The art of underwriting is evolving: Structured facilities

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The potential long-term effects of structured facilities, with their potent combination of excess capital and smart data analytics, are the talk of the market.

In simple terms, these are co-insurance agreements where the insurer automatically takes a share of a particular line or account based on pre-agreed criteria. This, in effect, bypasses the individual risk selection process - a core principle on which the market was built. With more deals being mooted, it's certainly not a minor issue.

This short article studies how the growing popularity of structured facilities could have a significant impact on the way underwriters work.