BIA Non-Life Insurance Diploma cheat sheet

Insurable risk requires measurable loss, accidental occurrence, insurable interest, and losses that are definite in time, place and amount; speculative or certain losses are excluded.

Indemnity restores the insured to pre-loss financial position; valued policies, reinstatement and new-for-old cover are deliberate exceptions to indemnity.

Utmost good faith (uberrimae fidei) obliges both parties to disclose material facts; the duty attaches before contract formation and at renewal.

Insurable interest must exist at inception for property and at the time of loss for liability; absence makes the contract void or unenforceable.

Proximate cause is the dominant, effective cause of loss; remote causes are disregarded when determining whether a peril is covered.

Subrogation transfers the insured's recovery rights against third parties to the insurer after indemnity payment; it cannot yield profit for the insured.

Contribution applies where two or more policies cover the same loss; each insurer pays rateably, commonly by independent liability or sum-insured proportion.

Market structure: Lloyd's syndicates, mutuals, composite insurers, MGAs and captives; distribution via brokers, agents and direct channels shapes pricing and capacity.

Premium = expected loss cost + expenses + risk margin + profit loading; cyclical soft markets compress rates and tighten wordings, hard markets reverse this.

A contract of insurance requires offer, acceptance, consideration, intention to create legal relations, capacity and legality; the policy is the written evidence.

Utmost good faith disclosure covers facts a prudent underwriter would consider material; the insured need not disclose facts they do not know or that are common knowledge.

Warranties are promissory conditions; breach discharges the insurer from liability for losses occurring after breach regardless of causation (subject to statutory reform).

Conditions precedent to liability (e.g. notification, claims cooperation) must be satisfied before the insurer's obligation to pay arises.

Misrepresentation remedies are typically avoidance ab initio, or proportionate reduction for negligent misrepresentation under modern consumer regimes.

Third-party rights: privity rules limit direct claims; statutory provisions (e.g. Road Traffic Acts, Third Parties (Rights against Insurers) Acts) create exceptions.

Limitation periods for contract claims are commonly six years from breach (twelve for deeds); tort claims run from damage or knowledge.

Choice of law and jurisdiction clauses determine which governing law and courts apply to disputes; arbitration clauses oust court jurisdiction.

Prudential regulation covers solvency, capital adequacy, governance and fit-and-proper management; conduct regulation covers fair treatment of customers.

Conduct rules typically require fair treatment, clear disclosure of cover and exclusions, complaints handling, and prompt, fair claims settlement.

Product oversight and governance requires manufacturers to identify target markets, test products and monitor outcomes after launch.

Financial promotion rules require communications to be fair, clear and not misleading; risk warnings and balanced benefit statements are mandatory.

Complaints must be logged, acknowledged and resolved within prescribed timeframes; unresolved complaints escalate to an independent ombudsman.

Anti-money-laundering duties: customer due diligence, beneficial ownership identification, sanctions screening, suspicious activity reporting and record retention.

Data protection: lawful basis for processing, purpose limitation, data minimisation, retention limits and breach notification obligations.

Regulatory capital regimes (e.g. Solvency II, risk-based capital) set minimum and solvency capital requirements with supervisory intervention ladders.

Risk = frequency × severity; expected loss cost = probability of loss × average loss amount, forming the technical premium base.

Risk control hierarchy: avoid, reduce, transfer, retain; engineering controls and loss prevention reduce frequency, protective measures reduce severity.

Moral hazard arises from insured behaviour; morale hazard from indifference or carelessness; both are managed by deductibles, conditions and claims scrutiny.

Underwriting information: proposal forms, surveys, loss runs, financial statements, claims history and risk improvement recommendations.

Rating factors must be statistically credible, actuarially justified and non-discriminatory; proxy discrimination is a regulatory concern.

Reinsurance and facultative placement allow underwriters to accept larger or more volatile risks by transferring peak exposures.

Accumulation control aggregates exposure by location, peril and event (e.g. CAT modelling, PML) to cap maximum probable loss.

Terms and conditions (deductibles, limits, exclusions, warranties) are as important as price in matching risk to appetite.

Policy structure: recitals, insuring agreement, definitions, exclusions, conditions, schedule and endorsements; endorsements override the printed wording.

Insuring clauses define the scope of cover; exclusions narrow it; conditions impose obligations whose breach may suspend or defeat cover.

Definitions control interpretation; ambiguity is construed contra proferentem against the insurer, but clear wording prevails.

Deductibles (excess) reduce each claim; franchises mean losses below the threshold are not payable but above it are paid in full.

Aggregation clauses group losses arising from one event or originating cause, determining whether one limit or several apply.

Average (underinsurance) clauses reduce claims proportionally when the sum insured is less than the value at risk.

Basis of settlement clauses (reinstatement, indemnity value, agreed value) determine how loss quantum is measured.

Notice and cooperation conditions require prompt notification, preservation of evidence and submission of proofs of loss.

Property perils: fire, lightning, explosion, storm, flood, escape of water, theft, impact and malicious damage; each has specific exclusions and conditions.

Fire cover typically extends to smoke, explosion and lightning but excludes spontaneous fermentation, electrical arcing and gradual deterioration.

Reinstatement cover restores property to new condition subject to a sum insured representing full rebuilding cost; underinsurance triggers average.

Business interruption indemnifies loss of gross profit or revenue plus increased cost of working, subject to an indemnity period.

BI formula: gross profit = turnover − uninsured working expenses; loss = reduction in turnover × gross profit rate + increased costs − savings.

