Risk Modelling Underwriting Risk Management

Underwriting risk on motor vehicle insurance companies in recent years has increased gradually. Occidental insurance for example as of June 2015 made the highest loss of 686 millions. Managing this risk has become a subject due to the financial crises of 2002 to 2014 and use of inappropriate methods in pricing of premiums and claim calculation. Greece for example has faced challenges whereby there is weaknesses of risk management leading to loan obligation becoming greater than G.D.P. Despite the existence of risk modelling in occidental insurance by use of deterministic models they have not yet employed the use of stochastic or simulation models leading to these losses. United Kingdom (UK), USA and India have practiced risk management whereby the UK has employed Solvency II model and stochastic models. This has assisted in the eradication of risk in the UK. Risk modelling is rarely used in computation of aggregate claims. The Kenyan insurance industry has not yet employed this modelling. The main objective of this book study was to apply risk modelling as an underwriting risk management strategy in Occidental insurance company and the insurance industry at large.