Market Analysis & Trends Flashcards
7 cards from real RIMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Market Analysis & Trends flashcards as text
Which market cycle phase is characterized by insurers loosening underwriting standards and aggressively reducing premiums to gain market share?
Answer: Soft market
In a soft market, excess capacity and competition cause insurers to lower premiums and ease underwriting criteria.
A risk manager observes that reinsurance capacity for catastrophe risks has tightened significantly. What is the most likely direct impact on primary insurance pricing?
Answer: Primary premiums will increase as reinsurance costs are passed to insureds
Reinsurance costs are a key component of primary insurer pricing, so tightening reinsurance capacity typically drives up primary premiums.
Which economic indicator is most useful for predicting changes in workers' compensation exposure when analyzing insurance market trends?
Answer: Employment rates and payroll data
Workers' compensation exposure is directly tied to payroll and employment levels, making payroll data the most relevant economic indicator.
What is 'loss development' in the context of insurance market analysis?
Answer: The process by which reported losses grow over time as claims mature
Loss development refers to how the ultimate cost of claims increases over time as initial estimates are revised upward as claims mature.
When assessing cyber insurance market trends, which factor has most significantly contributed to hardening conditions in recent years?
Answer: Rising frequency and severity of ransomware attacks
The surge in ransomware attacks has driven significant loss activity in cyber insurance, pushing premiums higher and tightening coverage terms.
A risk manager benchmarking their property insurance program notices their rate is 20% above the market median for similar risks. What should be the primary analytical step?
Answer: Investigate whether unique risk characteristics justify the premium differential
Benchmarking anomalies require investigation to determine if risk characteristics, loss history, or coverage differences explain the differential before drawing conclusions.
Which of the following best describes the concept of 'combined ratio' as a market health indicator?
Answer: The sum of loss ratio and expense ratio, indicating underwriting profitability
A combined ratio below 100% indicates underwriting profit, while above 100% signals underwriting losses, making it a key market health metric.