PGI Commercial Lines Underwriting 1 — Questions and Answers
Question 1: What factors does an underwriter consider when assessing a commercial property risk in Singapore?
- Only the sum insured and location
- Construction type, occupancy, fire protection, exposure to neighboring risks, management quality, and claims history (Correct answer)
- Only the insured's credit rating
- Only the age of the building
Correct answer: Construction type, occupancy, fire protection, exposure to neighboring risks, management quality, and claims history
Commercial property underwriting considers COPE factors: Construction (materials, age), Occupancy (what the building is used for), Protection (fire suppression, sprinklers, alarms), and Exposure (proximity to neighboring hazards), plus management and claims history.
Question 2: What is 'highly protected risk' (HPR) designation in commercial property insurance?
- Property in government-protected areas
- Property with superior fire protection systems and management quality, qualifying for preferred underwriting terms (Correct answer)
- Property insured for very high sums
- Property owned by financial institutions
Correct answer: Property with superior fire protection systems and management quality, qualifying for preferred underwriting terms
HPR designation applies to commercial properties with excellent fire protection systems (sprinklers, detection), strong risk management practices, and quality building construction — warranting preferential underwriting terms from specialist HPR insurers.
Question 3: In marine cargo underwriting, what does 'inherent vice' mean?
- Criminal activity during cargo transit
- The natural tendency of certain goods to deteriorate or cause loss without external cause (Correct answer)
- Vice found in marine vessel crews
- Intentional damage to cargo
Correct answer: The natural tendency of certain goods to deteriorate or cause loss without external cause
Inherent vice is the natural tendency of certain goods to deteriorate, ferment, rust, or otherwise damage themselves due to their own properties — for example, fruit rotting, metal rusting, or chemicals reacting. This is typically excluded from marine cargo policies.
Question 4: What is 'accumulation risk' in underwriting and why is it a concern?
- Risk of accumulating too many renewal policies
- The concentration of insured risk in one location or from one peril, which could cause multiple policies to produce large simultaneous losses (Correct answer)
- Risk of accumulating unpaid premiums
- The risk of agents accumulating too many clients
Correct answer: The concentration of insured risk in one location or from one peril, which could cause multiple policies to produce large simultaneous losses
Accumulation risk occurs when multiple insured risks share the same geographic area, industry, or peril. A single catastrophic event could trigger massive simultaneous claims across the accumulated portfolio, threatening the insurer's financial position.
Question 5: What is 'industrial all risks' (IAR) insurance and what does it typically cover?
- Insurance for industrial workers only
- Comprehensive property coverage for industrial plants, machinery, and equipment against accidental physical damage, with optional business interruption (Correct answer)
- Coverage only for machinery breakdown
- Fire and flood coverage for factories only
Correct answer: Comprehensive property coverage for industrial plants, machinery, and equipment against accidental physical damage, with optional business interruption
Industrial All Risks (IAR) insurance provides comprehensive property coverage for industrial facilities, covering accidental physical damage to buildings, plant, and machinery from any cause except specifically excluded perils, typically with optional business interruption extension.
Question 6: What is 'terrorism cover' in a commercial property policy and why is it often excluded in standard policies?
- It is always included as standard coverage
- Terrorism damage is excluded from standard property policies due to potential catastrophic scale and unpredictability, requiring separate terrorism coverage (Correct answer)
- Terrorism is covered under war risk extensions
- Terrorism coverage is mandatory in Singapore
Correct answer: Terrorism damage is excluded from standard property policies due to potential catastrophic scale and unpredictability, requiring separate terrorism coverage
Standard commercial property policies typically exclude terrorism because the potential scale is catastrophic and unpredictable, making it impossible to price conventionally. Separate terrorism policies or government-backed schemes are available in Singapore.
PGI Commercial Lines Underwriting 1
What factors does an underwriter consider when assessing a commercial property risk in Singapore?