MANAGEMENT OF REINSURANCE ACTIVITIES Iryna Nyenno, Doctor of Economics, Odessa I.I. Mechnikov National University. - презентация

1 MANAGEMENT OF REINSURANCE ACTIVITIES Iryna Nyenno, Doctor of Economics, Odessa I.I. Mechnikov National University

2 BORDERO (bordereau) - a list of risks taken for insurance in the part that is transferred by the assignor to reinsurance. B is sent by the assignor to the insurer in the terms specified in the reinsurance contract. B. are preliminary and final. PREMIUM DEPOSIT is a part of an insurance premium that belongs to the reinsurer but is temporarily retained by the reinsurer in order to increase the guarantee of timely fulfillment of obligations stipulated by the reinsurance agreement. The taxpayer must be returned with the termination of the contract. Taxpayers are mainly used in contracts with foreign reinsurers. The funds placed in a taxpayer account are reimbursed to the reinsurer. The essence of the concepts

3 EXCESS OF EXPENSES (excess of loss ratio) - a contract of disproportionate reinsurance. Allows the insurance company to protect itself against certain types of insurance in the event that the overall effects of the insurance business exceed the level of loss incurred in determining the premium for insurance contracts. EXCESS OF LOSS (excess of loss) - a contract of disproportionate reinsurance. Applies to insurers for protection against large and unpredictable losses. It enters into force when the amount of loss resulting from an insured event or a series of such cases that caused one event exceeds the amount specified in the contract (priority). The essence of the concepts

4 EXCESS OF LOSS REINSURANCE (excess of loss reinsurance) is an old and most important form of proportional reinsurance. Applicable in cases when the risks taken for insurance, in terms of insurance amounts are very volatile. E.L. helps to achieve the necessary balance of the insurance portfolio of the assignor. E.L. is most often used in insurance against fire, natural disaster, theft, accidents and life insurance. EXCESS OF SUMM (excess of sum) - an expedited reinsurance contract. According to its terms, all risks assumed for insurance, the insured amount of which exceeds the actual retention of the assignor, must be transferred to a reinsurance within a certain limit or an exendant, that is, the amount of its own retention of the assignor (line) multiplied by the specified number of times itself. The essence of the concepts

5 QUOTA IN INSURANCE (a) the share of the insurer's participation in the total insurance amount in the case of insurance of the object on the terms of co-insurance; b) the share of each participant in the reinsurance contract. QUOTA REALIZATION (quota share reinsurance) - rebate on a quota basis. This means that the insurer transfers to the reinsurer in an agreed share all the insurance risks taken without any exception for a certain type (group of types) of insurance. In this same proportion, the reinsurer transfers the received by the assignor from the policyholder a premium, and the reinsurer compensates the deducted loss paid within the limits of its share of the sum insured. The essence of the concepts

6 SURPLUS LINE (surplus line) - the share of liability in the contract of an exendant amount equal to the size of his own retention of the assignor. NON-PROPORTIONAL REINSURANCE is a form of reinsurance contracts, which involves liability of the reinsurer over the amount of loss or loss, that is, the liability of the reinsurer is not calculated depending on the insurer's liability. PORTFOLIO OF LIABILITY (portfolio of liability) - the total amount of liability of the insurer or reinsurer for all policies in force. PROPORTIONAL REINSURANCE - Includes quotas and excess reinsurance contracts, according to which the reinsurer has a share in the total amount of damages and the total amount of premiums. The essence of the concepts

7 NET-PREMIUM (net premium) - gross-premium minus load. NET-RATE (net rate) - part of the insurance tariff, which is designed to create the insurer's resources for the payment of insurance claims and insurance amounts. Methods of calculation N. с. in property and personal insurance are different. RETROCESSION (retrocession) - the process of further transferring previously accepted reinsurance risks to other reinsurers. R is achieved by fragmentation of large risks, division of responsibility between an increasing number of insurers. Sometimes such risks can go to the original insurer if there is no relevant objection in the contract. The essence of the concepts

