Underwriting capital is the most important asset of an insurer

General insurers manage a number of lines of business such as property, accident and health, motor, marine, aviation, transport and public liability. Activity in these markets may span a number of regions or countries. The biggest challenge for insurers is how to allocate their capital between these competing lines of business to achieve an effective balance of risk which maximises return on investment.

Increasingly geography is used by insurers to analyse their portfolios taking into account:

• Historic & projected premiums by market and territory
• Take up of domestic and commercial insurance by demographic type or industry classification
• Claims history
• Location specific exposure or risk accumulation

This analysis is used is to decide how and where to deploy underwriting capacity and how to price risk.

Geographic analysis is also used by insurers to review the performance of their brokers. Whilst the level of domestic business generated from Internet sites has grown steadily to 31% of all premium business, independent advisors still accounted for 40% of domestic business and 80% of commercial insurance premiums in 2010. Areas of interest include:

• The volume and quality of business written
• The cost of claims generated 
• Broker profitability and return on investment

Location intelligence is now an integral part of business processes used to:

• Allocate capital to markets and territories
• Price risk responsibly
• Minimise exposure to risk
• Utilise re-insurance capacity effectively

This ensures that insurers utilise underwriting capacity to maximise their return on capital employed.

The processes used to evaluate risk and to track capital allocated to markets and locations provides a transparent method of assessing exposure in compliance with Solvency II legislation.