Commercial, Property, Liability and Specialty Underwriting

Introduction

Commercial underwriting converts information about an organisation’s assets, operations, contractual obligations and external environment into decisions about coverage, limits, conditions, risk improvement and price. Unlike personal insurance, commercial risks may involve interconnected premises, high-value machinery, global supply chains, catastrophic liability and lengthy interruption losses. A single event can trigger several policies simultaneously.

The underwriter must therefore look beyond the immediate insured object. A factory fire may damage buildings and machinery, suspend earnings, delay customers, cause pollution, expose directors to litigation and activate cyber incident-response costs. Sound underwriting combines exposure analysis, engineering surveys, financial analysis, policy design and accumulation control.

Learning Objectives

After studying this chapter, students should be able to:

1. Analyse property, business interruption, engineering, marine, aviation, liability, cyber and professional exposures.
2. Distinguish hazards, perils, controls and loss consequences.
3. Interpret surveys and estimate credible loss scenarios.
4. Apply average, deductible, policy-limit and business-interruption calculations correctly.
5. Evaluate occurrence-based and claims-made liability structures.
6. Identify geographical, technological and supply-chain accumulations.
7. Recommend proportionate risk improvements and policy conditions.
8. Recognise governance, ethical, regulatory and technological issues in commercial underwriting.

1. An Integrated Underwriting Framework

A useful starting framework is:

Exposure → Peril → Hazard → Control → Consequence → Insurance response

An exposure is a person, asset, activity or financial interest capable of generating loss. A peril is the immediate cause, such as fire, collision or cyber intrusion. A hazard increases the probability or severity of loss. Controls prevent events, detect them, contain damage or support recovery.

For example, combustible stock is an exposure; fire is the peril; poor electrical maintenance is a hazard; automatic sprinklers are a control; and property damage plus interruption of operations are consequences.

Commercial underwriting normally follows six connected stages:

1. Submission validation: establish the identity of the insured, insurable interest, requested coverage and completeness of information.
2. Exposure identification: map locations, assets, activities, contracts, people, technology and supply chains.
3. Hazard and control assessment: examine construction, processes, governance, maintenance and emergency arrangements.
4. Loss scenario analysis: estimate frequency, severity, probable maximum loss and accumulation.
5. Insurance design and pricing: choose coverage, deductibles, limits, exclusions, conditions and premium.
6. Monitoring and improvement: require risk treatment, confirm compliance and reassess material changes.

Figure: Commercial underwriting is a controlled cycle rather than a one-time pricing exercise.

2. Exposure Analysis, Surveys and Loss Scenarios

2.1 Information sources

Relevant information includes proposal forms, audited accounts, asset registers, site plans, engineering reports, catastrophe maps, claims records, contracts, maintenance logs, business-continuity plans and cybersecurity assessments. Each source has limitations. Asset registers may contain historic rather than replacement values, and a favourable claims history may simply reflect a short observation period.

The underwriter should reconcile information across sources. Revenue in the business-interruption declaration, for example, should be broadly consistent with financial accounts and expected growth.

2.2 Risk surveys

A survey provides systematic evidence about physical and operational conditions. A property and engineering survey may examine:

• construction, compartmentation and occupancy;
• combustible loading and ignition sources;
• fire detection, alarms, water supplies and sprinklers;
• flood, storm, earthquake and subsidence exposure;
• machinery age, maintenance and protective devices;
• utilities and single points of failure;
• housekeeping, hot-work controls and emergency response;
• interdependencies between locations and suppliers.

Survey findings should distinguish verified facts, assumptions and recommendations. A survey does not guarantee safety and should not be represented as regulatory certification unless it legally performs that function.

2.3 Frequency, severity and expected loss

If N is the number of claims in a period and X_i is the severity of claim i, aggregate loss is S = ∑_i=1^NX_i. Under the special assumptions that severities are identically distributed and independent of claim count:

Here, E[N] is expected claim frequency per period and E[X] is mean claim severity in currency per claim. Their product has units of currency per period. The relationship is useful for attritional risks but may inadequately represent catastrophe dependence, inflation and sparse data.

A pure premium per exposure unit can be estimated as:

The commercial premium must also reflect expenses, capital costs, reinsurance, uncertainty and the insurer’s pricing objectives.

