Underwriting authority and referral
A written delegation setting what an underwriter may accept alone, by line, amount and territory, and requiring anything beyond it to be referred upward, an internal safeguard against concentration and error.
No underwriter commits its company without limit. Its underwriting authority, set out in a letter of authority, specifies the lines it may write, maximum amounts per risk and per event, territories, the types of clauses it may accept or change, and minimum pricing conditions. Anything beyond that framework must be referred to a more senior underwriter, a committee or management, which decides or declines. The mechanism pursues several aims. It guards against individual error and concentration, requiring a second look at the heaviest commitments. It makes experience an explicit criterion, since authority grows with seniority and results. It serves compliance, supervisors expecting insurers to show that their commitments respect the underwriting policy adopted by the board. And it structures external delegation, since underwriting agencies and coverholders receive delegations of the same kind. For a young underwriter, the authority granted is the most direct measure of the trust its employer places in it.
Textbook case: a cyber underwriter has authority of 5 million euros per risk for European companies with under 500 million in revenue, excluding healthcare. A private clinic with 200 million in revenue seeking a 3 million limit must be referred to the head of the line, because the sector is outside the delegation, even though the amount is not.
underwriting authority, letter of authority, referral limits
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