再保险 - ZLX老师讲义

Principles and Practice of Reinsurance

Instructor Zeng Lixin

Lecture One

Introduction to Reinsurance

I Concept of Reinsurance

The transaction whereby the reinsurer, for a consideration (premium), agrees to indemnify the ceding company against all or part of the loss that the latter may sustain under the policy or polices which it has issued. (CPCU 141 P2)

书上定义: The transfer of insurance risk from one insurer to another through a contractual agreement under which one insurer(the reinsurer) agrees, in return for a reinsurance premium, to indemnify another insurer(the primary insurer) for some or all of the financial consequences of certain loss exposure covered by the primary insurer’s policies. Insurance for insurers

PRC《保险法》第二十九条规定，“保险人将其承担的保险业务，以分保形式，部分转移给其他保险人的，为再保险。”

再保险合同并不改变原有的insured和primary insurer之间的权利义务关系。

Some Definitions

Reinsurer: The insurer that assumes all or part of the insurance risk from the primary insurer.

Reinsurance premium: The consideration paid by the primary insurer to the reinsurer for assuming some or all of the primary insurer’s insurance risk.

Primary insurer: The insurer that transfers or cedes all or part of the insurance risk it has assumed to another insurer.

(primary insurer=ceding company=cedent=direct insurer) 一个公司可以同时作为分出公司和分入公司

Insurance risk: Uncertainty about adequacy of insurance premiums to pay losses. Retention: The amount of insurance risk the primary insurer retains and that is not ceded to the reinsurer. (可以百分比形式或数额形式表示)

Retrocession: A reinsurance agreement whereby one reinsurer (the retrocedent) transfers all or part of the reinsurance risk it has assumed or will assume to another reinsurer (the retrocessionaire).

Retrocedent: The reinsurer that transfers or cedes all or part of the insurance risk it has assumed to another reinsurer.

Retrocessionaire: The reinsurer that assumes all or part of the risk accepted by another reinsurer.

Risk: Uncertainty about the occurrence of a loss. In reinsurance, the term risk often refers to the subject of insurance, such as a building, a policy, a group of policies, or a class of business.

Insurance reinsurance retrocession

insured primary reinsurer retrocessionaire insurer (retrocedent)

II History of Reinsurance

1. Emergence of all classes of reinsurance

The emergence of reinsurance in marine business (BC 700-1370) The development of fire reinsurance (1591-1820)

The development of life assurance (1600 annuity-1840) The development of accident reinsurance (1850)

2. Emergence of specialist companies

? Weseler reinsurance company in Germany (1843)–First subsidiary specialist reinsurance company ? Cologne Reinsurance Company in Germany (1852)

? The biggest reinsurance company today- Munich Re (1880) ? Swiss Reinsurance Company (1863)

III Functions of Reinsurance 1 Capacity

Large-line Capacity: An insurer’s ability to provide a high limit of insurance for a single risk (loss exposure), such as property coverage for a $50 million commercial office building or a $30 million jumbo jet.

Premium Capacity: The aggregate premium volume a primary insurer can write. Neither gross written premium nor large insured amount of a policy written by an insurer will show the its good or poor business operations. Both capacities are constrained regulations with respect to policyholder’s surplus. (Why can reinsurance help to increase capacity?) Reinsurers provide primary insurers with large line capacity by accepting liability of loss exposures that the primary insurer is unwilling or unable to retain. This function of reinsurance allows insurers with limited large line capacity to participate more fully in the insurance marketplace. Reinsurance allows the primary insurer to increase its market share while limiting the financial consequences of potential losses.

中华人民共和国《保险法》（2002年10月28日修订）

S99: 经营财产险的保险公司当年自留保险费不得超过其实有资本金加公积金总和的4倍。

S100: 保险公司对每一危险单位，即对一次保险事故可能造成的最大损失范围所承担的责任，不得超过其实有资本金加公积金总和的10%，超过部分应当办理再保险。（美国纽约州的规定亦同）

S101: 保险公司对危险单位的计算办法和巨灾风险安排计划应当报保险监督管理机构核准。

（当超过限制时，有三种方案：1.不承保2.coinsurance 3.reinsurance）

Providing Large-line Capacity and Premium Capacity Example:

? A newly founded Insurance Company

? No Unearned Premium and Outstanding Loss at the beginning of the year with $9m in assets.

? At the end of the year, written premium of $20m with $4m acquisition cost incurred and $10m unearned premium and $10m outstanding loss ? Show its Balance Sheet at the beginning of the year

? Show its Balance Sheet at the end of the year in the case of -no reinsurance at all

-with 75% quota share treaty of 30% commission

and compare the Ratio of Premium to Policyholder’s Surplus

Balance Sheet at the Beginning of the Year Assets Liabilities 9m O.L. 0 U.P. 0 P.S. 9m

9m 9m

Balance Sheet at the End of the Year

Assets Liabilities 9m O.L. 10m 20m U.P. 10m -4m P.S. 5m

25m 25m

Capacity ratio= N.W.P/P.S.= 20m/5m=4

Balance Sheet at the End of the Year with 75% Quota Share

Assets Liabilities 9m O.L. 2.5m 20m U.P. 2.5m -15m +4.5m

-4m P.S. 9.5m

14.5m 14.5m

Capacity ratio= N.W.P/P.S.=5m/9.5m=0.5 (surplus relief)

Reinsurance premium

Primary insurer reinsurer

Ceding commission

期初 当前 期末

Earned premium Unearned premium Written premium

Insurers that are growing rapidly may have difficulty maintaining a desirable capacity ratio because of how they must account for their expenses to acquire new policies. State insurance regulation mandates that for accounting purposes, such expenses be recognized at the time a new policy is sold. Aggravating this situation is the requirement that insurers are required to recognize premiums as revenue only as they are earned over the policy’s life. immediately recognizing expenses combined with gradually recognizing revenue causes an insurer’s P.S. to decrease and the capacity ratio to increase.

