Please can you confirm the correct Solvency II line of business for the allocation of liabilities emerging from pet insurance products? Market practice appears to differ (despite pet policies providing broadly similar cover), with some firms allocating this to medical expenses (on the basis that the key benefit is to cover vets bills), others to fire and other property damage (on the basis that pets are property), and others to miscellaneous financial loss. It appears that rationale can be constructed to support all three approaches, even for the same overall cover.
The differences in premium risk and reserve risk parameters within the Standard Formula are materially different for each, and so this can be very material for firms who write a large proportion of pet insurance.
Pet insurance products can have different objectives. For instance, “pet health insurance" and "pet liability insurance” can be distinguished.
Therefore, depending on the coverage of risk, pet insurance can be allocated to different lines of businesses, as generally indicated in the Guidelines on valuation of technical provisions.