2.4 Maximum-loss concepts

Terminology varies across insurers, so definitions must be documented:

• Maximum foreseeable loss (MFL): an extreme credible loss assuming key protective systems fail and adverse circumstances occur, but excluding physically implausible outcomes.
• Probable maximum loss (PML): a severe loss under explicitly stated assumptions about event intensity and control performance.
• Estimated maximum loss (EML): a scenario-based maximum estimate under the insurer’s chosen operating assumptions.

These are not universal mathematical constants. A PML without its scenario, probability interpretation and control assumptions is unreliable.

2.5 Accumulation control

Accumulation occurs when one event affects several insured interests. Examples include properties in one floodplain, cargoes aboard one vessel, aircraft at one airport, firms using the same cloud provider and multiple insureds exposed to one defective product.

Control measures include geocoding, event-footprint modelling, vessel and flight tracking, supplier mapping, policy linkage, exposure limits, facultative reinsurance and portfolio stress testing. Underwriters must examine gross and net accumulations because deductibles, policy limits, treaty terms and reinstatements can materially alter the insurer’s retained loss.

3. Commercial Property Underwriting

Property insurance may cover buildings, contents, stock and machinery against specified or broadly defined accidental physical loss, subject to exclusions. Major underwriting dimensions include construction, occupancy, protection and external exposure, often abbreviated as COPE.

Values should normally reflect the policy’s valuation basis, such as replacement cost, reinstatement value, indemnity value or agreed value. Inflation, debris removal, professional fees, code upgrades and stock seasonality may require specific allowances.

3.1 Average or coinsurance condition

Where a policy applies average, underinsurance reduces the claim proportionally. The exact wording and jurisdiction govern calculation. For a common structure in which the deductible is subtracted after applying average, a non-negative, policy-limited settlement is:

where:

• P = claim payment in currency;
• C = applicable policy limit or sublimit in currency;
• L = covered loss before average and deductible in currency;
• S = declared sum insured relevant to the property in currency;
• V = value that should have been insured under the policy basis in currency;
• D = applicable deductible in currency.

The formula assumes V > 0, L ≥ 0 and D ≥ 0. The inner minimum prevents overinsurance from increasing the loss, the maximum provides a zero floor, and the outer minimum enforces the loss and policy caps. Some contracts apply deductibles before average, use a stated coinsurance percentage or contain special limit rules; their wording must replace this model.

Worked example. A building should have been insured for $5,000,000 but was declared for $3,000,000. A covered loss is $1,200,000, the deductible is $50,000, and the applicable limit is $3,000,000.

The amount after average is $720,000. After the deductible, payment is $670,000. This is below both the loss and the applicable limit, so the settlement is $670,000.

4. Business Interruption Underwriting

Business interruption (BI) insurance protects an earnings or revenue-related interest during disruption, usually following insured physical damage unless non-damage cover is specifically granted. The underwriter must understand how the business earns money, not merely its annual turnover.

Key questions include:

• Which premises, suppliers, customers and utilities are critical?
• How long will debris removal, design, permitting, replacement and recommissioning take?
• Are specialist machines subject to long lead times?
• Can work be transferred, outsourced or performed remotely?
• Is demand postponed, permanently lost or increased after recovery?
• Does the indemnity period extend beyond physical reinstatement?

Under a turnover-based gross-profit wording, the gross profit rate generally represents insured gross profit divided by turnover, using the policy’s definitions. Accounting gross profit and insured gross profit may differ.

A simplified claim model is:

Increased cost of working (ICOW) is additional expenditure reasonably incurred to reduce the insured loss. Ordinary ICOW is commonly limited to the amount of insured loss avoided, although additional increased cost may be insured under a separate extension. The result remains subject to the indemnity period, policy limit, causation, trends adjustments and any average condition.

Worked BI example with economic-limit verification

A business expected revenue of $4,000,000 during an interruption period. Without mitigation, it would have earned $1,900,000. It spent $150,000 on temporary production, increasing actual revenue to $2,500,000. The insured gross profit rate is 35%, and insured expense savings are $25,000.

The mitigation restored revenue of:

The insured loss avoided was:

Because the $150,000 ICOW is less than the $210,000 loss avoided, it satisfies the assumed economic-limit test. The post-mitigation reduction in turnover is $1,500,000, giving:

Subject to all other terms and an adequate limit, the BI loss is $650,000. Without proof of at least $150,000 in avoided insured loss, full ICOW recovery could not be assumed.

