Associate Commercial Insurance Underwriter (ACIU) cheat sheet

Underwriting decision framework: exposure identification → hazard/loss-frequency assessment → loss-severity assessment → coverage design → pricing → terms and conditions → documentation.

Loss ratio = (incurred losses + loss adjustment expense) ÷ earned premium; a combined ratio above 100% indicates underwriting loss before investment income.

Frequency × severity = expected loss cost; use it to compare accounts rather than premium alone, since premium reflects rate adequacy as well as risk quality.

Risk selection question set: what can go wrong, how often, how bad, what controls exist, what is retained versus transferred, and what is the worst credible loss.

Authority levels: underwriters act within granted binding authority; anything above the limit, outside appetite, or requiring referral must be escalated with full documentation.

Terms and conditions are underwriting tools: deductibles, coinsurance, sublimits, warranties, protective safeguards endorsements, and reporting provisions shift or cap risk.

Documentation standard: record the exposure basis, the rationale for deviations from manual rates, referral approvals, and any subjectivities attached to the quote.

Common referral triggers: high-hazard occupancies, poor loss history relative to class, large values in catastrophe zones, unverified protective safeguards, and new ventures without loss experience.

Renewal decision inputs: loss ratio trend, exposure changes (payroll, sales, values), control improvements, market conditions, and whether prior subjectivities were satisfied.

Financial statement analysis: current ratio = current assets ÷ current liabilities; quick ratio excludes inventory; both flag liquidity stress that predicts claim and retention problems.

Leverage and profitability checks: debt-to-equity and net income trend indicate capacity to absorb deductibles, fund controls, and survive a large retained loss.

Loss history analysis: compute loss ratios by year and in total, separate frequency from severity, and exclude or adjust open and catastrophically reserved claims.

Trend and credibility: small accounts have limited credibility, so losses are blended with class experience; large losses are examined individually rather than by ratio alone.

Exposure bases by line: general liability uses sales or payroll, property uses replacement cost values, auto uses fleet count and radius, workers compensation uses payroll by class code.

COPE for property: Construction, Occupancy, Protection, Exposure - the four factors that drive fire and catastrophe loss potential for a building.

Business income exposure: estimate gross earnings or gross profit, the chosen period of indemnity, and whether the account has a contingent business income dependency.

Class code accuracy matters: misclassification misprices the account and creates audit exposure; verify operations against payroll or sales breakdowns, not just the application.

Account narrative should answer: what the business does, how it makes money, what its largest single loss is, and how it would recover.

Portfolio management: track mix of business by class, territory, and size; concentration in one catastrophe zone or one class increases aggregate volatility.

Appetite statements define target, acceptable, and prohibited classes; strategy is executed by aligning producer incentives and referral rules to that appetite.

Rate adequacy versus retention: monitor hit ratios and quote-to-bind ratios; a very high hit ratio can signal underpricing, a very low one can signal poor distribution fit.

Catastrophe aggregation: modeled probable maximum loss (PML) at a chosen return period (for example 1-in-100 or 1-in-250 years) sets the capacity consumed by an account.

Reinsurance interacts with strategy: treaty capacity, retentions, and facultative requirements determine the largest risk the carrier can write.

Segmentation: differentiate accounts by hazard quality and loss experience rather than applying a single rate level across a class.

Cycle management: in a soft market, protect terms (deductibles, sublimits) rather than cutting price alone; in a hard market, prioritize remediation of poor-performing segments.

Producer and agency management: use loss ratio, premium volume, and submission quality metrics to allocate underwriting capacity and appointment decisions.

Growth measurement should pair premium growth with risk-adjusted return and retention of profitable accounts, not premium alone.

Property loss exposures: real property, personal property, business income and extra expense, and time-element losses; each needs separate limit analysis.

Valuation bases: actual cash value = replacement cost − depreciation; replacement cost ignores depreciation; functional replacement cost substitutes modern materials or design.

Coinsurance clause: payment = (limit carried ÷ limit required) × loss, subject to the policy limit; limit required = coinsurance percentage × value at risk.

Example: 80% coinsurance, value $1,000,000, required limit $800,000, carried limit $600,000, loss $200,000 → payment $150,000.

Agreed value option suspends the coinsurance penalty when the insured submits a verified value statement; it does not raise the policy limit.

Causes of loss forms: basic (named perils), broad (named perils, expanded), special (open perils, subject to exclusions) - the form determines the burden of proof.

Common exclusions: flood, earth movement, ordinance or law, wear and tear, and employee dishonesty; these require separate coverage or endorsements.

Business income: period of indemnity, gross earnings versus gross profit definition, and the need to include extra expense and extended period of indemnity.

