Finite Reinsurance
This presentation is the property of its rightful owner.
Sponsored Links
1 / 9

A Buyer’s Perspective PowerPoint PPT Presentation


  • 57 Views
  • Uploaded on
  • Presentation posted in: General

Finite Reinsurance Discussion and Demonstration. A Buyer’s Perspective. Finite/Blended Risk Transfer – A Buyer’s Perspective Overview. Risk-Transfer Spectrum. Full Risk-transfer. Probability Weighted Economic Cost. Structured. Blended. Finite. Reduction in Economic Volatility.

Download Presentation

A Buyer’s Perspective

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


A buyer s perspective

Finite Reinsurance

Discussion and

Demonstration

A Buyer’s Perspective


A buyer s perspective

Finite/Blended Risk Transfer – A Buyer’s PerspectiveOverview

Risk-Transfer Spectrum

Full Risk-transfer

Probability

Weighted

Economic Cost

Structured

Blended

Finite

Reduction in

Economic Volatility


Finite blended risk transfer a buyer s perspective overview

Finite/Blended Risk Transfer – A Buyer’s PerspectiveOverview

  • Evolved because traditional reinsurance does not work for all levels of coverage, capacity, and pricing

  • More conducive to frequency/working layers than severity/excess layers

  • More effective with long-tailed exposures and favorable interest rate environment

  • Less risk-transfer involved than traditional reinsurance

  • Designed to meet financial objectives

  • Desire to smooth results over multiple years


Finite blended risk transfer a buyer s perspective program features

Finite/Blended Risk Transfer – A Buyer’s PerspectiveProgram Features

  • Customized risk transfer

    • Increased flexibility and innovation

  • Experience account

    • Funds transferred

    • Funds withheld

  • Upside/Downside

    • Additional premiums

    • Profit Commissions


Finite blended risk transfer a buyer s perspective examples of programs

Finite/Blended Risk Transfer – A Buyer’s PerspectiveExamples of Programs

  • Aggregate Stop Loss Cover

    • Increase Confidence in Projected Earnings

    • Customize level/amount of risk transfer

  • LPT/Adverse Development Covers

    • Management of net leverage

    • Release capital from operations

    • Wall off results of continuing operations from discontinuing operations


Finite blended risk transfer a buyer s perspective aggregate stop loss example

Finite/Blended Risk Transfer – A Buyer’s PerspectiveAggregate Stop Loss Example

Plan Loss

Ratio

Used to Reduce Volatility

Incremental Probability

Coverage

Loss Ratio


A buyer s perspective

Finite/Blended Risk Transfer – A Buyer’s PerspectiveAggregate Stop Loss Example

  • A company writes $500 million of casualty business at a planned 100% combined ratio.

  • The planned loss ratio is 65%, with CV of 22%.

  • The objective is to reduce the variability of the actual combined ratio, in the event of adverse experience.

  • Features of the proposed structure:

    • Attachment point of 65%, Limit of 85%

    • Net premium equal to 55% of ceded losses

    • Funds withheld at a 4.5% interest credit

    • Premiums grossed up for a 40% ceding commission


A buyer s perspective

Finite/Blended Risk Transfer – A Buyer’s PerspectiveAggregate Stop Loss Example

  • Proposed structure provides a nearly 4% reduction to combined ratio at plan +10%.

Pre-Aggregate

Post-Aggregate

Combined

Expected

Cover

Ceded

Cover

Ratio

Underwriting

PV Profit

Income

Scenario

Combined Ratio

Premium

Losses

Expenses

Combined Ratio

Benefit

Benefit

Commission

(Loss)

Plan+10%

110.0%

45,833

50,000

18,333

106.1%

3.9%

22,500

5,132

2,750

Plan +11%

111.0%

50,417

55,000

20,167

106.7%

4.3%

24,750

5,187

3,025

Plan +12%

112.0%

55,000

60,000

22,000

107.4%

4.6%

27,000

5,242

3,300

Plan +15%

115.0%

68,750

75,000

27,500

109.6%

5.4%

33,750

5,405

4,125

Plan + 20%

120.0%

91,667

100,000

36,667

113.5%

6.5%

45,000

5,228

5,500

91,667

45,000

Plan + 30%

130.0%

100,000

36,667

125.7%

4.3%

0

(9,370)


A buyer s perspective

Finite/Blended Risk Transfer – A Buyer’s PerspectiveSummary

  • Alternative Reinsurance

    • Designed to achieve various financial statement objectives

    • Complement traditional reinsurance programs

    • Reduces financial risks such as credit, investment and timing risks


  • Login