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Risk Management (Reinsurance (LP141) (Uses (surplus relief (regulators…

- - - - reduce earnings volatility
      - allow more insureds (diversification)
    - - regulators allow lower stat reserves
      - but extra capital for counterpary risk
      - ratings
    - - why reinsurer?
        
        better geo- diversification
        
        more expertise in UW and pricing exposure
        
        more capitalized
    - - benefits for insurer
        
        entering a new market, product, LOB
        
        focus on core business
    - - NB is costly (high FY comm&exp)
  - - - due diligence on insurer: expertise, history, risk attitude
      - audit insurer on terms compliance
      - all risks of a defined block
    - - accept a single/packaged risks; UW individually
  - - - Quota share reins
      - Surplus/Excedent Reins
        
        retention line & capacity
      - higher premium than non-proportional
      - based on sum of insureds risks
    - - based on actual loss
        protect against high-severity low-frequency
      - Excess of loss reins (XL)
        
        Priority and capacity
      - Stop-loss reins => XL on an entire portfolio of insurance contracts
        
        priority = % of premium
        
        copayment for excess of priority