An insight into our approach to risk: frequency versus severity

Risk management is at the core of how insurance companies drive their business. Following the Solvency 2 Directive, which governs the EU insurance market, risk management has become an even more important part of the decision-making and organizational process of any insurance company.

CertAsig has a very clear and well-defined risk management system, which is derived from our strategy and business model, and shapes the way we approach, evaluate and build our quotes and offers for our clients.

As in any insurance company, our main risk is the underwriting risk, which needs specific assessment techniques and mitigation actions.

How CertAsig deals with underwriting risk

Our first step in analysing underwriting risk starts with the decision on what we want to underwrite (which risks will we cover by the products we offer), followed by establishing our appetite for risk in specific segments.

We operate in markets which are heavily dominated by motor insurance products, but CertAsig chooses to focus on other products, which require superior business expertise, such as: engineering, bonds, marine, liability, accidents.

CertAsig seeks to balance and spread its risks in two main categories. There are low frequency – high impact risks, such as those related to marine, engineering and performance bonds (infrastructure projects) classes. The second category on which we focus is high frequency – low impact risks, as on classes of liability, accidents and property.

Risk Impact

In the case of our products which cover low frequency – high impact risks, our guiding lines are prudent underwriting, permanent supervision and prompt decisions in case of loss ratio increase.

Potential claims in this category have high impact, for instance the case of Fortuna S, a cargo vessel which run aground in the Danube channel Sulina in October 2014, an event which led to a 4.000.000 USD claim (the highest in Romania that year) and a 2-years rescue and site clean-up operation which CertAsig actively managed and co-ordinated.

In contractual bonds, where we are the largest player in Romania and Bulgaria, we have another clear zone of high impact risks. We have worked for major construction companies, on large scale infrastructure projects, so naturally, the risks are equally large scale.

We have insured construction projects of highways and national roads, ring roads infrastructure, major bridges, water treatment plants etc. Among our clients we can count renowned companies like Astaldi, Aktor, Alstom, Delta ACM, Constructii SA, Maltauro, Pizzarotti, Constructii Erbasu and the list goes on and on.

To mitigate underwriting risks which could arise, CertAsig uses measures including:

  • clear marine underwriting guidelines, taking into account criteria such as age of vessels, crew compensation scales, navigating areas etc.
  • engineering policies and performance bonds, CertAsig performs risk surveys not only before taking the risk in insurance, but also during the insurance contract period, to identify potential risks of delays in performance
  • detailed bond underwriting guidelines, a scoring model and performance matrix which are periodically updated, introduced several new collaterals.

In addition to all these measures, we have a not-so-secret defence weapon in our arsenal:  our reinsurance

partners.  CertAsig uses reinsurance as the main risk mitigation technique, to minimise the severity of


We have strong reinsurance partners, rated A- or better by S&P or AM Best.  In our case, reinsurance covers both individual claims and multiple policies claims, such as CAT treaty (catastrophic risks).

In conclusion…

Insurance business is a very dynamic one, our business is to make things less unpredictable for our clients, so we have built a creative and experienced team which thrives on challenges, on finding solutions to mitigate and control the risks we take. After all, where there is risk, there is opportunity for all of us.