Chapter 6 = reinsurance

Question 1

Compare facultative and treaty reinsurance

Answer 1

Facultative is insuring specigic risk, loookngn at accepting or declined. Covers specific risks. The reinsurance can negotiate terms and conditions for each individual contract The term of the reinsurance corresponds with the policy period and expires with the policy.. Requires u/w review of each risk before its accepted. Often purchased for losses exposres or risk that could development of significant loss exposure or unusual loss exposures or potentially catastrophic

Treaty is auto risk acceptance to the reinsurance. Could be on a proportional or non-proportional method This is broad ageeement between insurer and reinsurer. . The risk is automoatically accepted and transferred to reinsurer. . Treaties tend to be in force for long period of time . Does not require review of each risk before its accepted. . The reisurer will need to know the background knowledge of the insurer senior management people to ensure they have solid underwriting practices for good risk, loss control measures guidelines. reasonable objectives and inline with strategy

Question 2

list the factors that can affect an reinsurer business

Answer 2

global events and consolidates events
competition between insurers
competition from other reinsurers
insolvencies
corportate influence
rating agencies
emerging exposures
government and other influences
reinsurance trust agreement

Question 3

global events

Answer 3

reviewin g its underwriting strategy, to restrict business from certain product, LOB. territory or provide exclusions to certain events

Question 4

competition between insurers

Answer 4

fewer dollars available to reinsurance if more insurers compete in market which drives down premium which equals less premium for the reinsurance and similar risk.

Question 5

competition from other reinsurers

Answer 5

new reinsurance may be able to offer better terms as they have not suffered or no history of bad losses. Can choose company in Bermuda with better terms but must understand the capitalization requirements are differen

Question 6

corporate influence

Answer 6

parent company may tell reinsured to no longer service the branch insurer or primary insurer

Question 7

rating agencies

Answer 7

downgrade in rating will hamper the reinsurer ability fur further dealing or primary insurance may drop the reinsurer

Question 8

emerging exposures

Answer 8

long term exposures to environmental/long tail exposures. Sexual abuse or long term molestation for personal or professional liability.

Question 9

government

Answer 9

registered by federal government vs unregistered. .regulators impose limits on the percentage of total purchase of reinsurance that a primary insurance can obtain from unlicensed reinsurances. . some solid resinruance are in Canada but have not registered due to lack of capitall requirement or to avoid taxes

Question 10

reinsurance trust agreements

Answer 10

primary insurers that do business with unlicensed reinsurance must have a reinsurance trust agreements