Part 26 (Cedar)

Question 1

Large Line Capacity, how reinsurance helps

Answer 1

Reinsurance can help the insurance company ensure an individual policy or an individual location that exceeds the insurance company’s typical risk appetite

Question 2

What can large line capacity limit

Answer 2

The amount of business that the insurer can write, for example if the insurer has to walk away from writing a business because the exposure risk is too great

Question 3

Advantages of purchasing per risk reinsurance when dealing with Large Line Capacity

Answer 3

• Satisfy market demand
• Continue to maintain underwriting standards (large line capacity)

Question 4

What is the Catastrophic Risk Protection provided by Cedar

Answer 4

an Annual aggregate excess of loss treaty

Question 5

Recoverable on Paid will be accounted for in where

Answer 5

Assets “Amounts Recoverable from Reinsurer”

Question 6

Recoverable on Unpaid will be accounted for where

Answer 6

Liabilities, net out from loss reserves

Question 7

CAT Reinsurance effectiveness depends on what

Answer 7

The strength of the hurricane season. As less and less strong, less and less benefit

Question 8

An insurer with insufficient surplus can do what things

Answer 8

• Raise capital via issuing stock or debt
• reduce the surplus requirement by reducing the level of risk
• Purchase reinsurance, where in second case reduces risk

Question 9

what factors to consider to determine how much reinsurance to use

Answer 9

• ceding risk may reduce the required surplus, but also reduces the available surplus
• Purchasing reinsurance from a poorly rated reinsurer introduces additional risk as the reinsurer may be unable to pay the losses in an adverse event. Insurer may need to hold additional surplus to protect against this.

Question 10

Reinsurance can also help with what things

Answer 10

• Large line capacity
• Catastrophes
• Surplus Relief
• Stabilization of results
• Market Entrance
• Withdrawal
• Mandatory and Voluntary Pools
• Internal Reinsurance Transactions

Question 11

What impact does stability have on stock price of insurer

Answer 11

More stability benefits with higher stock price

Question 12

Before stabilizing, what does an insurer need to do

Answer 12

Determine what metric needs to be stabilized (net combined ratio, earnings, etc)

What time horizon metric needs to be stabilized (quarterly, annually, etc)

Question 13

What issues may an insurer have when entering a new markert

Answer 13

• Poor underwriting results
• Adverse selection
• Mispriced business

Question 14

What reinsurance can help with withdrawing from a market segment

Answer 14

Retroactive Reinsurance

Question 15

Two structures in which pools can operate

Answer 15

Servicing Carriers
- Writing the policy on behalf of the pool

Take all Comers
- Insurer cannot deny coverage to any customer

Question 16

An individual business unit’s risk appetite may be less than the appetite at the corporate level, what reinsurance would the business unit consider buying

Answer 16

Internal Reinsurance

Question 17

What does internal reinsurance do

Answer 17

Writes risk, but cedes excess amount to its parent company instead of externally, therefore keeping benefits like profits within the organization

Question 18

When can fronting arrangements be used

Answer 18

Can be used when an insured wants to purchase coverage from an insurer that is not licensed in the state.