Underwriting risk assessment in marine cargo insurance

Abstract

The unreliability of all complex systems or processes is mainly caused by the numerous of different activities, presence of sub-systems and interactions between the subsystems and different external or internal impacts, which may be constant or occasional. Any complex system, including the system of insurance business, is not fully foreseeable and is exposed to potential risks, which can be considerable. In their operations, the underwriters are facing the requests for cover of different types of risks. Underwriting in cargo insurance involves the analysis, selection and classification of insurance applications, assessment of clients' exposure to certain risks and definition of appropriate price of insurance coverage. Thus, the underwriting in cargo insurance tends to be a very risky process. In the insurance business, due to the complexity of business systems and the number of external influences, the different types of risk assessment is often done intuitively, based on experience or knowledge of individuals. The aim of this research is to present an approach to risk assessment in underwriting process on the marine cargo insurance market in Serbia. When had in mind the complexity of the analysed issue and the numerous of risks and risk parameters in underwriting on the one hand and faults of the representative statistical data on risks in underwriting process on the other hand, Fuzzy Analytic Hierarchy Process (FAHP) method can provide acceptable quantitative data. These data can be used for the development of appropriate measures and strategies at the national level, which can minimise or eliminate the identified risks.