We take a disciplined approach to underwriting and risk selection and the Club continues to aim for a combined ratio of 100 per cent or lower.
It is the aim of the underwriter to ensure that the total premium or call paid by each Member of the Club represents a fair price for the risk presented by that Member compared with the risks presented by all other Members of the Club. Overall, the underwriting process must generate all the funds required by the Club.
The process has developed over many years. While the aim has never changed, the techniques used by underwriters to achieve the fairest possible result have evolved over time. When the Clubs first started operating in the last century, each Member paid the same rate per ton; gradually more refinement was introduced to achieve greater equity, and this development has continued to the present day. Although many Members will be familiar with some of the concepts utilised by the underwriters in assessing future risk, such as the acceptable loss ratio, this document sets out in detail the current policy and practices of the underwriters operating under the general direction of and in support of the policy of the Board.
In a system which has no tariff and where each Member is rated individually, the Board has a responsibility for ensuring that fairness is achieved to the greatest possible degree; the mechanisms used by the Board to do so are also outlined.
Our underwriting process is governed by a number of principles.
Meeting principles 1-3 above cannot be a mechanical process; it requires the exercise of judgment by skilled and experienced individuals. Principles 4-6 contribute to making certain that the judgment is fairly exercised, ensuring that there is each year a review of the past premiums compared with the actual claims experience of the Member and the Club as a whole.
In order to increase the potential for fairness, the annual renewal process for each individual Member combines a detailed analysis of his past experience combined with an assessment of the risk of his future operations, both set within the context of the view of the Board as to the likely overall Club claims experience which has been forecast for the forthcoming year. The process is necessarily complex, given the inherently conflicting aims of accurately assessing the future risk for a Member and simultaneously maintaining continuing fairness while at the same time ensuring that the Club remains properly funded.