General Insurance Practice
General Insurance Practice
This domain tests underwriting, pricing, claims, reserving and reinsurance for non-life business. Candidates must link loss experience, expenses, cat risk and capital to technical provisions and underwriting decisions.
Core rules and concepts
- Gross premium must cover expected claims, expenses, risk margin and profit; loss ratio is claims divided by premium.
- Reserves include case reserves, IBNR and unexpired risk reserves. Chain-ladder develops paid or incurred claims to ultimate.
- Reinsurance can be proportional (quota share, surplus) or non-proportional (excess of loss, stop loss).
- Catastrophe models combine hazard, exposure and vulnerability; model output needs validation.
Worked example
Paid claims to date are INR 800 lakh. The selected age-to-ultimate development factor is 1.25. Ultimate claims = 800 x 1.25 = 1,000 lakh, so IBNR = 200 lakh. If a 100 lakh excess-of-loss layer attaches above 700 lakh, expected reinsurance recoveries should be assessed separately from the gross reserve.
Traps
Confusing case reserves with IBNR, applying development factors mechanically without checking claims inflation, ignoring reinstatement premiums, and assuming reinsurance removes credit risk. Also using a single loss ratio for heterogeneous portfolios.