last destination or the expiration of 60 days after the last port has been released,
whatever first4.
B) MARINE REINSURANCE POLICY
The basic standards of Marine Insurance are drawn from the Marine Insurance Act,
1963. As in all agreements of protection on property, the agreement of Marine Insurance
depends on the key standards of Indemnity, Insurable Interest, Utmost Good Faith,
Proximate Cause, Subrogation and Contribution. Professionals of Marine Insurance must
acclimate themselves with the Act and maintain these Principles while arranging Contracts
and settling claims under the agreement5.
Indemnity:
The object of a protection contract is to put the guaranteed after a misfortune in a
similar relative monetary position in which he would have stood had no misfortune
happened. By the Marine Insurance Act, the reimbursement that is given is "in the way and
to the degree concurred." A "business" repayment is accordingly given. Since back up plans
can't attempt to reestablish or supplant load in case of misfortune or harm, they pay a total of
cash, concurred ahead of time, that will give sensible remuneration. By and by, this is
accomplished by concurring ahead of time the protected esteem, in light of C.I.F., estimation
of the merchandise to which it is standard to include a concurred 10% which is expected to
incorporate the general overheads and maybe an edge of benefit on the exchange. Upon all-
out loss of the whole payload by a guaranteed hazard the aggregate protected is forked over
4 Balbas et al., 2015
5 Kiln, R. (2017). Reinsurance underwriting. Informa Law from Routledge.
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the required funds, and if some portion of the freight is an all-out misfortune, the proper
extent of the safeguarded esteem is paid. In Marine protection, it is standard to issue
concurred esteem strategies. The concurred esteem is definitive between the Insurer and
the Assured aside from in case of the accidental blunder or where extortion is affirmed.
"Obligation" and "Expanded Value" approaches do not concur esteem arrangements. They
give unadulterated reimbursement as it were.
Reinsurable Interest:
There is a very clear definition of insurable intrigues in the Marine Insurance Act. It
states that a physical item must be submitted to marine hazards and that the protected must
be legally connective to the article, which enables it to maintain it and is partially affected by
misfortune or damage, or may impose obligations on it6.
Although an insurable intrigue in flame and malaise protection must exist at the
beginning and during the time of misfortune, there must be a passion for a sea contract in
time of misfortune, but it might not have been when protection has been affected. In the
season of misfortune. This is important when you think of the business practice in which the
offering and the purchase of products during travel are plausible. However, where the
product is guaranteed "lost or not lost," the MIA indicated that the guaranteed may recover
from the disadvantage, although it could not have gained his enthusiasm until after the
misfortune, unless he knew of the misfortune at the time of its protection, and it was certainly
not the backup plan. If the guaranteed person did not feel enthusiastic about the unfortunate
season, he could not get any enthusiasm after he knew about the misfortune by any
demonstration or decision. An unforeseen and a defective intrigue emerging from this is
insurable. An intrigue of a fraction is also insurable. Whatever happens first after release at
the last port.
Good Faith:
According to Zhu et al., (2015) all insurance contracts are contracts with the
"uberrimae fidei" meaning that the insurer, as well as the insured, must have the utmost
6 Lucas, M. T., & Terzoli, F. J. (2015). U.S. Patent Application No. 14/313,986.
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good faith7. In Marine Insurance, the Proponent is obliged to disclose all material facts
relating to risk clearly and accurately. One important fact is that a prudent underwriter's
judgment would affect whether or not they would enter into a contract at all or one premium
rate or another, and which terms and conditions. The insured must act in good faith towards
the insurer throughout the duration of the contract, except with respect to the obligation of
disclosure.
Close-down, hiding, innocent misrepresentation, fraudulent misrepresentations are
the four customary categories of infringements of the duty of extreme good faith. The two are
known as passive violations, and the other two as active violations. The Maritime Insurance
Act imposes a statutory obligation to inform the insurer, in the ordinary course of its
business, of all the relevant circumstances that it is aware of or should know. For instance,
over-valuations must be communicated to the insurers; if not communicated, the material
fact is disguised, and the insurance is void8(Lucas et al., 2015).
Proximate Cause:
"Proximate cause means an active and effective cause that initiates a train of events
that results from the beginning and actively operating of a new and independent source
without any intervention by any force." Insurers are liable if an insured risk is the nearest
cause of loss. In cases where the insured risk is the only distant cause of the loss, the
nearest cause is a non-insured or excluded hazard; insurers do not have to accept
responsibility for this. The main cause of the loss is its efficiency and operation9(Kiln, 2017).
C) UNDERWRITING AND COMPETITION
Underwriting is subjective, and many underwriters appear not to be used to verbalising their
reasoning with regard to decisions which even affect top-level strategies. However,
reasonable assumptions in order to deliberately underwrite loss can be jeopardised. The
main reason for this behaviour is presumably that the present product constitutes a form of
7 Zhu, H., Deng, C., Yue, S., & Deng, Y. (2015). Optimal reinsurance and investment problem for an
insurer with counterparty risk. Insurance: Mathematics and Economics, 61, 242-254.
8 Lucas et al., 2015
9 Kiln, 2017
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loss leader that, although an immediate loss is caused, somehow will give the insurer a new
gain over a longer period10.
Economic trends
The country has its own economic trends that affect the insurance cycle and strategy,
for example. Inflation increases the value of the property and the sum insured also
increases. Similarly, unemployment rises in claims of robbery11.
