A Practitioner's Approach to Marine Liability Pricing Using Generalised Linear Models

Marine Liability underwriters – notably those at the Protection and Indemnity (P&I) Clubs – have traditionally used empirical approaches based on individual risk experiences to arrive at their pricing. But P&I is a direct class of insurance and the underwriters have at their disposal significant data volumes. This means that it is more than possible to apply the kind of modelling techniques to P&I (and, for that matter, to other classes in the marine sector) that have become commonplace elsewhere in the General Insurance (Property & Casualty) world. In this paper we note the traditional methods, the data available and indicate how the Generalized Linear Modelling technique can be used to derive rating models that apply to Marine Liability business.