1. In previous post I have covered business nature of reinsurers, RI's diversification, asset-liability management, & capital management.
2. Link as follow <http://levelnineatwork.blogspot.my/2014/12/products-3-in-1-liablity-product-bundle.html>
3. The rapid increase of insurable assets in areas prone to natural catastrophes creates accumulation risks which offers both challenges and opportunities for re/insurers in the region.
4. Re/insurers must find ways to manage risks accumulation.
HOW RISKS ACCUMULATES - LIFE INSURANCE
1. When individuals buy covers across products.
2. When individuals buy covers on the same product across group companies
3. When individuals have their own personal insurance policies and are also covered by the same insurer under group schemes purchased by their employers.
HOW RISKS ACCUMULATES - NON-LIFE INSURANCE
1. Insurer issues several commercial property policies in the same location.
2. Multiple commercial risks underwritten from same customer.
3. Multiple vessels and voyages in the same route.
4. Multiple ‘all risk’ policies for the same contractor.
HOW RISKS ACCUMULATES - REINSURERS
1. Acceptance of risks from multiple insurers in the same region.
2. Reinsurers’ inherent dependency on insurers’ underwriting effectiveness
3. Absence of aggregate limits in treaties.
4. Hidden aggregations within portfolio.
5. Multiple risks accepted on facultative basis in the same location.
6. Cross exposure in treaties covering multiple lines (non-marine treaty)
7. Non-proportional treaties covering catastrophic claims
8. Inadequacy of retrocession cover
GROWTH AND OPPORTUNITIES
1.Opportunities exist in various classes with new ways to do business, to access risks and to build portfolios
2. Growth is driven by the sheer power of demographics and by the rapid accumulation and gradual spread of wealth in the economies, spurring dynamic economic development and fuelling the rise in insurable interests.
VIEWS
1. Data quality, accuracy and timeliness are key to improving underwriting.
2. New capital have a knock-on effect on pricing and underwriting discipline.
3. Capital creates downward pressure on rates, whether at the reinsurance level or at the insurance level.
4. What differentiates the various pool of capitals is the underlying strategies.
5. The decision to cede risks to capital providers must balance the terms and conditions obtained with the necessity to safeguard the capital providers’ financial security, continuity of capacity and promise to pay in the future.
6. It is important to have processes that help in effectively identifying peak property exposures through name and location clearance systems in order to allow for the identification of significant exposures to non-property lines of business at the same location.
7. In part 2, we will cover loss severity models, analytical and guidance functions requirements, factors that add to the complexities of computation around risk accumulation and how to incorporate these into the business processes.
