Underwriting

Underwriting is the central process by which an insurer or reinsurer assesses a risk presented to it, decides whether to accept or decline it, and, if accepted, sets its pricing terms (premium, deductible, sub-limits) and contractual terms (covers, exclusions, clauses). The underwriter is the actor who embodies this function: they combine a technical analysis of the risk, a judgment on the quality of the insured, market knowledge and mastery of actuarial tools to produce an offer that is competitive while meeting the risk carrier's profitability objectives. Underwriting is often described as an art as much as a science: quantitative models provide a pricing foundation, but assessing qualitative factors, the insured's reputation, the quality of their risk management, the transparency of their disclosures, the consistency of their claims history, calls for human judgment that algorithms do not yet fully replace. A distinction is drawn between direct underwriting, between the insurer and the insured, and delegated underwriting, in which a third party (managing general agent) is authorized to underwrite on behalf of the insurer, as well as reinsurance underwriting, which covers portfolios or treaties rather than individual risks. In cyber insurance, underwriting presents particular challenges: information asymmetry is strong (the insured knows their IT environment far better than the insurer), the risk evolves faster than renewal cycles, and the correlation between exposures makes building a balanced portfolio difficult. These constraints have driven the rise of very detailed cyber underwriting questionnaires and tools for external scanning of insureds' IT environments.

A cyber underwriter receives a submission from an industrial company with 500 employees. He consults his cyber questionnaire: the company uses SCADA systems not segregated from the IT network, has no multi-factor authentication and no documented IR plan. The underwriter accepts the risk but reduces the limit from 5 M to 2 M euros and imposes a 100,000 euro deductible, reflected in the policy as underwriting terms.

underwriting, souscripteur, underwriter, sélection des risques