Risk selection, rating factors and the standard schedule of exclusions. Technical premium is built from our own frequency, notification, admission and settlement experience, with published loadings.
Underwriting is the assessment of a risk and the setting of a price at which it can be carried. This page sets out how our technical premium is constructed, which classes we decline, and the exclusions applied as standard.
The expected loss cost of a class is the starting point. Between an insured event occurring and a sum leaving this institution there are three further conditional stages. Each is measured from our own book, each is stable year over year, and each is therefore a rating factor.
| Stage | Factor | Amount per policy per year |
|---|---|---|
| Expected loss cost, full incidence of insured events | Base | 1,180.00 |
| Notification rate, events reported to us | 61 per cent | 719.80 |
| Admission rate, notified claims accepted in principle | 78 per cent | 561.44 |
| Settlement rate, proportion of assessed sum ultimately paid | 64 per cent | 359.32 |
| Expense and acquisition loading | 31 per cent of gross | 523.90 |
| Gross premium charged | Technical price | 1,690.00 |
| Underwriting margin | 1,690.00 less 523.90 less 359.32 | 806.78 |
| Margin as a share of gross premium | 47.7 per cent |
On behavioural factors. Notification propensity is the single most predictive variable in this book. It is measured from our own claims experience across eleven years, moves by less than two percentage points year over year, and is refreshed each January alongside the loss cost tables. Insurers rating on incidence alone consistently misprice classes in which reporting behaviour differs materially from event frequency, and the correction is usually made through the loss ratio rather than through the rate.</div>
Rating factors are applied where they are statistically predictive of the outcome being priced.
| Renewal year | Price | Cumulative increase |
|---|---|---|
| Year one, as quoted | 1,690.00 | Base |
| Year two, plus 9 per cent | 1,842.10 | 9.0 per cent |
| Year three | 2,007.89 | 18.8 per cent |
| Year four | 2,188.60 | 29.5 per cent |
| Year five | 2,385.57 | 41.2 per cent |
We will match any comparable quotation presented at renewal. Present the alternative terms to your broker or to us directly and the rate is adjusted for the year, with no requirement to re-broke and no loss of continuity credit.
Some risks cannot be written at any price. We say so at quotation stage rather than at claim stage, which we regard as the material courtesy in this business.
Applied to all commercial wordings unless bought back by endorsement.
| Exclusion | Scope | Rationale as filed |
|---|---|---|
| Prior known circumstances | Anything the proposer was aware of before inception | Fortuity |
| Wear, tear and gradual deterioration | Damage developing over time rather than at an identifiable moment | Maintenance is not an insurable peril |
| Faulty design, workmanship or materials | The defective part, and consequential damage where the defect is the proximate cause | The quality of a third party contract is not a rated exposure |
| Communicable disease | Loss arising from, contributed to by, or in connection with any communicable disease | Aggregation |
| Cyber, absolute | Any loss where a computer system is a contributing cause, whether or not the attack was targeted | Aggregation, and the difficulty of establishing attribution |
| Pollution and contamination, absolute | Discharge of any substance, sudden or gradual | Latency exceeds the policy period |
| Contractual liability | Liability assumed by agreement beyond that which would exist at law | Liability assumed by agreement was not within the rated exposure |
| Deliberate acts | Acts of the insured, and of any person for whom the insured is responsible | Fortuity |
| Consequential and economic loss | Loss of profit, market, goodwill or opportunity, unless separately insured | Quantification |
| Failure to mitigate | Any increase in loss attributable to the insured’s inaction after the event | The duty arises at common law and the exclusion restates it |
Each exclusion above is standard market wording and is drafted as narrowly as the market permits. Six of the ten are available for buy-back by endorsement, subject to survey and to additional premium, and our underwriters will quote a buy-back on any commercial submission at the same time as the base terms. The remaining four are excluded across the market and are not available on any wording we write.