definition of clash risk

[kiki]

Hi,

I am confused about the definition of "clash risk", in chapter 22, it suggested it is risk in the same class; whereas in chapter 23 (page 8). it suggested multi line of insurer / reinsurer may experience clash risk from exposure to potential losses from different parts of its portfolio.

example : if insurer writes D&O and credit line, both have exposure to bank of America, ie if bank of america default / downgrade lead to claim arise from D&O and credit lines, is clash risk ? according to the definition, it seems not as it is not the risk from same class (D&O and credit lines).

anyone can give me an example of clash risk please ?
thank you very much for your time

 

[Busy_Bee4422]

Hi
I have seen clash risk used to mean both scenarios ie

1. a single event resulting in multiple claims to the same class.
2. exposure to a single client resulting in multiple claims in different classes.

It would be better if you just google clash reinsurance cover to get more detail.

 

[kiki]

thank you. I am still confused about the definition given by the core reading as definition given in chapter 22 seems conflict with chapter 23.

as in chapter 22, suggested risks arise in the same class of business ; whereas in chapter 23, suggested risks can arise from different part of portfolio (ie imply different class of business) ?

 

[Busy_Bee4422]

Hi
They are not in conflict. These are two different examples of clash risk. I would broadly say it is the risk that a single exposure may result in multiple claims. The exposure may be an event or a client.