中财讲义再保险方式TypesofReinsurance.ppt

Types of Reinsurance,再保险方式,Types of Reinsurance,There are three general types of reinsurance agreements Facultative - Individual risks are submitted to a reinsurer for consideration. Coverage terms and conditions are negotiated. The reinsurer may reject the risk. Treaty - Covers a book of business. All risks falling within the scope of the agreement must be ceded and must be accepted. Coverage is automatic. Facultative Obligatory Treaty submit：提交,Types of Reinsurance,Reinsurance agreements may also be categorized as proportional or excess: Proportional or pro rata reinsurance involves sharing both premiums and losses in the same predetermined percentage. Excess reinsurance is non-proportional. The reinsured company retains losses up to a certain amount (its retention), and the reinsurer pays up to 100 percent of the excess subject to a maximum limit of liability. Categorize：分类,Three Ways Of Reinsurance,Facultative Treaties Facultative Obligatory Treaty,Facultative,Under this method, there is no obligation on either ide to cede or accept. There is freedom of: choice of and number of reinsurers/Ceding Company amount of reinsurance to be placed/accepted the scope of cover to be placed/accepted rate to be offered/rejected,Facultative,While the foregoing may be considered as important advantages of this method of reinsurance, the main disadvantages are: It is expensive in administration. It is time-consuming in completing the reinsurance placement. It hampers insurers quick service to their clients. Foregoing：前述的； hampers：妨碍了,Facultative,In cases where large facultative reinsurance is expected to be placed, the market should be sounded and a lead obtained for a specific rate, which then should be quoted the insured to avoid embarrassment all around. rate to be offered/rejected Quote：报价； embarrassment：阻碍 all around：周围,Facultative,Uses: Its main uses are: when a large capacity is required. where there are no automatic reinsurance facilities available, or when it is not desired to make use of these facilities.,Treaties,A treaty, as its name indicates, is an agreement in writing between the two parties to a reinsurance agreement for reinsurances to be offered by one party in respect of certain specified classes of business on a basis outlined and to be accepted automatically by the other party. This agreement will be bind the Ceding Company to offer the excess line to this treaty, if it is first in the line of several reinsurance agreements effected by the Ceding Company, up to the limit specified in the contract and then only to seek further reinsurance protection for amounts in excess of the treaty limit. bind：约束； up to：一直到,Treaties,It will be noted that no offers of individual risks are made to reinsurers. But it will not dispense with the recording of cessions made to the reinsurers in the Ceding Companys books, if only because the Ceding Company has to ascertain the total premium to be remitted to the reinsurers. This is usually done by entering the cessions in a bordereaux in a serial order. Bordereaux：分保明细表，清单 dispense with：免除； remitted：移交给,Treaties,This bordereaux will have columns for recording the following items: Cession number. Insureds name. Period Brief details of risk and perils covered. Total sum insured (TSI). Ceding Companys share of Sum Insured. Ceding Companys share of gross premium. Sum Insured cession made to reinsurers. Reinsurers share of premium.,Treaties,Any alterations/amendments involving refund/additional premium must also be recorded in the said bordereaux. In the early days of the development of treaty reinsurance, the Ceding Company was required to send copies of this premium bordereaux to its reinsurers. Refund：退款,Treaties,Reinsurance has now come to be deemed more of a cash transaction and the reinsurers are concerned with the final result once they have chosen their right partners. Submission of bordereaux is, therefore, waived by most reinsurers (with the exception of those for rather highly specialised or hazardous classes), but the Ceding Companies have to maintain records. Deem：相信，认为； Submission：提交 Waived：放弃,Treaties,It is evident from the foregoing, that the treaty form of reinsurance arrangements is practically a form of blind arrangement very much depending on the bona fides of the Ceding Company, which is trusted implicitly. bona fides：忠诚，诚实； Implicitly：含蓄的，暗中的,Methods Of Reinsurance,Proportional Non Proportional Treaties,Proportional,The first one is based on the total commitment in terms of money value known as sum insured. Decision is taken to keep only a portion of this aggregate commitment or sum insured and reinsure the balance. The reinsurers participate on every one of the policies issued on the risk concerned and earns his premium. Similarly, he participates in each and every one of the losses reported under the policies. It is also called pro rata distribution. Under the proportional treaty method of reinsurance, there are some kinds in actual operation.,The Quota Share Treaty,A quota share treaty is an agreement whereby the ceding company is bound to cede and the reinsurer is bound to accept a fixed proportion of every risk accepted by the ceding company. The reinsurer thus shares proportionally in all losses and receives the same proportion of all premiums commission.,The Quota Share Treaty,For example, a ceding company may decide to arrange an 80% quota share treaty covering all its fire business. The retention of the company will be 20% of each and every risk and the proportion to be ceded to the reinsurer 80%. Thus, the reinsurer will cover 80% of all risks, will receive 80% of premiums (less commission) and pay 80% of all claims falling under the treaty.,The Quota Share Treaty,The main advantages for a ceding company of a quota share are: Simplicity of operation. Higher commission and better terms are obtainable.,The Quota Share Treaty,The main disadvantages are: The ceding company cannot vary its retention for any particular risk and thus it pays away premiums on small risks which it could well retain for its own account. The sizes of risks retained are not homogeneous as the ceding company retains a fixed percentage of all risks written and which are of varying sizes. Homogeneous：均匀的,The Quota Share Treaty,The advantages to a reinsurer are: The reinsurer receives a share of each and every risk. There is no selection against him and he participates in the business written to a larger extent than under other types of reinsurance. The reinsurer obtains a larger share of profits from the ceding company than would be obtained under any other