即：保费收入→权责发生制，费用支出→收付实现制

业务发展时，越到后期业务量（保费收入）越多，所以在时期中点时，未满期保费多于已满期保费。

2. Catastrophe Protection

? Major catastrophes: A single event causes multiple losses. Such as fire, windstorm (hurricane, tornado, and other wind damage), and earthquakes. Industrial explosions, airplane crashes, or product recalls.

? A single event might result in a large number of property and liability claims to a single insurer. 当没有再保险时，巨灾可能会使primary insurer减少保费收入，甚至威胁偿付能力

? Losses exceeding $100m are common, often more than $10 billion.

? Among the insurance claims in 911 event 52-55% of the total losses were covered by reinsurance which amounted to $27 billion. The first four loss-carriers were reinsurers. They are: The Lloyd’s of London $2913 billion Munich Re 2.442 billion Swiss Re 2.316 billion Berkthier Re 2.275 billion

3. Stability (经营稳定性)

Purposes: Loss experience typically fluctuates from year to year, creating variability in insurer financial results. Insurers prefer to have stable loss experience, and using reinsurance can help maintain stability. Reinsurance aids financial planning and supports growth. It also may encourage capital investment because investors are more likely to invest in companies with stable financial results. Reasons to cause instability: -economic reason

-social and natural forces

4. Spread of Risks

Circumstances applying for risk spreading:

? Accumulations of claims under different classes:

? Risks accumulate greatly when primary insurers write large volume of business which could make good profit in a certain period.

? To spread risks geographically (reciprocal exchange)(互换业务)

Reinsurance will reduce the impact of fluctuating claims costs and better advantage can be taken of …

5. Financial Benefit

? Increase the credit of the original insured. ? 40% premium reserve retained for 12 months.

? Investing reinsurance premium during the moratorium period. ? Reinsurance commission

? Balance sheet betterment (to the ceding company)购买再保险会使P.S.↑，capacity ratio↓

6. Underwriting Expertise (provide underwriting guidance) ? Newly founded and/or small companies ? Risks covered, premium rating etc.

? Any concerns?会告知很多公司的情况包括商业机密、客户私人信息等

A reinsurer’s understanding of insurance operations and the insurance industry can assist other insurers, particularly inexperienced primary insurers entering into new markets and offering new products.

7. Decrease Expense Ratio, Increase Profit Ratio (费用率，基本上是acquisition costs)

? Administration costs are very similar for either small or a large acceptance. ( Expenses are always fixed, 当业务量↑,expense ratio↓)

? Ceding commission (分保佣金) will help to compensate some or all acquisition costs thus to control expense ratio of ceding company.

? Any concerns? 在监管者眼中，一个保险公司不能过多地依赖再保险，risk in becoming insolvent

8. Withdraw From a Territory or Line of Business Three ways to withdraw:

? Stop selling new insurance policies and keep liable for in force policies until they expire. (此方法不能立即退出市场)

? Cancel all policies (if insurance regulations permit) and refund the unearned premium to insureds.

? Purchasing portfolio reinsurance (未了责任再保险, 100% quota share reinsurance)(可以立即退出市场) The primary insurer must continue to fulfill its obligations to its insureds.

Portfolio Reinsurance: A reinsurance agreement that reinsures the loss exposures of an entire type of insurance, class of business, or geographic area. In portfolio reinsurance, the reinsurer accepts all of the liability for certain loss exposures covered under the primary insurer’s policies. (General rule is that reinsurers don’t accept all of the liability for specified loss exposures of an insurer.)

IV Methods of Reinsurance

1. Treaty Reinsurance 合同/合约再保险(是各种保单的集体再保险)

A reinsurance agreement that covers an entire class or portfolio of loss exposures and provides that the primary insurer’s individual loss exposures that fall within the treaty are automatically reinsured.

? Under this method an agreement is made between cedant and a reinsurer. The agreement allows that a primary insurer will cede and the reinsurer will automatically accept all reinsurance which are offered within the limits of the treaty. ? Limits:

-the type of risk acceptable

-the geographical area in which risks are located -the size of risks

-the amount of risk which is acceptable (Key words: have to/obligated/compulsory)

Advantages of Treaty Reinsurance

? Administration: by large policy volume, save cost/expense, average fixable cost↓

? Underwriting: limitations in the treaty can reduce fluctuations, thus achieve homogeneity(提高同质性). Otherwise, provide underwriting expertise. ? Continuity: certainty, stability

? Spread of risks (for ceding company): Treaty always with more than one reinsurer. Risks can be spread geographically.

? Commission: ceding commission offsets acquisition costs (for primary insurer).

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