A planning estimate for an 18-month gross-profit sum insured may start with annual insured gross profit multiplied by 18 ÷ 12, then adjusted for expected growth. It is not a universal claim formula because policy definitions and trends clauses differ.

5. Engineering Insurance

Engineering insurance addresses machinery breakdown, electronic equipment, boilers and pressure vessels, construction, erection and related delay exposures. Unlike ordinary wear, insured breakdown usually requires sudden and accidental physical damage as defined by the policy.

Important factors include:

• design and operating environment;
• age, duty cycle and maintenance quality;
• vibration, lubrication and temperature monitoring;
• pressure-relief and shutdown systems;
• operator competence and statutory inspection;
• spare-parts availability and original-equipment support;
• prototype features and serial defects;
• testing and commissioning hazards.

Contract works underwriting changes as construction progresses. Excavation dominates early stages; structural collapse and storm exposure increase during erection; fire loading rises during finishing; and testing may create the highest machinery exposure.

Delay in start-up (DSU) or advance loss of profits covers delayed earnings following insured project damage. Underwriting requires the critical-path schedule, revenue assumptions, debt obligations, replacement lead times and available schedule float. A delayed component causes insured delay only to the extent that it affects the project’s critical path under the wording.

6. Marine and Aviation Underwriting

6.1 Marine risks

Marine cargo underwriting considers commodity susceptibility, packing, transit route, mode, storage, conveyance, season, theft exposure and loss experience. Incoterms allocate certain delivery, cost and risk responsibilities between trading parties, but they do not by themselves establish every term of insurance coverage.

Cargo accumulation can occur at ports, warehouses, container yards and aboard a single vessel. Temperature-sensitive goods require validated refrigeration, monitoring, contingency power and prompt response procedures.

Hull underwriting examines vessel type, age, classification, flag, management, trading area, machinery and casualty history. Protection and indemnity exposures may include crew injury, collision liability, pollution and cargo liability.

6.2 Aviation risks

Aviation underwriting covers hull, passenger and third-party liability and may extend to airports, manufacturers and service providers. Relevant factors include aircraft type and value, fleet age, pilot training, utilisation, maintenance, routes, weather, airport quality and geopolitical exposure.

Severity can be extreme because one accident may cause total hull loss and multiple fatalities. Accumulation also arises when several aircraft are parked at one airport during hail, windstorm, conflict or ground-handling events. Underwriters therefore examine maximum passenger capacity, liability jurisdiction and catastrophe concentration rather than relying only on historical accident frequency.

7. Liability and Professional Risks

Liability insurance responds to legally recognised obligations, defence costs and related expenses according to the wording. The underwriter considers duty, breach, causation, injury or damage, defences and potential remedies.

Major classes include public liability, products liability, employers’ liability, environmental liability, directors’ and officers’ liability and professional indemnity. Liability is often long-tail: claims may emerge or develop years after the underlying conduct. Medical inflation, legal-cost inflation and changing judicial attitudes can amplify severity.

7.1 Occurrence and claims-made structures

An occurrence-based policy is generally triggered by injury or damage occurring during the policy period, even if the claim is presented later, subject to wording and limitation laws.

Under a claims-made policy, the claim must usually first be made against the insured during the policy period. The insured must also comply with the policy’s reporting requirements, which may require reporting during the period or within a specified extended reporting period. A retroactive date may exclude conduct occurring before that date.

A claim and a circumstance are not identical. A valid notification of a circumstance during the policy period may, if the wording’s requirements are satisfied, cause a later related claim to be treated as made during that earlier period. Merely knowing of a problem or mentioning it informally does not necessarily constitute compliant notification. Underwriters must assess continuity, retroactive dates, prior-known circumstances, related-claims clauses and reporting provisions.

7.2 Professional indemnity

Professional risk depends on the service provided, client profile, contract terms, project size, quality controls and the financial consequences of error. An architect’s design defect, an accountant’s negligent audit and a technology consultant’s failed implementation produce different loss pathways.

Controls include peer review, engagement letters, scope definition, conflict checks, document retention, complaint escalation and contractual limitation of liability where legally enforceable. Underwriters should examine both technical competence and the insured’s ability to prevent disputes.

8. Cyber and Other Specialty Risks

Cyber insurance may include incident response, data restoration, business interruption, cyber extortion, privacy liability, regulatory defence where insurable, and liability arising from network security failure. Coverage varies substantially.

