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  Samuel Kangi December 28, 2012 9:14

  Thanks Everybody for your comments and especially Kandoussi Y. for your attachment on Llyolds Risk Management ToolKit.

  At the time of reading exploring the toolkit i was developing a training manual for my organisation and it has has greatly helped to come up with the "Areas to Cover"

  God Bless and a Happy 2013 to all members of this Group.
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  Robert Arvanitis December 25, 2012 0:09

  In the broad sense, Mr. Helton has the right idea, if perhaps an ambiguous perspective. Sometimes insurers are accused of not making payments that are due (bad faith).  Regrettably, insurers are more often required to make payments that are NOT due (deep pockets).

  I presume the original question is not about external considerations such as "judicial innovation" but rather the true operational risks insurers face.

  If so, then we can start with a definition. Process Risk is where we know the mean of the distribution and are merely unfortunate in the sample. E.g.  Drivers have a fair odds of 1% for accidents, but in this case we suffered 5%.  Thus the sample consumed both premium plus margin, as well as additional surplus allocated to that risk. This risk is offset by scale.  A small insurer may get swamped but a large one is unlikely to be merely unlucky.

  The other danger is Basis Risk.  We priced policies presuming a 1% risk for accidents, when the TRUE metric was 2%.  In that case, the fault lies in ourselves, and not the stars.

  Here we have the dynamic tension between two strategies.  One view says don't put all your eggs in one basket.  A multiline insurer can be wrong on auto, but not lose on life or homeowners.  Diversification helps.

  A second view says "put all your eggs in one basket but then WATCH that basket!"  Specialist insurers have prospered by know one line intensely, including domain knowledge as WELL AS likely external regulatory/judicial interference. (That of course brings us right back to knowing and offsetting Mr. Helton's point.)

  Returning to the original request -- we can describe strategies to offset the underlying hazards; there is no formula to compensate for Solvency XX strictures or management inadequacies.
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  Youness El Kandoussi December 19, 2012 7:47

  Dear Carmenza, I am attaching herein a ToolKit from LLoyds.

  I hope you'll find it helpful

  LloydsRMToolkit[1].pdf
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  Stuart Elson December 18, 2012 19:35

  I think you need to drill down and be a little more specific.

  Are you referring to claims processing, funds management, fraud / KYC, risk measurement, etc?

   
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  3rnjga0mpzt43 December 18, 2012 15:18

  Everything to do with large amounts of money are political, and "Insurers" are companies with large sums.  They requires PR on two fronts, the people in general (clients and potential clients) and the government.  A PR mess was Katrina.  Over seven billion dollars were not paid out between Texas and Florida.  The following hurricane in Florida added another 1.7 - 2.5 billion almost a year later.  The largest PR failure was the inability to answer one simple question.  Why were the clients paid on Grand Boca with homes of four million dollars or higher, and the people living in approximately one hundred and forty mobile homes, at forty thousand not paid?   The Insurance Agencies weren't liquid, but the wealthy were paid, and it was upheld by both the state and the Federal Government.  The question to answer after Katrina is; why should any person have insurance when insurers don't have to pay?