Understanding Underwriting Risks

UNDERWRITING RISK
Ask staffs in an insurer what are risks associated with underwriting risks and chances are you will get "the risk factors when evaluating the cases underwritten" as a general statement. Here is an except from BNM's defining underwriting activities.

"Insurance underwriting deals with the principles and practices concerning the acceptance or rejection of risks, fixing of premium rates, terms and conditions, the amount of acceptance, retention and reinsurance."

China's Credit Risk Exposure

CHINA'S  NPL INCREASES TO FIVE-YEAR HIGH

Since FY 11 to FY15 Q1, NPLs in China are on an upward trend with NPL of four largest banks reaching a 5 year high.. Refer graph below for NPL trends. Source: (http://www.financeasia.com)

This post will discuss factors in addition to the increase in China's NPL. The factors are constant rollovers and credit risk carried outside of the banks potentially causing a dominos effect as assets become impaired during an economic slowdowns. Lastly we will look at how prepared the banks are by comparing their portfolio of off-balance sheet assets against their total asset.

[Framework] Managing Tail-Risk Events

BACKGROUND
Tail-risk events are extreme events such as flood, storms and market crashes which can erode an insurer's capital and profitability.Tail-risks are found at the extreme left end of bell curves. Insurers would want to minimize fat tail risks without losing out on right tail growth potentials. 

Relative Loss Ratios Using One Way Method

BACKGROUND

The pricing of a policy are highly dependent on the characteristics of the individual to whom the policy is sold. The characteristics could consist of existing conditions (inherent risks) and claims patterns from the same pool of policy holders.  An individual could consist of characteristics from different pools of data (by age, by location, by gender, etc).

To find the relationship between the various pools of claims history is the traditional way of looking at series of one-way tables to determine relativities by rating factor (either focusing on the relative risk premiums or the relative loss ratios)