Core underwriting dimensions include:

• asset and data inventory;
• multifactor authentication, especially for remote and privileged access;
• offline or immutable backups and restoration testing;
• patch and vulnerability management;
• endpoint detection, logging and network segmentation;
• employee awareness and payment-verification controls;
• vendor, cloud and managed-service dependencies;
• incident-response and business-continuity capability.

Cyber accumulation challenges conventional diversification. A vulnerability in widely used software or failure of a major cloud provider can affect thousands of policyholders. Underwriters may use sublimits, waiting periods, coinsurance, systemic-event exclusions and portfolio scenarios, but ambiguous restrictions create conduct and reputation risks. The interaction between cyber events and traditional property or liability policies—sometimes called silent or non-affirmative cyber exposure—must be clarified.

Other specialty classes include crime, political risk, trade credit, product recall, event cancellation, kidnap and ransom, renewable energy and intellectual-property risks. Each requires a tailored causal model. Product recall underwriting, for example, combines manufacturing controls, traceability, regulatory obligations, brand sensitivity and supply-chain reach.

9. Policy Architecture and Risk-Improvement Decisions

A policy is a structured allocation of risk rather than a list of insured perils. Important components include:

A higher deductible may align incentives and reduce attritional claims, but it does not correct severe fire accumulation or defective governance. Likewise, an exclusion may control uncertainty but leave the insurance commercially unsuitable. Terms should respond to identified exposure and should be communicated clearly.

Risk recommendations can be prioritised using the control hierarchy:

1. eliminate the hazardous activity where feasible;
2. substitute a safer material or method;
3. introduce engineering controls;
4. strengthen administrative controls and training;
5. improve emergency response and recovery.

Each recommendation should specify the deficiency, required action, responsible party, completion date and verification evidence. Critical safeguards may justify a condition precedent, warranty or suspension mechanism only where legally valid and proportionate. Minor housekeeping issues should not automatically be converted into broad coverage restrictions.

10. Illustrative Integrated Case: Meridian Components Ltd.

Background

This fictional case concerns Meridian Components Ltd., a manufacturer operating from two adjoining units beside a river. It seeks property, BI, machinery breakdown, products liability and cyber insurance. Replacement values are $18 million for buildings, $12 million for stock and $10 million for machinery. Annual insured gross profit is forecast at $18 million.

Problem

The proposal requests a $30 million blanket property limit and a $20 million BI limit with an 18-month indemnity period. The survey identifies impaired sprinklers in one unit, weak fire separation, a single transformer, a nine-month replacement time for a customised production line and moderate flood exposure. Both units share network infrastructure and one cloud-based production platform.

Analysis

Total declared property value should be $40 million before considering additional allowances. A $30 million limit could be inadequate and may also activate average if the wording applies it.

The initial 18-month BI planning value, before growth adjustment, is:

Applying forecast growth of 5% gives:

The requested $20 million BI limit is therefore materially below this planning estimate.

A credible fire scenario produces $9 million building damage, $10 million stock damage and $7 million machinery damage, totalling $26 million property damage. Estimated BI loss is $12 million. The combined gross scenario is therefore $38 million before deductibles and policy restrictions. Because the units lack effective separation, they cannot be treated as independent fire risks.

The single transformer and customised line create engineering and BI bottlenecks. River flooding could damage both units simultaneously. Shared cloud infrastructure creates a cyber accumulation that is not resolved by physical separation.

Approach and Solution

The underwriter proposes:

• property values aligned with the verified $40 million replacement exposure, plus separately assessed fees and debris-removal allowances;
• a BI limit based on validated financial projections and an 18-month restoration scenario, with consideration of a longer period if permitting or line replacement could exceed 18 months;
• sprinkler restoration before inception or tightly controlled interim terms;
• tested fire compartmentation between units;
• flood barriers, raised electrical controls and a documented flood-response plan;
• a spare-transformer strategy and supplier agreement for critical machinery components;
• network segmentation, multifactor authentication and tested offline backups;
• products-liability review of quality assurance, traceability and recall procedures;
• catastrophe and cyber-accumulation coding for portfolio control.

Outcome

The insurer offers conditional terms after management accepts the critical fire and cyber actions. The revised programme uses adequate declared values, a higher BI limit, a flood deductible reflecting local exposure and engineering sublimits consistent with replacement lead times. Completion evidence is reviewed within agreed deadlines.

