I'm not sure whether this has already been asked in a past exam papers, but does anybody know what are the advantages and disadvantages to the insurer and the reinsurer of these two bases for writing reinsurance? Are they they the same pros/cons of underwriting year vs accident year for insurance? Cheers
yes, same thing. I suppose that for reinsurance you may have added considerations, for example, it may be nice to have your reinsurance on an LOD basis if the underlying primarly business is also LOD.
Maybe I've got it wrong, but risks attaching during (RAD) is not the same as Losses Occurring During (LOD). The attached link gives an example describing the difference: http://www.irmi.com/expert/Articles/2003/Schiffer11.aspx My take on it, is that if you are a reinsurer LOD policies probably earn faster. I do, however, agree that it's sensible for insurers to have consistency between: a) the basis on which they have purchased RI cover; and b) the basis on which they offer cover to policyholders.
Think you've misread the first post, freesurf, Risks attaching is equivalent to UY, and LOD is equivalent to AY.
which basis is most common in industry? Is risk attaching common in lloyds so it ties into the funded accounts? Is LOD more common for commercial / personal lines?
Wouldn't like to say which is most common these days - I've seen both bases in Lloyd's and the company market. But if I was to guess, I'd say you're right, Moomanoid.
