HUD announced its first settlements concerning "Captive title reinsurance," an expression that sounds like something out of a romance novel in a real estate office. But rather than having anything to do with romance, captive title reinsurance is all about another subject: Money - and who gets it. Reinsurance is...
When one discusses finite risk reinsurance, it is necessary to restrict the agreement or transaction to two parties, a ceding insurer and an assuming reinsurer, each of which is licensed to assume risk. This document confines its discussion only to finite reinsurance, and not takes into consideration corporations who have...
Just over two months after Hurricane Katrina's landfall, it is clear that Katrina will most likely be the cause of the largest property catastrophe loss ever recorded. There is, however, an unusually high degree of uncertainty surrounding the ultimate magnitude of the claims that insurers are facing from the event....
In response to increased focus on structured insurance and reinsurance contracts, a number of organizations have studied issues surrounding risk transfer. The U.S. National Association of Insurance Commissioners NAIC has approved several reporting requirements that will take effect for 2005. The newly required disclosures consist of three parts: additional General...
This report is a study of property catastrophe reinsurance markets in 22 countries and four regions, representing over 90 percent of the worldwide market for catastrophe reinsurance. It reviews catastrophe exposures and the availability of insurance from either private or government sources to cover losses from catastrophes. It also summarizes...
The international Monte Carlo Rendezvous is a timely reminder of the local/global dynamics of the reinsurance business. While the reinsurance market has globalized in the past decade, creating a smaller number of much larger businesses, many of the issues facing insurance companies are much more local in nature, and although...
The investigations of several reinsurance contracts characterized as nontraditional or finite by various regulators inside the United States have demonstrated increasing concerns over the potential misuse of finite reinsurance. The regulators' primary concern is that insurers are using finite reinsurance as a method of concealing their true financial results from...
This report provides information on payment of bodily injury claims across Europe as well as an update on the industrial liability and reinsurance markets. Liability insurers and reinsurers are faced by diverse approaches across Europe to the payment large bodily injury claims. Despite moves to harmonize minimum levels of available...
Although much has been written on how to properly determine reinsurance premium, relatively little literature exists on how a primary insurer, once it pays that premium, should incorporate the cost of reinsurance into its rate level indication. This paper discusses two approaches for including the cost of catastrophe excess reinsurance...
The myths of reliability relate to reinsurance being a business governed by "utmost good faith," there being some moral obligation for future contracts to compensate a reinsurer for losses on past contracts and a belief that there is no risk in fronting. Reinsurance has been, still is and hopefully always...
This research investigates the strategic behavior of private crop insurance firms reinsured by the USDA through the Standard Reinsurance Agreement. This arrangement allows the private firm to strategically allocate individual policies into different risk sharing arrangements. Thus, firm earnings are conditioned upon accurately forecasting policy loss experience. The analysis begins...
This research paper shows analytically that, for large numbers of primary insurers, this mathematical expression provides a "square-root rule"; i.e., the optimal number of reinsurers in a market is given asymptotically by the square root of the total number of primary insurers. It notes further that an analogous "fourth root...
This report provides an update on the regulatory response to finite reinsurance in the UK and EU. Over the last year 'finite reinsurance' has become a description tainted by the suspicions of insurance regulators. This article identifies the issues in relation to finite reinsurance that the Financial Services Authority FSA...
This research paper discusses a number of aspects relating to the "guaranteed minimum death benefit" in unit-linked contracts. It deals briefly with the different types of guarantees found in the market, and then examines the forms of reinsurance that are potentially suitable and assesses the risks associated with such covers....
Binding arbitration clauses in reinsurance agreements are common and generally enforceable. Enforcing such clauses may be problematic, however, when state regulators are liquidating an insurance company. Enforcement depends on the state liquidation statute at issue. This article identifies factors that need to be considered when deciding whether a state liquidator...
This review represents the first annual survey of the German reinsurance market completed by the Institute of Insurance Economics. Reinsurance buyers responded to questions that focused on the marketplace as a whole as well as details regarding their company-specific treaties. These responses provide insight into the dynamics underlying the market...
For more than a decade, there has been much discussion on the topic of closer links between capital markets and reinsurance markets. The early catalyst of this discourse was Hurricane Andrew in 1992, which produced a devastating loss of $16bn for reinsurers, more than four times the size of any...
Basic concepts of captive insurance companies are reviewed from reinsurers' point of view. The basics are then expanded to give insights into understanding what differentiates captives from commercial insurers, the core matters of interest to reinsurance professionals. The conclusion is in the form of some key factors for reinsurance success...
The purpose of this paper is to develop a theoretical framework within which the optimal reinsurance arrangement for catastrophic risks is explored and derived. In the model, it is assumed that the insurer values the stability of its underwriting results in purchasing reinsurance protection. The optimal solutions to the model...
Proportional reinsurance is often thought to be a very simple method of covering the portfolio of an insurer. Theoreticians have not been particularly interested in analyzing the optimality properties of these types of reinsurance covers. This paper uses a real-life insurance portfolio in order to compare four proportional structures: quota...
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