Learning Points

The case demonstrates that underwriting cannot be divided into isolated policy silos. Property damage, engineering failure, BI and cyber dependency share common bottlenecks. Accurate values alone are insufficient: scenario severity, recovery time, control reliability and portfolio accumulation determine whether the risk is acceptable.

11. Governance, Ethics and Regulation

Commercial underwriting must operate within delegated authority, solvency requirements, licensing rules, sanctions controls, anti-money-laundering obligations, privacy law and applicable insurance-contract law. Requirements vary by jurisdiction.

Ethical underwriting requires honest communication, consistent treatment, protection of confidential data and avoidance of arbitrary discrimination. Risk differentiation should rest on relevant evidence rather than prohibited or unjustifiable proxies. The file should explain why material terms, exclusions or declinations follow from the exposure.

Conflicts may arise when sales pressure encourages inadequate pricing or when a surveyor’s commercial relationship threatens independence. Governance responses include peer review, referral thresholds, separation of duties and auditable approval records.

Artificial intelligence can extract information from submissions, interpret imagery, detect anomalies and support catastrophe modelling. However, model outputs may be biased, outdated or difficult to explain. Human accountability remains essential. Good governance includes data-quality controls, validation, drift monitoring, access security, explainability appropriate to the decision and procedures for overriding automated recommendations.

12. Contemporary Challenges and Best Practices

Climate change complicates the use of historical catastrophe data because hazard frequency and intensity may be non-stationary. Inflation increases replacement costs, liability awards and repair times. Global supply-chain concentration makes contingent BI more severe, while electrification introduces battery fire and emerging technology risks.

Best practice therefore includes:

• obtaining current, exposure-specific information;
• validating replacement and BI values;
• documenting scenario assumptions;
• stress-testing correlated losses;
• linking terms to identified risk drivers;
• tracking completion of recommendations;
• reviewing emerging legal, climate and technology trends;
• learning systematically from claims and near misses.

Models support—but do not replace—professional judgement. Sparse data, uncertain dependencies and changing conditions mean that precise numerical outputs can create false confidence. Defensible underwriting makes uncertainty visible and chooses terms robust to plausible adverse scenarios.

Chapter Summary

Commercial underwriting assesses assets, activities, dependencies and legal obligations through integrated exposure analysis. Property underwriting applies COPE analysis, sound valuation and credible loss scenarios. Average-condition settlements require a zero floor and applicable policy caps. BI underwriting examines earnings, recovery periods, mitigation and the economic limit on ordinary increased cost of working.

Engineering, marine and aviation risks require specialist attention to equipment, transit, operations and catastrophe concentration. Liability underwriting must distinguish occurrence and claims-made triggers and carefully separate claim reporting from notification of circumstances. Cyber and specialty underwriting extend analysis to technology dependence, systemic events and unusual causal pathways.

Surveys, accumulation controls, policy architecture and proportionate risk improvements allow the insurer to translate risk evidence into coverage, limits, deductibles, conditions and price. Effective practice also requires ethical judgement, regulatory compliance, transparent documentation and responsible use of technology.

Key Terms

Accumulation: Exposure of multiple insured interests to one event or common cause.

Average condition: A policy provision reducing recovery when the insured value is understated.

Business interruption: Cover for insured financial loss during disruption, subject to policy terms.

Claims-made policy: A policy generally triggered when a claim is first made during the covered period, with applicable reporting requirements.

COPE: Analysis of construction, occupancy, protection and external exposure.

Deductible: The amount of an insured loss retained by the policyholder.

Estimated maximum loss: A scenario-based estimate of severe loss under stated assumptions.

Hazard: A condition increasing the probability or severity of loss.

ICOW: Additional expenditure incurred to reduce an insured business-interruption loss.

Indemnity period: The maximum period for which covered BI consequences may be measured.

Occurrence policy: A policy generally triggered by injury or damage occurring during the policy period.

Peril: The immediate cause of loss.

Policy limit: The maximum amount payable under the relevant coverage, subject to wording.

Professional indemnity: Coverage for liability arising from alleged errors or omissions in professional services.

Retroactive date: The date before which relevant conduct is excluded under many claims-made policies.

Risk survey: A structured inspection and analysis of exposures, hazards and controls.

Sublimit: A lower limit applying to a specified category within broader coverage.

Waiting period: A time-based retention before certain coverage begins to respond.

