Review
The business – an introduction
Business profile
The insurance and reinsurance business written across the Group is diverse. While the business as a whole is influenced by the cyclical nature of insurance markets generally, many of the classes of business underwritten are in different stages of their cycle and do not have heavily correlated claims. For example, our UK commercial motor results are not influenced by US windstorm activity, unlike our property (re)insurance portfolio. Certain lines of business, such as catastrophe reinsurance, are heavily exposed to natural catastrophe activity, but we also seek diversity by underwriting lines that are not, such as professional indemnity insurance. An overview of the business written in 2008 is shown in the chart below.
Another feature of the business underwritten is that, in its market segment, the risk underwritten is likely to be large or relatively complex in nature. Most of the insurance business underwritten is for commercial clients with only a modest personal lines content. Where personal lines business is underwritten it is where the market scale is small and is serviced by specialist brokers, such as our yacht or bloodstock accounts.
The chart below shows the geographic markets, valued by gross written premium, for the Group. The US and UK are dominant, but business is written worldwide.
UK commercial business is written by Amlin UK. Most of this business is underwritten on policies where Amlin is the sole insurer. For the Amlin London division, Amlin typically underwrites policies on a subscription basis. This is where individual insurers underwrite only a proportion of each policy, usually because the policy limit is too large for one insurer to underwrite alone.
The majority of business written is sourced through independent insurance brokers. Brokers provide a global distribution network and, because of their knowledge of Amlin’s products and standards, working together provides an efficient channel for business. We prefer to underwrite on individual direct contracts of insurance, known as facultative insurance, or through treaty reinsurance which provides tailored cover for an insurance company clients’ own portfolio. Business underwritten in this way provides us with control over the pricing and terms of the contract and we tend to have a greater relationship with the ultimate insured, or reinsured.
However, we also partner intermediaries, managing general agents or insurance brokers, in underwriting on binding authorities or lineslips. This is done where their controls are perceived to be good and our ability to influence the type of business accepted is high. This is important as binding authorities delegate the day to day underwriting to the underwriting agents or brokers. For these contracts, we are reliant on the intermediary to exercise judgement on our behalf, although they are given a clear framework within which to operate. In these circumstances the intermediary is incentivised to produce an underwriting profit through the payment of profit commission
The flowchart below shows the different distribution channels used by our businesses. Amlin accepts commercial business from Lloyd’s brokers, regional brokers, managing general agents and a small amount of personal lines business on a direct basis. The relationships are varied and subject to varying competitive pressure.
Top