Legal Definitions - accommodation acceptance

An accommodation line in insurance refers to one or more insurance policies that an insurance company issues for a risk that it would typically decline or underwrite differently based on its standard criteria. The insurer makes an exception to its usual rules primarily to maintain a valuable business relationship with a key agent, broker, or a significant customer. This practice prioritizes the long-term strategic value of the relationship over the immediate risk assessment of that particular policy.

• Example 1: Retaining a Valued Corporate Client

  A large manufacturing company has been a loyal client of "SecureShield Insurance" for over two decades, insuring all its factories, equipment, and vehicle fleets. When the company decides to launch a new, experimental division focused on developing highly specialized, unproven robotics, SecureShield's underwriting department initially flags the new venture as too high-risk and outside their standard acceptable parameters. However, to avoid losing the entire, highly profitable manufacturing account to a competitor, SecureShield's executive team decides to issue a comprehensive policy for the new robotics division, making a special exception to their usual risk assessment protocols.

  This illustrates an accommodation line because SecureShield insures the riskier, experimental robotics division, not because it perfectly aligns with their standard underwriting guidelines, but to preserve the much larger and long-standing business relationship with their valued manufacturing client.

• Example 2: Supporting a Key Brokerage Partner

  "Elite Brokers Inc." is a top-performing brokerage firm that consistently brings a substantial volume of high-quality, profitable business to "Reliable Underwriters." One of Elite Brokers' new clients is a small, innovative startup developing a unique form of biodegradable packaging, whose long-term liability profile is somewhat uncertain due to the novelty of the materials. Reliable Underwriters' standard policy for new businesses typically requires a more established track record. However, to strengthen their partnership with Elite Brokers and ensure they continue to refer valuable clients, Reliable Underwriters agrees to provide the necessary liability coverage for the startup, despite the slightly elevated and less predictable risk.

  Here, Reliable Underwriters provides an accommodation line by insuring the startup with an ambiguous risk profile. They do this primarily to maintain and enhance their crucial business relationship with Elite Brokers Inc., a significant source of their overall business, rather than strictly adhering to their usual stringent new business underwriting rules.

• Example 3: Consolidating Business for a Major Account

  "Global Conglomerate Holdings" decides to consolidate all its diverse insurance needs—ranging from property and casualty to professional liability across its dozens of subsidiaries—with a single provider, "Apex Insurance." While Apex is eager to secure this massive, lucrative account, one of Global Conglomerate's smaller subsidiaries operates a niche, high-risk deep-sea exploration venture, a type of specialized risk Apex typically avoids due to its complexity and limited actuarial data. To win the entire, highly sought-after Global Conglomerate contract, Apex agrees to underwrite the deep-sea exploration subsidiary, even though it falls outside their usual scope of acceptable risks.

  Apex Insurance issues an accommodation line for the deep-sea exploration venture. They accept this unusual and typically avoided risk because the strategic value of securing the entire, comprehensive insurance contract from Global Conglomerate Holdings outweighs the specific risk assessment of that single, specialized policy.