Please explain: how should shower leaks be dealt with under insurance

Annemos

Capital modelling?? A quick google throws up..... (I would not have been a good actuary. I could not catch on to statistics at A' level. So I dropped the subject within 2 weeks of starting!) 

General insurance actuaries provide expertise in three main areas:

1. Reserving - actuaries apply statistical techniques to assess the likely outcome of general insurance liabilities and the provisions that are needed for reporting purposes
2. Pricing - actuaries assesses the frequency and average amount of claims to estimate premiums
3. Capital modelling - actuaries projects both the liability and assets of insurers to assess solvency and future capital needs.

Sandtree

Annemos said:

Capital modelling?? A quick google throws up..... (I would not have been a good actuary. I could not catch on to statistics at A' level. So I dropped the subject within 2 weeks of starting!) 

Yeah, most Actuaries dont like it if you call them Statisticians

Capital modelling works out how much money an insurer needs to cover its liabilities for up to a "1 in 200" event and how sensitive it is to fluctuations. This sets the amount of monies they need to hold to be considered solvent and you'll see companies talk of their solvency capital ratio which is the percentage of this amount they are holding - almost all will be 130% and well north of this (Direct Line for example is 212% at the end of last year)

In theory its a good way to tell if your insurer is going to go bust or not however it somewhat depends on how well the actuaries have done their job... if you look outside general insurance and say at annuities (ie insurance backed pensions) then "a cure for cancer" is a major risk for them (or any other major disease)... are they correctly predicting that longevity will continue to slowly increase and ignoring the possibility of a big step change should there be a major breakthrough?

Annemos

Oh, that is such useful information.

I shall go and look mine up straight away! 

Thanks again Sandtree. You may also remember the long discussion we had "a hundred years ago" about MGA's.

Your explanation has been invaluable for me during my still ongoing claim. It is now at the Ombudsman.

I think of your MGA explanation as the base-line of what I needed to know, to understand what was going on and where the fault might lie. 

So thank you again for all your help. 

Annemos

Well 240 per cent for the parent.... the branch is in a foreign language which I am trying to decipher! 

Found it.... the branch is 177 per cent. 

Does that qualify as "well north of 130 per cent"? 

Sandtree

Annemos said:

Found it.... the branch is 177 per cent. 

Does that qualify as "well north of 130 per cent"? 

It does in my book

If you are really bored you can read the entity, and Group if you fancy, reports; they will often contain things like if there is a parental guarantee and so is the 240% SCR a comfort factor because they'll be obliged to support their subsidiary in the event of major losses or if not then its broadly irrelevant as they can let the company tank if they believe its in an irrecoverable situation.

Annemos

Yes and in fact I have compared that foreign report to an English Language one. The English one contains less numbers, but has some more explanations. 

Apparently, the parent was not totally happy with 177 per cent as it was less than "the target set by the Board Management".

So they have done a capital injection. 

It is very reassuring for me to see that it is all being monitored.