Review Questions

Short Answer Questions

1. Distinguish an exposure, a peril and a hazard.
2. What four dimensions are assessed under COPE?
3. Why must a PML be accompanied by scenario assumptions?
4. What is the economic-limit test for ordinary ICOW?
5. What is meant by cyber accumulation?

Long Answer Questions

1. Explain the commercial underwriting cycle and the information required at each stage.
2. Discuss the major factors in property and business-interruption underwriting.
3. Compare the underwriting of engineering, marine and aviation risks.
4. Explain occurrence-based and claims-made liability coverage, including retroactive dates and circumstance notifications.
5. Evaluate the role of policy limits, deductibles, exclusions, conditions and risk recommendations in controlling insurer exposure.

Analytical / Application Questions

1. A property valued at $8 million is insured for $6 million. A covered loss is $2 million, the deductible is $100,000, and the applicable limit is $6 million. Assuming average applies before the deductible, calculate the settlement and explain each cap.
2. Analyse how one cloud-service failure could affect cyber, BI, professional indemnity and portfolio accumulation for an insurer.
3. Design an underwriting and risk-improvement plan for a food manufacturer exposed to refrigeration breakdown, contamination, product recall, flood and supply-chain interruption.

Multiple Choice Questions with Answers

Question 1

Which sequence best represents the integrated commercial underwriting process?

A. Price, claim, survey, reinsure, cancel

B. Validate, map exposures, assess controls, model losses, design cover, monitor

C. Survey, exclude all hazards, issue, close file

D. Advertise, bind, audit, litigate, renew

Correct Answer: B. Validate, map exposures, assess controls, model losses, design cover, monitor

Question 2

A property should be insured for $5,000,000 but is insured for $3,000,000. A covered loss is $1,200,000, the deductible is $50,000, and the applicable limit is $3,000,000. Average applies before the deductible. What is the settlement?

A. $670,000

B. $720,000

C. $1,150,000

D. $1,200,000

Correct Answer: A. $670,000

Question 3

A business spends $150,000 on mitigation and thereby avoids $210,000 of insured gross-profit loss. Under an ordinary ICOW economic-limit test, which conclusion is correct?

A. None of the expenditure can qualify because it exceeds $100,000

B. Only $60,000 can qualify

C. The full $150,000 may qualify, subject to other policy terms

D. The business automatically recovers $210,000 as ICOW

Correct Answer: C. The full $150,000 may qualify, subject to other policy terms

Question 4

Which factor most directly creates a business-interruption bottleneck?

A. A replaceable office chair

B. A customised production line with a nine-month replacement time

C. A diversified customer list

D. An unused storage room

Correct Answer: B. A customised production line with a nine-month replacement time

Question 5

Under a claims-made policy, which statement is most accurate?

A. Coverage depends only on when physical damage occurs

B. A claim must generally first be made during the covered period, and reporting requirements must also be satisfied

C. Every informal mention of a problem is automatically a valid claim

D. A retroactive date has no relevance

Correct Answer: B. A claim must generally first be made during the covered period, and reporting requirements must also be satisfied

Question 6

What may be the effect of validly notifying a circumstance under a claims-made policy?

A. It may cause a later related claim to be treated as made during the earlier policy period, subject to wording

B. It converts the policy into occurrence coverage

C. It guarantees payment of every later claim

D. It removes all policy limits

Correct Answer: A. It may cause a later related claim to be treated as made during the earlier policy period, subject to wording

Question 7

Which example best illustrates marine cargo accumulation?

A. One employee driving to work

B. Several insured cargoes stored at the same port during a cyclone

C. Two unrelated homes in different countries

D. A company reducing its stock level

Correct Answer: B. Several insured cargoes stored at the same port during a cyclone

Question 8

Which control most directly reduces the risk of unauthorised use of privileged cyber accounts?

A. Multifactor authentication

B. Increasing the property sum insured

C. Extending the marine route

D. Reducing fire compartmentation

Correct Answer: A. Multifactor authentication

Question 9

What is the main underwriting purpose of a deductible?

A. To guarantee that all losses are fully reimbursed

B. To retain a specified portion of loss with the insured

C. To increase the replacement value of property

D. To remove the policy limit

Correct Answer: B. To retain a specified portion of loss with the insured

Question 10

Annual insured gross profit is $18,000,000. Ignoring growth, what is the initial planning amount for an 18-month indemnity period?

A. $12,000,000

B. $18,000,000

C. $27,000,000

D. $36,000,000

Correct Answer: C. $27,000,000