Andrew Cox, Capital Optimization, Guy Carpenter, and Niall Clifford, Financial Strategy Group, Mercer, explore a number of reinsurance solutions available to insurance companies in the fourth video installment of the Holistic Balance Sheet Management series.
Whether using the Solvency II standard formula, undertaking specific parameters using the standard formula or an internal model, there are a range of solutions to achieve corporate goals. It is necessary, however, for insurers to be fully aware of how they measure risk in order to make choices about the types of reinsurance cover that would offer the greatest benefits. When considering solutions it is important that insurance companies focus less on what the upfront cost is for each structure and more on how that product will help balance their overall risk portfolio and the benefits it will bring in the long-term. The solutions may be prospective, such as quota share, excess of loss and stop loss, or retrospective, such as loss portfolio transfer (LPT) and adverse development cover (ADC).
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