Blanket versus specific insurance: blanket applies one limit across multiple locations, useful when values shift between scheduled sites.

Catastrophe exposure: flood and wind zones require separate limits, deductibles stated as percentages of value, and consideration of contingent business income.

CGL occurrence form: coverage triggered by bodily injury or property damage during the policy period, regardless of when claim is made; the claims-made form triggers on the claim date.

Coverage parts: A bodily injury and property damage, B personal and advertising injury, C medical payments; exclusions and limits apply per part as stated.

Limits structure: general aggregate, products-completed operations aggregate, each occurrence, personal and advertising injury, damage to premises rented, and medical expense.

Aggregate erosion: each occurrence payment reduces the general aggregate; products-completed operations losses reduce the separate products aggregate.

Key exclusions: expected or intended injury, contractual liability, pollution, professional liability, employer's liability, and damage to the insured's own product or work.

Additional insured status: endorsement breadth varies (ongoing operations only versus completed operations); verify the contract requirement and the endorsement form used.

Certificates of insurance are evidence of coverage, not a grant of coverage; the endorsement itself controls the actual additional insured rights.

Professional liability is claims-made: retroactive date, extended reporting period, and prior-acts coverage determine whether a claim is covered.

Umbrella and excess: umbrella may drop down over a self-insured retention or uncovered loss; excess follows the underlying terms and does not broaden coverage.

Core duties: act with integrity, maintain competence, serve the client's interest, and comply with applicable law and regulatory requirements.

Utmost good faith: applicants must disclose material facts; underwriters must not knowingly accept a risk on misrepresented information or encourage concealment.

Conflicts of interest must be disclosed and managed; compensation arrangements that could bias a recommendation require transparency.

Confidentiality: insured financial data, loss history, and claims information should be shared only for legitimate underwriting, reinsurance, or regulatory purposes.

Fair discrimination versus unfair discrimination: pricing by actuarially supported risk characteristics is legitimate; pricing by protected characteristics is not.

Redlining and unfair trade practice rules prohibit denying or pricing coverage based on territory in ways unrelated to actual risk.

Documentation as an ethical control: contemporaneous records of decisions and referrals reduce the risk of after-the-fact justification.

Ethical decision test: is it legal, does it treat the customer fairly, would it withstand public and regulatory scrutiny, and is it consistent with stated appetite?

Underwriting decision framework: exposure identification → hazard/loss-frequency assessment → loss-severity assessment → coverage design → pricing → terms and conditions → documentation.

Loss ratio = (incurred losses + loss adjustment expense) ÷ earned premium; a combined ratio above 100% indicates underwriting loss before investment income.

Frequency × severity = expected loss cost; use it to compare accounts rather than premium alone, since premium reflects rate adequacy as well as risk quality.

Risk selection question set: what can go wrong, how often, how bad, what controls exist, what is retained versus transferred, and what is the worst credible loss.

Authority levels: underwriters act within granted binding authority; anything above the limit, outside appetite, or requiring referral must be escalated with full documentation.

Terms and conditions are underwriting tools: deductibles, coinsurance, sublimits, warranties, protective safeguards endorsements, and reporting provisions shift or cap risk.

Documentation standard: record the exposure basis, the rationale for deviations from manual rates, referral approvals, and any subjectivities attached to the quote.

Common referral triggers: high-hazard occupancies, poor loss history relative to class, large values in catastrophe zones, unverified protective safeguards, and new ventures without loss experience.

Renewal decision inputs: loss ratio trend, exposure changes (payroll, sales, values), control improvements, market conditions, and whether prior subjectivities were satisfied.

Financial statement analysis: current ratio = current assets ÷ current liabilities; quick ratio excludes inventory; both flag liquidity stress that predicts claim and retention problems.

Leverage and profitability checks: debt-to-equity and net income trend indicate capacity to absorb deductibles, fund controls, and survive a large retained loss.

Loss history analysis: compute loss ratios by year and in total, separate frequency from severity, and exclude or adjust open and catastrophically reserved claims.

Trend and credibility: small accounts have limited credibility, so losses are blended with class experience; large losses are examined individually rather than by ratio alone.

Exposure bases by line: general liability uses sales or payroll, property uses replacement cost values, auto uses fleet count and radius, workers compensation uses payroll by class code.

COPE for property: Construction, Occupancy, Protection, Exposure - the four factors that drive fire and catastrophe loss potential for a building.

Business income exposure: estimate gross earnings or gross profit, the chosen period of indemnity, and whether the account has a contingent business income dependency.

Class code accuracy matters: misclassification misprices the account and creates audit exposure; verify operations against payroll or sales breakdowns, not just the application.

