Underwriting appetite
The set of risks a carrier accepts to write, expressed by classes, territories, limits and exclusions, and formalized in a plan bounded by capital and reinsurance.
In August 2018 Lloyd's launched its Decile 10 review: every syndicate had to produce a remediation plan, or an exit plan, for the worst-performing 10% of its book, and several exited whole classes for 2019. Underwriting appetite is that decision seen from the box: the operational translation of the board's risk appetite. It states what the underwriter writes on its own authority, what it writes after referral, and what it declines. It is set out by class, territory, limit per policy and per event, loss history threshold, mandatory exclusions and maximum capacity per accumulation zone. What separates it from a commercial preference is that it is bounded upstream. By capital, which caps aggregate exposure through the SCR, calibrated at 99.5% over one year by Article 101 of Solvency II. By reinsurance, whose terms say what can be ceded and therefore written. And at Lloyd's by the Corporation, which approves each syndicate's business plan. Published, it tells a broker whom to show a risk to; vague, it costs submissions.
Underwriting plan of a specialty insurer, 2026 year: cyber up to 10M EUR limit for companies below 500M EUR of revenue, excluding essential service operators and North America, with a maximum accumulation of 180M EUR in the health sector. The three bounds come respectively from the excess of loss treaty capacity, a reinsurance exclusion, and an accumulation limit set by the risk committee.
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