8 PROFIT COMMISSION - a commission on the profit received, which the reinsurer pays annually to the assignor for the consequences of the passage of reinsurance contracts. The reservation on T. is a form of encouragement by the reinsurer of the assignor for the participation in reinsurance contracts and careful conduct of the case. STORAGE OWNER (retention) - a reasonable level of insurance amount, within which the insurer leaves in its responsibility the fate of insurance risks, and transfers the rest to reinsurance. The essence of the concepts

9 FACULTATIVE REINSURANCE (reinsurance) - a method of reinsurance, in which the insurer is not liable to the reinsurer for the transfer of risks to reinsurance. The question of whether to transfer the risk of reinsurance and to what extent, solves the assignor. In its turn, the reinsurer does not have an obligation to the insurer to take risks at his or her own responsibility. The main disadvantage of the insurance company is the lack of confidence in the insurer in placing the risk in reinsurance, the high cost of time for the registration of the insurance company. FACULTATIVE OBLIGATORY TREATY - a form of reinsurance contract, according to which the assignor has no right to choose whether to transfer the risk of reinsurance or not. Similarly, the reinsurer does not have the right to refuse to reinsure a given risk. The essence of the concepts

10 FACULTY CONTRACT (facultative treaty) - a reinsurance contract of a specific risk, concluded on a voluntary basis. CEDENT (cedent) - an insurer, who transfers for a fee part of the contract taken with the insurer on the risk of reinsurance to another insurer or professional reinsurer. CESSION (cession) - the process of transferring the insured risk to reinsurance. CESSIONER (cessionary) - the person to whom the right of ownership is transferred. In insurance, CI is an insurance company that accepts reinsurance risk. The essence of the concepts

11 Task 1 Determine the amount of insurer's retention. The insured sum under the contract is EURO. In accordance with the contract of an excess of sum, the reinsurer's share is 50% of the sum insured. 1) What sum will be reinsured (ceded) at a reinsurance rate of 3.6%? 2) What will be the size of the reinsurers claim in case of complete damage of the insured property?

12 Task 1 Solved Determine the amount of insurer's retention. The insured sum under the contract is EURO. In accordance with the contract of an excess of sum, the reinsurer's share is 50% of the sum insured. 1) What sum will be reinsured (ceded) at a reinsurance rate of 3.6%? 2) What will be the size of the reinsurers claim in case of complete damage of the insured property? Answers: 1) х 50% х3,6% = 7200 EURO 2) EUR

13 Task 2 Assume that in the insurer's portfolio there are 1000 individual insurance policies for accident insurance with a net premium (excluding costs and benefits) of 0.1% in the event of disability. Based on the statistics, he predicts when calculating the premium that of 1000 insured one will die from an accident during the year. In its portfolio, 800 insurers are insured for a sum of EUR 20,000, 100 for 40,000 euros and 100 for 80,000 euros. The inadequacy of the gross premium collection at a rate of 0,1% compels the insurer to conclude a contract of ex-ante reinsurance (an excess of the amount) and reinsure all insurance amounts in excess of 20,000 Euros. 1) How much will the gross premium collection of the insurer for 1000 insured at a tariff of 0, 1%? 2) What is the size of a reinsurance premium when reinsurance contracts with an insurance amount of 40,000 EURO and 80,000 EURO? 3) If we consider a similar scheme of disability insurance, how much will it be necessary to compensate the reinsurer and the insurer under a contract with an insured amount of 40,000 EURO at a loss of capacity of 25%?

14 Task 2 Solved 1) 20,000 x 0.1% x 800 = EURO 40,000 x 0.1% x 100 = euros х 0.1% х 100 = EURO 2) х 50% = EURO х 75% = EURO х25% х 50% = EURO

15 1.What is the distinction of cession to retrocession? 2.What is the distinction of net premiums and gross premiums written? 3.Explain the sense of obligatory and facultative reinsurance. 4.Give the examples of the excess of sum insurance. 5.Give the example of the excess of loss reinsurance. Check questions to section