type of treaty.,The Quota Share Treaty,The quota share treaty is best suited for: New ceding companies or companies entering into a new class of business or a new area. This would be the best way to get reinsurers to participate in a portfolio with unknown experience and limited spread. A ceding company which wishes to accept reinsurance business itself and has to provide a share of its own business in reciprocity.,The Surplus Treaty,A Surplus treaty is an agreement whereby the ceding company is bound to cede and the reinsurer is bound to accept the surplus liability over the ceding companys retention. Surplus treaty：溢额合同,The Surplus Treaty,A Surplus treaty thus allows the ceding company to reinsure under the treaty any part of the risk, i.e., the surplus, which it is not retaining for its own account. Thus, if a certain risk is wholly retained, there is no surplus left to place to the treaty. When speaking of a surplus treaty, it is usually said that the treaty is for, say, 20 or 30 lines. This means that the treaty will accept a maximum of 20 or 30 times the ceding companys retention; a line being the amount of the ceding companys retention.,The Surplus Treaty,The way in which a surplus treaty operates can be seen from a simple example. If risks A and B having the same sum insured of US$. 500,000 are accepted by a ceding company and A is a very good risk whereas B is a poor one. The maximum retention of the company is say US$. 50,000 and it has a surplus treaty of 20 lines. The company may further decide to retain the maximum amount for A and only US$. 20,000 for B.,The Surplus Treaty,Thus :,The Surplus Treaty,The advantages of Surplus reinsurance to the ceding company are: Only the portion of the risk which exceeds the companys retention is reinsured. As the ceding company retains a fixed monetary limit (as opposed to a fixed proportion under a Quota Share) the portfolio it retains is homogeneous. By retaining a larger amount of good risks and a smaller amount of the poor ones, the ceding company can keep more profitable business to itself than it gives to its reinsurers.,The Surplus Treaty,The principal disadvantage to the ceding company is: high cost of administration as experienced persons must be employed to determine the retention for each and every risk according to type, quality, exposure and calculating the premium retained and the premium going to reinsurers accordingly. However the use of computers has reduced this administrative burden to a large extent.,Pools,Pools are established for a variety of reasons. The main one is the creation of capacity to handle risks of a catastrophe nature or of a special category, for example, atomic energy risks.,Pools,The principle of a reinsurance pool is that all members of the pool put all or part of their premiums for a particular category of business into a common fund and they share the aggregate claims arising either in the same proportions as their premiums or in any other agreed manner. Profits, losses and expenses are shared in the same way. In fact a pool acts as an insurance or reinsurance company created by its members without however those members having had put up the necessary capital to form such a company.,Pools,The advantages of a pooling system have been referred to already. There are also disadvantages, the main one being the potential danger of the accumulation of risks of a similar nature and subject all of them to damage at the same time by one single event. The resources of the members might not be sufficient to enable them to cope with a loss of that nature.,Facultative Obligatory Treaty,As the name implies， the facultative obligatory treaty has both the characteristics of facultative cessions and of obligatory treaties. In fact it is an agreement whereby the ceding company has the option to cede (not bound to), as for facultative risks, and the reinsurer is bound to accept (no option to decline), as under a treaty arrangement, a share of a specified risk underwritten by the ceding company. It normally comes after a surplus treaty and gives automatic reinsurance facilities to the ceding company when the capacity of the surplus has been exhausted.,Facultative Obligatory Treaty,The advantages for the ceding company are: Immediate reinsurance after treaty facilities. Automatic facility for risks of specific nature or of irregular occurrence pattern. Immediate：紧凑的,Facultative Obligatory Treaty,The disadvantages to the reinsurer are: No control can be exercised over the business ceded. No flow of business can be guaranteed as under a quota share or a surplus. There is a danger of anti selection by the ceding company.,Facultative Obligatory Treaty,The only advantage to the reinsurer is that this method allows him to have a slightly better spread of risks than under the facultative method.,Non Proportional Treaties,A non-proportional treaty is an agreement whereby the reinsurer agrees to pay the ceding company all losses which exceed a certain specified limit of retention of that ceding company. This limit may be either a monetary one, e.g., Excess of Loss; or a percentage one, e.g., Stop Loss. An any one event one, e.g., Excess of Loss; or, an any one year one, e.g., Aggregate Excess of Loss.,Non Proportional Treaties,The agreement is not concerned with any proportion of the sum insured on any one risk or with the proportional sharing of claims between the ceding company and the reinsurer. The reinsurer only pays the ceding company when the original loss has exceeded the limit of retention.,Excess Of Loss,The reinsurer under this form of treaty pays all losses over the ceding companys retention, or deductibles as it is more usually called. The ceding company decides the amount that it can safely bear in case of loss resulting from any one event, and seeks reinsurance under a treaty whereby the reinsurer will pay all losses in respect of any one event over and above the selected amount. Deductibles：免赔额,Working Covers,Working covers are excess of loss treaties under which both the ceding company and the reinsurer accept that there will be losses with routine regularity and thus they protect the normal daily exposure of the business covered. The excess points are low and are easily attained by losses. They are thus exposed either for any one policy or any one risk.,Working Covers,There are two ways of arranging working excess of loss covers. The first, which is the most common, is to arrange for the reinsurer to pay all losses arising out of one event, irrespective of the number of risk affected by the loss, in excess of the chosen deductible. The second