Portfolio Management & Strategy Flashcards

Risk-Adjusted Return on Capital (RAROC) is used in transportation insurance portfolio management to:

Answer: Evaluate whether lines of business generate sufficient return relative to the capital they consume

RAROC allows insurers to compare profitability across business segments on a capital-adjusted basis, enabling better resource allocation decisions.

The rise of autonomous and semi-autonomous commercial vehicles is MOST likely to affect transportation insurance portfolio strategy by:

Answer: Shifting liability allocation between driver error and product/technology failure, requiring new coverage forms and pricing models

Autonomous vehicle technology blurs the traditional driver-liability paradigm, forcing insurers to develop new frameworks that address manufacturer and technology provider liability.

Cyber risk is increasingly relevant to transportation portfolio strategy because:

Answer: Connected fleets, GPS systems, and freight management platforms create new attack surfaces that can trigger physical damage and cargo loss

Digitally connected transportation assets—including trucks, ships, and logistics platforms—can be compromised through cyberattacks, causing physical, cargo, and liability losses.

A transportation insurer managing a multimodal portfolio (trucking, ocean cargo, rail, and air freight) should prioritize which portfolio strategy to manage correlated catastrophe exposure?

Answer: Monitoring cumulative port, terminal, and hub exposures across all modal lines to prevent silent accumulation

Cargo from multiple modes often passes through the same hubs and terminals, creating correlated accumulation risk that must be tracked across the entire portfolio.

Portfolio runoff management for a transportation insurer involves:

Answer: Orderly management of claims, reserves, and reinsurance on discontinued lines or books of business

Runoff management ensures that discontinued transportation books are properly reserved, claims are resolved, and reinsurance recoveries are maximized over the remaining liability period.

ESG (Environmental, Social, Governance) considerations are increasingly influencing transportation insurance portfolio strategy by:

Answer: Leading some insurers to restrict or reprice coverage for high-emission fleets or environmentally risky cargo

ESG frameworks cause some insurers to apply underwriting restrictions, higher pricing, or coverage exclusions for transportation risks with poor environmental or safety profiles.

Strategic account management in a transportation insurance portfolio differs from standard account handling because it:

Answer: Dedicates specialized resources, customized program structures, and proactive loss control to large, complex transportation risks

Strategic accounts receive dedicated underwriting, risk management consulting, and tailored coverage structures that reflect their complexity and premium significance to the portfolio.