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III IC-99 study materials
III IC-99 study resources

III IC-99: Commercial Lines Coverages and Risk Management

III IC-99 · Work through your exam, one topic at a time.

All guide sections

Commercial Lines Coverages and Risk Management

Scope

The exam tests how large and complex risks are covered and how risk is identified, measured and financed - including reinsurance structure. Expect questions on marine and engineering covers, PML/EML and treaty types.

Core rules

  • Package and all-risks covers combine fire, burglary, machinery, business interruption and liability; industrial all-risks wordings are subject to single-risk and catastrophe limits.
  • Marine cargo uses Institute Cargo Clauses: ICC(A) all risks, ICC(B) and ICC(C) progressively narrower named perils; war and strikes are separate clauses. Cover runs warehouse-to-warehouse, terminating on delivery or expiry of the transit period after discharge.
  • Engineering: Contractors' All Risks (CAR) and Erection All Risks (EAR) cover construction/erection including testing, with design and maintenance exclusions; machinery breakdown and electronic equipment policies cover sudden and unforeseen failure, not wear and tear.
  • Risk management process: identify → analyse → evaluate → treat → monitor and review. Treatments: avoid, reduce, share/transfer, retain. Control reduces frequency/severity; financing funds retained and transferred risk.
  • PML/EML estimates the worst credible loss on a single risk; NAT CAT accumulation looks across a portfolio by location.
  • Reinsurance: facultative or treaty; proportional (quota share, surplus) or non-proportional (excess of loss, stop loss). Retention is what the cedant keeps.

Worked example

A factory has a PML of ₹60 crore. The insurer retains ₹20 crore and buys a casualty-catastrophe excess-of-loss treaty of ₹40 crore in excess of ₹20 crore. Reasoning. A ₹55 crore loss: the insurer pays ₹20 crore retention, the treaty pays ₹35 crore. A ₹90 crore loss exhausts the treaty at ₹40 crore, leaving a ₹30 crore gap unless a second layer or facultative cover exists - always check layers above the working layer.

Traps

Confusing risk reduction with risk transfer. Assuming CAR covers defective design. Forgetting that reinsurance does not change the insured's contract with the original insurer.