Limited risk of catastrophically large losses
The essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed.
Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5%. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurers appetite for additional policyholders.
Insurance Books
Insurance News
- Do I tell insurers about cancelled policies? 1 Sep 2010
I had a policy cancelled by Saga because of an error in my document wording - do I have to disclose this to new insurers? - Insurer aims to protect at risk home owners 23 Aug 2010
A new home insurance service was launched today which aims to provide cover for the 15% of people who are often rejected by other insurers… - How we snared crash insurance fraudsters 21 Aug 2010
A journey from hospital saw pensioners Alma and Eric Gallanders become one of 700 victims of one of Britain’s biggest insurance frauds… - Pet owners ditch vet insurance as costs soar 18 Aug 2010
The cost of pet insurance has rocketed by 28% in just two years, forcing many households to abandon protection for their beloved cats and dogs…
HealthInsurance