The opening up of competition by direct operators, banking insurers, affinity sellers
such as supermarkets and recently aggregators on the personnel market caused the profit
margins to be tightened. The increase in new price transparency (such as aggregators) also
has made for greater consumer choice and innovation in the manner in which customer
products are introduced.
For example, insurers unbundled the products in order to provide basic cover for
additional product features and services to be sold or cross-selling. Despite the aspect of
"commoditising" in the segment, greater marketing and brand development needs and
investment to ensure appropriate consumer recognition. There has also been a rise in the
number of direct providers in small businesses. Electronic commerce has developed in both
areas into an effective new supply channel for insurance products and the automation of
underwriting has moved forward.
ReInsurers have invested in improved IT systems which have led to the cost of
production to reduce significantly and are valuing their customers more by investing more in
customer service12.
In addition, reinsurers have used the outsourcing and offshoring of lower-cost
economies, such as India, to adopt procedures such as the passage of information, the
development of opportunities or to get the board out of business finances. These financial
professionals are then prepared to focus on various components of the approval process, for
10 Gurses, O. (2016). Marine Insurance Law. Routledge.
11 Gurses, 2016
12 Zhu et al., 2015
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instance, chance assessment, estimation and agreement with the representative or
customer13.
D) Recommendations
Each person will be likely to be affected to a certain extent by the increased risk of
economic changes which can take a toll on our staple industries Our future economies,
societies and ways of responding to reducing the risk now. Public government partnerships
with private insurance companies can support large-scale risk management. Governments
have a good position to finance large-scale mitigation projects because of their responsibility
for the administration by state and federal taxes of infrastructure and existing financial
structure. Transportation, water, energy and waste systems can be part of public
infrastructure that is essential to economic development and prosperity. It is commonly
considered the insurance industry that is best suited to reducing and expanding financial
risk14.
Their business of reducing financial risk has sensitised policyholders, put the
economic value at risk, and led to advocacy for climate change as well as physical risk-
reduction mitigation and adaptation. In order to encourage risk-averse conduct and
regulation, the industry has been and will continue to be a critical influence. Reinsurance
industry cannot, however, make necessary changes on its own. The industry
recommendations highlight the importance of working with non-profit organisations,
governments, the scientific community and industry partners. In order to succeed, the
motivations and limitations of each party must be understood and shared priorities explored.
The potential global risks are critical for partnerships which encourage honest exchanges
and promote a co-worked spirit. The need for various messages and communication
methods to share risk information, to offer risk reduction solutions and to confirm incentives
is equally important. While the safeguarding of supply chains can encourage private
13 Gurses, 2016
14 Kiln, 2017
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businesses to secure share prices, rural farmers may be more interested in predicting and
adapting to variable rainfall to ensure the continuing wellness of their families15.
The insurance sector is an important world investor and can invest in green bonds to
mobilise "private capital" for projects to mitigate and adapt to climate change. Each
motivation is valid and should be dealt with in order to change behaviour. A catalyst to unite
partners is required for cooperation. The most profitable or losing party is often the catalyst.
The insurance industry has this role, and it is expected that it will continue. The insurance
industry can lose far more as climate change advances as its ultimate accruers of risk.
Although the risk of climate change cannot be prevented in particular, the insurance industry
is uniquely ready to influence global response significantly. Private and public entities should
remain to partner and encouraging industry to pursue innovative solutions to reduce climate
change financial and physical risks. This will not eventually eliminate risks, but it can avoid
the extent of the impact on our societies and economies of catastrophes (Zhu et al., 2015).
CONCLUSION
The nature of the underwriting and marine cargo depends majorly on controls varies
depending on the method of delivery chosen. This calls for a thorough employee inspection.
It is the centralised underwriting functions responsible for exercising control over the
technical aspects, including the authorisation (and sometimes the implementation) of the
rate changes, and for setting underwriting policies, maintaining ratings and underwriting
parameters.
15 Thomas, R. (Ed.). (2015). The modern law of marine insurance: Volume four. CRC Press.
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REFERENCES
Books
Economics 61 (2015): 242-254. Gurses, Ozlem. Marine Insurance Law. Routledge, 2016.
Kiln, Robert. Reinsurance underwriting. Informa Law from Routledge, 2017.
Thomas, Rhidian, ed. The modern law of marine insurance: Volume four. CRC Press, 2015.
Journals
Balbás, Alejandro, Beatriz Balbás, Raquel Balbás, and Antonio Heras. "Optimal reinsurance
under risk and uncertainty." Insurance: Mathematics and Economics 60 (2015): 61-
74.
Carolan, Michael, Brendan Mullan, and Elizabeth C. Sackett. "RECENT DEVELOPMENTS
IN EXCESS INSURANCE AND REINSURANCE." Tort Trial & Insurance Practice
Law Journal52, no. 2 (2017): 369.
Lucas, M. T., & Terzoli, F. J. U.S. Patent Application No (2015). 14/313,986.
Zhu, Huiming, Chao Deng, Shengjie Yue, and Yingchun Deng. "Optimal reinsurance and
investment problem for an insurer with counterparty risk." Insurance: Mathematics
and
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GLOSSARY OF KEYWORDS
Reinsurance:
A protective agreement
Reinsurable interest:
There is a very clear definition of insurable intrigues in the Marine Insurance Act. It
states that a physical item must be submitted to marine hazards and that the protected must
be legally connective to the article, which enables it to maintain it and is partially affected by
misfortune or damage or may impose obligations on it
January 2019 11