Indemnity period is the maximum period over which BI loss is measured; it must reflect the realistic time to rebuild, re-equip and regain trade.

Material damage proviso requires the property damage peril to be insured for BI to respond; denial of access and supplier/customer extensions extend cover.

Stock and transit cover, including declaration and stock throughput policies, address goods in storage and movement.

Public liability covers third-party bodily injury and property damage arising from the insured's premises or operations, excluding employee injury (employers' liability).

Employers' liability responds to work-related injury or disease to employees; statutory schemes may mandate cover.

Products liability covers injury or damage caused by goods supplied; recall and product guarantee cover address withdrawal costs.

Professional indemnity covers negligent acts, errors or omissions in professional services; claims-made basis with retroactive date and extended reporting period.

Occurrence vs claims-made triggers: occurrence policies respond to injury/damage occurring during the period; claims-made policies respond to claims first made during it.

Liability limits are typically per occurrence or in the aggregate; defence costs may be inside or outside the limit.

Key exclusions: contractual liability, pollution, asbestos, punitive damages, and damage to the insured's own property.

Employers' liability and public liability claims depend on establishing negligence, breach of statutory duty and causation.

Motor cover levels: third-party only, third-party fire and theft, and comprehensive (own damage plus third-party liabilities).

Compulsory motor insurance satisfies statutory minimum third-party bodily injury and property damage requirements; uninsured driving is a criminal offence.

No-claims discount rewards claim-free years; protected NCD preserves the discount after a limited number of claims.

Motor total loss: market value at loss for indemnity basis; salvage disposal, agreed value and new-for-old clauses alter settlement.

Home insurance covers buildings (structure, fixtures) and contents (movables, personal effects); accidental damage and all-risks extensions broaden cover.

Personal accident and travel cover provide fixed benefits for death, disability and medical expenses; pre-existing conditions and age limits apply.

Motor excesses and young/inexperienced driver loadings reflect frequency and severity; telematics-based pricing adjusts for driving behaviour.

Subrogation and recovery from at-fault third parties reduce net motor claims cost; knock-for-knock agreements simplify inter-insurer settlements.

Reinsurance transfers risk from a ceding insurer (cedent) to a reinsurer; it improves capital efficiency and enables larger line sizes.

Proportional treaties: quota share (fixed percentage of premium and loss) and surplus (shares above a retention line by risk).

Non-proportional treaties: excess of loss (per risk or per event) and stop loss (aggregate annual loss ratio protection).

Facultative reinsurance is placed risk-by-risk; treaty reinsurance covers a defined portfolio automatically under agreed terms.

Reinstatement of excess-of-loss layers requires additional premium; the number of reinstatements caps recoveries per treaty year.

Follow-the-settlements and claims cooperation clauses bind reinsurers to the cedent's settlements made in good faith.

Retrocession is reinsurance of a reinsurer; captives and finite reinsurance are alternative risk transfer mechanisms.

Net retention and ceded premium determine net risk appetite; reinsurance credit risk affects solvency capital calculations.

Claims process: notification, acknowledgement, coverage verification, investigation, quantum assessment, settlement and recovery.

Reservation of rights letters preserve the insurer's position while coverage is investigated; they do not waive defences.

Fraud indicators: late notification, inconsistent accounts, exaggerated or inflated claims, staged accidents, duplicate claims and altered documents.

Claims triage and data analytics detect fraud patterns; suspicious claims are referred to special investigation units (SIUs).

Indemnity settlement options: repair, replacement, cash settlement, reinstatement or salvage disposal; betterment is deducted.

Subrogation and salvage recoveries reduce net claims; contribution resolves overlapping policies.

Claim reserving: case reserves plus IBNR (incurred but not reported) estimates; reserve adequacy is reviewed regularly.

Prompt, fair settlement duties and complaint escalation apply where claims are declined or delayed.

Technical provisions comprise best-estimate liabilities plus a risk margin; claims reserves include case reserves and IBNR.

Chain-ladder and Bornhuetter-Ferguson methods develop incurred and paid claims triangles to estimate ultimate losses.

Solvency capital requirement (SCR) covers quantifiable risks over one year at a 99.5% confidence level; MCR is the lower intervention threshold.

Assets must match liabilities in currency and duration; liquidity and investment limits protect policyholder obligations.

Combined ratio = loss ratio + expense ratio; a ratio below 100% indicates underwriting profit.

Loss ratio = incurred losses ÷ earned premium; expense ratio = expenses ÷ written premium; operating ratio adds policyholder dividend ratio.

Investment return, reserve releases and reinsurance recoveries affect overall profitability; reserving prudence must not be excessive.

Own risk and solvency assessment (ORSA) links risk profile, capital needs and business planning; governance requires board oversight.

Core ethical principles: integrity, objectivity, competence, confidentiality, fairness and compliance with laws and professional standards.

Conflicts of interest must be identified, disclosed and managed; commissions and inducements require transparency.

Treating customers fairly requires clear communication, suitable products, fair claims outcomes and accessible complaints routes.

Confidentiality obligations protect client data; disclosure is permitted only with consent or legal compulsion.

Professional competence requires continuing professional development and working within one's expertise.

Whistleblowing and escalation duties apply where misconduct or regulatory breaches are identified.

Fair treatment extends to vulnerable customers, requiring reasonable adjustments in communication and service.

Ethical decision-making considers consequences, duties and fairness; documented rationale supports accountability.