3. Reinsurance Flashcards
4 reasons insurers buy reinsurance
Risk transfer
Peace of mind
Balancing out peaks and troughs
Releasing capacity
Why sell reinsurance?
Accessing business not otherwise available
New classes of business
Business preference
Retention / retained line
Amount of original risk that insurer retains
Full follow clause
Insurer makes all claims decisions
Reinsurer has right to ask questions
Claims Co-operation Clause
Original insurer has to advise reinsurer of a loss and keep them informed during the handling of the claim
Reinsurer does not have right to interfere with claims handling strategy
Claims Control Clause
Reinsurer has full decision-making control and failure by the original insurer
Facultative obligatory reinsurance
Insurer makes an agreement that for all risks that it writes which fall within X criteria will be ceded to reinsurers.
(optional for insurers, obligatory for reinsurers)
Excess of loss
Non-proportional reinsurance
Coverage is bought / sold in layers not proportionally
Deposit premium
Down payment payable which can be adjusted sometime later, and might have to be partly refunded
Minimum premium
Lowest amount of premium payable on a contract, irrespective of later adjustment
Reinstatement
Triggers to to bring the policy layers back to life after a loss usually for the payment of additional premium
Collecting note
Document which sets out details of the event and indicate financial loss - to be presented to XL reinsurers for claims
Reinstatement premiums do not trigger brokerage fees
Fact
Stop loss reinsurance
Reinsurance for excessive combined ratios
Two types of proportional reinsurances
Quote share treaty
Surplus treaty