Account narrative should answer: what the business does, how it makes money, what its largest single loss is, and how it would recover.

Portfolio management: track mix of business by class, territory, and size; concentration in one catastrophe zone or one class increases aggregate volatility.

Appetite statements define target, acceptable, and prohibited classes; strategy is executed by aligning producer incentives and referral rules to that appetite.

Rate adequacy versus retention: monitor hit ratios and quote-to-bind ratios; a very high hit ratio can signal underpricing, a very low one can signal poor distribution fit.

Catastrophe aggregation: modeled probable maximum loss (PML) at a chosen return period (for example 1-in-100 or 1-in-250 years) sets the capacity consumed by an account.

Reinsurance interacts with strategy: treaty capacity, retentions, and facultative requirements determine the largest risk the carrier can write.

Segmentation: differentiate accounts by hazard quality and loss experience rather than applying a single rate level across a class.

Cycle management: in a soft market, protect terms (deductibles, sublimits) rather than cutting price alone; in a hard market, prioritize remediation of poor-performing segments.

Producer and agency management: use loss ratio, premium volume, and submission quality metrics to allocate underwriting capacity and appointment decisions.

Growth measurement should pair premium growth with risk-adjusted return and retention of profitable accounts, not premium alone.

Property loss exposures: real property, personal property, business income and extra expense, and time-element losses; each needs separate limit analysis.

Valuation bases: actual cash value = replacement cost − depreciation; replacement cost ignores depreciation; functional replacement cost substitutes modern materials or design.

Coinsurance clause: payment = (limit carried ÷ limit required) × loss, subject to the policy limit; limit required = coinsurance percentage × value at risk.

Example: 80% coinsurance, value $1,000,000, required limit $800,000, carried limit $600,000, loss $200,000 → payment $150,000.

Agreed value option suspends the coinsurance penalty when the insured submits a verified value statement; it does not raise the policy limit.

Causes of loss forms: basic (named perils), broad (named perils, expanded), special (open perils, subject to exclusions) - the form determines the burden of proof.

Common exclusions: flood, earth movement, ordinance or law, wear and tear, and employee dishonesty; these require separate coverage or endorsements.

Business income: period of indemnity, gross earnings versus gross profit definition, and the need to include extra expense and extended period of indemnity.

Blanket versus specific insurance: blanket applies one limit across multiple locations, useful when values shift between scheduled sites.

Catastrophe exposure: flood and wind zones require separate limits, deductibles stated as percentages of value, and consideration of contingent business income.

CGL occurrence form: coverage triggered by bodily injury or property damage during the policy period, regardless of when claim is made; the claims-made form triggers on the claim date.

Coverage parts: A bodily injury and property damage, B personal and advertising injury, C medical payments; exclusions and limits apply per part as stated.

Limits structure: general aggregate, products-completed operations aggregate, each occurrence, personal and advertising injury, damage to premises rented, and medical expense.

Aggregate erosion: each occurrence payment reduces the general aggregate; products-completed operations losses reduce the separate products aggregate.

Key exclusions: expected or intended injury, contractual liability, pollution, professional liability, employer's liability, and damage to the insured's own product or work.

Additional insured status: endorsement breadth varies (ongoing operations only versus completed operations); verify the contract requirement and the endorsement form used.

Certificates of insurance are evidence of coverage, not a grant of coverage; the endorsement itself controls the actual additional insured rights.

Professional liability is claims-made: retroactive date, extended reporting period, and prior-acts coverage determine whether a claim is covered.

Umbrella and excess: umbrella may drop down over a self-insured retention or uncovered loss; excess follows the underlying terms and does not broaden coverage.

Core duties: act with integrity, maintain competence, serve the client's interest, and comply with applicable law and regulatory requirements.

Utmost good faith: applicants must disclose material facts; underwriters must not knowingly accept a risk on misrepresented information or encourage concealment.

Conflicts of interest must be disclosed and managed; compensation arrangements that could bias a recommendation require transparency.

Confidentiality: insured financial data, loss history, and claims information should be shared only for legitimate underwriting, reinsurance, or regulatory purposes.

Fair discrimination versus unfair discrimination: pricing by actuarially supported risk characteristics is legitimate; pricing by protected characteristics is not.

Redlining and unfair trade practice rules prohibit denying or pricing coverage based on territory in ways unrelated to actual risk.

Documentation as an ethical control: contemporaneous records of decisions and referrals reduce the risk of after-the-fact justification.

Ethical decision test: is it legal, does it treat the customer fairly, would it withstand public and regulatory scrutiny, and is it consistent with stated appetite?