Role A — Underwriter

Case Background

In the third year of a 5-year insurance agreement, a broker representing a client with 45 power plants requested changes to the policy terms. The broker argued that the insurance market had softened, meaning rates are now generally lower. They asked for:

  • 10% reduction in premium → $4.05M

  • 5% increase in commission → 20% ($810,000)

If Allied World agreed without adjusting other conditions, the company would incur an approximate 15% loss on its share of the deal.

Current Market Setup

  • Insurer A (Lead): 50% share

  • Insurer B: 20% share

  • Allied World: 30% share

Current Policy Details:

Claims History:

  • Year 1: $2M (turbine failure)

  • Year 2: $0

  • Year 3: $5M (fire damage)

You are the empowered decision-maker for Allied World. You have full authority to approve, reject, or modify the deal terms. Your role is to balance profitability with relationship management. You can call the shots—whether to proceed with the broker’s request, counter with new terms, or walk away from the deal.

Your mission: Protect Allied World’s interests while keeping the client engaged.

You want to keep the account but avoid setting a precedent for deep discounts and high commissions. Your minimum acceptable premium is $4.275M with 15% commission.

Goals:

·       Avoid loss: Keep net revenue ≥ $1.5M for Allied World.

·       Increase share to 50% for better premium volume, by taking over the 20% share from the second insurer.

·       Be the lead insurer.

·       Introduce higher deductible ($2M) and risk management conditions.

·       Offer rate stability for next 2 years.

·       Keep a good relationship with the main insurer and the broker.

·       Avoid setting a new standard for lower prices and high commissions that could hurt other deals.

Levers:

  • Capacity: Offer to be the lead insurer and -insurer if the broker agrees to price limits and terms.

  • Deductibles: Change the deductibles (the amount the client pays before insurance starts) and other rules to protect against big or common losses.

  • Service Add-ons: Offer extra help, like risk engineering and fast claims handling

Constraints/Guardrails:

·      A lowest price for the insurance (minimum premium $4.275M).

·      A highest limit for the broker’s pay (max 16% commission).

·      Any costs for ending the long-term deal.

·      Limits on total risk across all power plants.

·      Internal deadlines for getting the deal approved.