Casualty Insurance Fundamentals

This is not sarcasm! Casualty insurance is a surprisingly interesting field.

Welcome to the exciting world of casualty insurance!

At Ledger Investing, we’re intensely interested in better modeling and understanding portfolios of casualty insurance risks, as well as the casualty insurance marketplace as a whole.

We even do this education internally – most of our data science and engineering staff came to Ledger without any prior experience in the insurance industry!

The core of our business model is using cutting-edge statistics and technology to more accurately and transparently assess casualty risks, and to bring new sources of capital to the insurance market. In so doing, we spend a lot of time educating people about the casualty insurance market.

This book provides a brief introduction to the basic concepts of casualty insurance from a risk- and data-oriented perspective. We talk about how insurance policies are structured, what sorts of information about policies and claims are collected, and how this information is aggregated into useful metrics for assess risk. Essentially all of this material is common knowledge in the actuarial community, but we were unable to find any publicly available resources that weren’t either extremely simplistic or painfully dry. To solve this problem, we did what startups do and built our own solution: this book.

This book doesn’t spend any time covering the statistical models that we use to assess and forecast insurance risks. We made this decision for a couple of reasons. First, the statistical methods we use involve some fairly in-depth mathematics, and the audience of people who want to understand them fully is smaller than the audience of people who just want to understand insurance data and draw their own conclusions. Second, although we are very open about the statistical methods we use, we do use methods and models that are not at all common in the insurance industry. Our separation of data and modeling discussions makes it easier to tell when we are sharing industry-standard information, and when we are expressing points of view that are more distinctly Ledger’s.

Let’s get started!