BK.Reins

Question 1

6 functions of reinsurance

Answer 1

Hint: cat - SWIGS

• CATatstrophe protection
  
  • reduce insurer’s potential loss from CAT events
• Stabilize loss exprience
  
  • reinsurance cut off the right tail of loss dist’n
• facilitate Withdraw from a market segment
  
  • off-loading risk to reinsurance is quicker than run-off
• Increase large-line capacity
  
  • insurer wants to limit exposure per policy, but portions of market demand more coverage
  • reinsurance increase capacity, but minimize associated risk
• Guidance from reinsurer
  
  • reinsurers with expertise of UW, pricing & reserving for a new makert that insurer wants to enter
• Surplus relief
  
  • reduce net leverage raio
  • net leverage ratio = (NWP + net liab)/Equity