P&C Insurance Risks
P&C insurance activities are subject to If P&C´s main underwriting principles; the company should always have the necessary knowledge, expertise and data to understand and quantify the risks.
P&C insurance risks can be split into three components:
Premium risk is the risk that the claims cost for future claims exceeds the expected level. This could be due to e.g. inadequate pricing, risk concentration, improper reinsurance coverage or due to unexpected deviations in the frequency of claims (i.e. the number of claims incurred during the period being higher than expected) and / or in the size of claims (i.e. claims when they occur being larger than anticipated).
Reserve risk is the risk that technical provisions are not sufficient to cover the cost for already incurred claims and results from fluctuations in the timing and amount of claim settlements.
Catastrophe risk is the risk of low frequency, high severity events, such as natural catastrophes, that are not captured adequately by the premium risk or reserve risk.
This section presents the development of P&C insurance risks during 2010. In addition, the P&C insurance risk management principles are presented.