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
In RIMS market analysis, what does 'adverse selection' describe in the context of insurance pricing trends?
Answer: Higher-risk insureds disproportionately seeking coverage, skewing pool risk upward
Adverse selection occurs when information asymmetry causes higher-risk individuals to be more likely to purchase insurance, worsening the risk pool.
Which emerging risk trend is driving the development of parametric insurance products in the property market?
Answer: Increased frequency of climate-related natural catastrophes and coverage gaps
Climate-related catastrophes expose coverage gaps in indemnity products, and parametric insurance provides faster payouts based on objective triggers like wind speed or rainfall.
A RIMS-certified risk manager is analyzing casualty market trends. Which metric best indicates whether the casualty market is hardening?
Answer: Rising premium rates with stricter underwriting requirements
A hardening casualty market is characterized by rate increases and more restrictive underwriting as insurers respond to adverse loss experience.
What role does 'social inflation' play in current liability insurance market trends?
Answer: It refers to rising claim costs driven by litigation trends, nuclear verdicts, and expanded legal theories
Social inflation drives up liability claim costs through factors like litigation funding, plaintiff-friendly legal environments, and large jury awards.
When reviewing D&O insurance market trends, which event type has historically caused the most significant market dislocations?
Answer: Economic downturns coupled with high-profile corporate bankruptcies and securities litigation
Economic downturns trigger shareholder lawsuits and securities class actions, historically causing significant D&O market hardening.
A risk manager is evaluating alternative risk transfer (ART) options as the traditional insurance market hardens. Which ART mechanism involves securitizing insurance risk through capital markets?
Answer: Catastrophe bonds (cat bonds)
Catastrophe bonds transfer insurance risk to capital market investors who receive returns unless specified catastrophe triggers occur.
Which factor most directly influences the underwriting cycle in the property insurance market according to RIMS market analysis principles?
Answer: The interplay between insurer capacity (surplus) and loss experience over time
The underwriting cycle is fundamentally driven by how surplus levels and cumulative loss experience influence insurer pricing and appetite.