Estimating the potential loss that could be incurred in a particular event is a fundamental requirement of the insurance industry. Loss estimates are included in all property underwriting reports as this information is necessary for underwriters to determine capacity and premium.
The majority of loss estimates are relatively simple, considering for example the situation of a fire being allowed to burn itself out, i.e. it runs out of combustible materials. However some cases require a more thorough examination due to the complexities of the insurance cover provided and the potential losses that could be incurred.
RiskTech has conducted a number of more detailed loss estimate studies for unique situations. These have included the potential public liability losses associated with a demolition project for an eight storey building in a congested (and operational) part of a city, the potential environmental liability losses arising from the transport of hazardous chemicals and the potential damage from an earthquake event to a c omplex made up of multiple separate buildings.
These studies are generally conducted in a semi-quantitative fashion, using whatever data is available and combining this with conservative judgements to provide an indication of the potential loss that could be incurred.
Some of the benefits of this process will be:
- An indication of the potential loss assists decision makers who are required to obtain insurance or accept the risk of a project;
- Provides underwriters with the ability to determine appropriate capacity and premium levels;
- Allows insurance brokers to determine the appropriate limits of cover in conjunction with the organisation’s appetite for risk.