Abdourahmane Fenor Professional. What is excess of loss treaty reinsurance? Excess of Loss Treaty Reinsurance. Jonelle Wienant Professional. What does facultative reinsurance mean? Facultative insurance is reinsurance for a single risk or a defined package of risks. The ceding company the primary insurer is not compelled to submit these risks to the reinsurer , but neither is the reinsurer compelled to provide reinsurance protection.
Younas Todriya Professional. What is catastrophe reinsurance? Catastrophe reinsurance is purchased by an insurance company to reduce its exposure to the financial risks associated with a catastrophic event occurring.
Kleber Biedenweg Explainer. What does cede mean in insurance? Cede — when a company reinsures its liability with another. The original or primary insurer, the insurance company that purchases reinsurance, is the "ceding company" that "cedes" business to the reinsurer. Johnsie Sologuren Explainer. How does stop loss reinsurance work?
Stop loss reinsurance is a form of reinsurance under which the reinsurer pays the cedant's losses in any year over a particular percentage of the earned premium. Specific annual stop loss reinsurance limits the primary carrier's liability each year to a specified percentage of total ultimate incurred loss.
Conny Komani Explainer. What is non proportional reinsurance? Non - proportional reinsurance is based on loss retention. The ceding insurer agrees to accept all losses up a predetermined level. The reinsurer agrees to reimburse the ceding insurer for losses above the predetermined level and up to the reimbursement limit provided for in contact. Anca Plogemaker Pundit. What is reinsurance accounting? Deposit Accounting.
Weijian Abreu Pundit. What is proportional reinsurance? Proportional reinsurance coverage is reinsurance of part of original insurance premiums and losses being shared between a reinsurer and insurer. Under proportional reinsurance coverage, the insurer and the reinsurer both share the premiums and the claims on a given risk in a specified proportion. Gurinder Panal Pundit. What is facultative reinsurance? The important feature here is that the direct insurer agrees to reinsure only the surplus amount,.
This means that the insurer can automatically make a gross acceptance of the risk to the extent of his retention, plus the amount of retention multiplied by the number of lines for which a treaty has been made. Example 1. The arrangement will be as follows:.
The arrangement will be:. The students must realize here that the principle of reinsurance is being violated by such an attempt. Whilst all the advantages of the facultative and quota share system are there, the disadvantages of these two types are missing. Important advantages of the surplus treaty are. The approach of the reinsurance arrangement is quite different here from those methods already discussed. Under this system, unlike facultative, quota, or surplus, the sum insured does not form any basis, and it is not expressed in terms of proportion or percentage of the sum insured.
Surplus share: Surplus share treaties are a form of proportional treaty that allows the cedant to vary the quota share percentage and determine the proportion ceded at the time of underwriting each and every risk. In each of these examples, the cedant and reinsurer share in the premium based upon the cession percentage determined by the cedant at the time the risk is underwritten. Due to the fact that this form of proportional reinsurance could theoretically involve adverse selection against the reinsurer, surplus share treaties are less common.
Uncertainty surrounding loss development, exposures and timing of loss payments in casualty lines lead to surplus share being used less frequently for casualty business. Pricing: Pricing for proportional reinsurance generally follows the original policy pricing.
However, these treaties generally pay ceding commissions:. As well, the ceding commissions and ceding of large amounts of unearned premium reserves provide some measure of expense and surplus relief. Depending on the percentage of business ceded to the proportional treaty and the exposure to event or catastrophic risk, proportional treaties can provide substantial catastrophe protection. Losses in the property and casualty world are generally not binary and usually fall short of the full policy limit.
If there is a fire in a story office tower, the loss is generally contained to one or a handful of floors, not the entire building. As a result, reinsurers are willing to consider reinsurance structures that will allow the cedant to retain the first portion of loss as a retention and, above the retention reinsurers, would pay losses. This is per risk excess reinsurance, sometimes referred to as excess of loss or XOL reinsurance.
Because the cedant is retaining the first dollars of loss, there is also a disproportionate sharing of premium.
As the retention relative to overall exposure increases, per risk excess pricing reduces. As with quota share, per risk excess reinsurance enables cedants to write larger risks.
And the structure allows a cedant to cap-off peak risks within her or his portfolio. These treaties sometimes have ceding commissions, but, since the premium volumes are generally lesser than proportional reinsurance, the expense and surplus relief are lesser too. Due to the first loss retention of per risk excess treaties, they generally provide lesser protection against catastrophic risk than do proportional reinsurance treaties. Casualty coverages include all forms of liability coverages, from individual liabilities resulting from auto accidents, to corporate liability and professional liability of lawyers, doctors, and directors and officers.
Per occurrence excess treaties protect cedants against an accumulation of risk to a single occurrence or event. Per occurrence excess treaties are similar to per risk excess treaties in that the cedant retains the first portion of loss and reinsurers respond excess of that retention.
As is the case with per risk excess treaties, pricing for per occurrence excess treaties reduces as the retention increases. For property Cat treaties, reinsurers utilize catastrophe models to develop expected annual aggregate losses exposing the treaty and price accordingly.
For casualty clash treaties, there are no industry-standard models for pricing and pricing generally follows benchmarks relative to other similar treaties, attachment relative to the maximum per risk exposure or to industry concentrations. In casualty insurance, an occurrence is an event that results in one or more claims. In most casualty per occurrence excess treaties, an event requires multiple claims against multiple policies.
Since the early s, the capital markets have played an increasing role in supplying capacity for catastrophic risk. As investments, they are popular with pension plans and other investment funds that are looking for extra returns from uncorrelated investments. The most common form for these instruments is a bond that is purchased by the investor; the bond pays a regular coupon and at maturity repays the principal, unless there is a pre-specified catastrophic event.
This bond is held by a special purpose vehicle SPV reinsurer which enters into a reinsurance agreement with the insurer; if there is a catastrophe, the principle is not repaid and coupon payments cease.
0コメント