Subdivision Underwriting - Insurance Act 1973 - Determination of Prudential Standards - GPS 110 - Capital Adequacy for General Insurers; GPS 120 - Assets in Australia for General Insurers; GPS 210 - Liability Valuation for General Insurers; GPS 220 - Risk Management for General Insurers; GSP 230 - Reinsurance Arrangements for General Insurers; GPS 410 - Transfer and Amalgamation of Insurance Business for General Insurers and Transitional Prudential Standard GPS 900- Early Approvals of Auditors and Actuaries (07/02/2002) - Underwriting

Underwriting

Underwriting is the process by which an insurer determines whether and under what conditions to accept a risk. Weaknesses in the controls and systems surrounding the underwriting process can expose an insurer to the risk of unexpected losses which may threaten the capital position of the insurer.
At a minimum the risk management and control system for underwriting must consist of policies and procedures including:

(a) a statement of the insurer’s willingness and capacity to accept risk;

(b) the classes and characteristics of insurance business that the insurer is prepared to underwrite including:

(i) geographical areas;

(ii) the types of risks that may be underwritten; and

(iii) criteria for the use of policy exclusions and reinsurance;

(i) the criteria for assessing risk;

(ii) the method for monitoring emerging experience; and

(iii) the method by which emerging experience is taken into account in updating the underwriting process;

(d) appropriate approval authorities and limits to those authorities that are definitive and specific (including controls surrounding delegations given to intermediaries of the insurer);

(e) concentration limits; and

(f) methods for monitoring compliance with underwriting policies and procedures such as:

(i) internal audit;

(ii) peer review of policies underwritten;

(iii) assessments of brokers’ procedures and systems to ensure the quality of information provided to the insurer is of a suitable standard; and

(iv) in the case of reinsurers, audits of ceding companies to ensure that reinsurance assumed is in accordance with treaties in place.

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