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CHAPTER VI
JOINT UNDERWRITING AND EXCHANGE OF
UNDERWRITING INFORMATION
Joint underwriting arrangements are an established feature of many
insurance markets. Joint underwriting may result from economic and
market forces (e.g., risks are so substantial that they cannot prudently be
insured by any one company) or from legal requirements (e.g.,
state-mandated insurer cooperation to underwrite risks in so-called
residual or involuntary markets).
A. General Description of Joint Underwriting Arrangements
Joint underwriting arrangements take many different forms. The four
most common structures are described below.
Pools. Pools are associations of insurers or reinsurers each of which
has an interest or share in the business written by the pool.401 Pools
typically provide insurance or reinsurance for high-risk, unusual, or
specialized lines that single companies could not underwrite because they
lack either the capacity or the underwriting expertise, for example, aviation
insurance. By spreading risk, pools may permit (1) introduction of an
insurance product that could not be offered by single companies, (2)
additional capacity from insurers that could not enter the market on an
individual basis, or (3) lower rates because the pool can accept a lower risk
premium than could any single company. Pools also may offer specialized
engineering, inspection, loss prevention, or claims adjustment services that
individual insurers could not economically provide on a unilateral basis.402
Pools may issue policies in the name of the pool itself, in the name of
the members of the pool, or in the name of designated members (who are
then reinsured by the pool or its individual members). By their nature,
pools are designed to provide insurance for more than one transaction.
Pools may have an indefinite life or be renewed periodically by agreement
401. NATIONAL ASS’N OF INS. COMMISSIONERS REGULATION OF VOLUNTARY
UNDERWRITING AND REINSURANCE POOLS WHITE PAPER (2003)
[hereinafter NAIC REPORT] available at http://naic.org/
store_pub_whitepapers.htm#voluntary_underwrite.
402. See generally NAIC REPORT, supra note 1, at 1-10.
