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FJF/FÖRSÄKRINGSRÄTTSDAGEN: ÅTERFÖRSÄKRING

FJF/FÖRSÄKRINGSRÄTTSDAGEN: ÅTERFÖRSÄKRING. Göteborg , den 10:e oktober 2013. Fredrik Strömberg. Agenda. Why reinsurance To buy and sell reinsurance The reinsurance market. Part 1. SECTION PAGE TITLE GOES HERE Why reinsurance. Reinsurance in traditional sense = Spreading the risk.

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FJF/FÖRSÄKRINGSRÄTTSDAGEN: ÅTERFÖRSÄKRING

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  1. FJF/FÖRSÄKRINGSRÄTTSDAGEN: ÅTERFÖRSÄKRING Göteborg, den 10:e oktober 2013 Fredrik Strömberg

  2. Agenda • Why reinsurance • To buy and sell reinsurance • The reinsurance market

  3. Part 1 SECTION PAGE TITLE GOES HERE Why reinsurance

  4. Reinsurance in traditional sense = Spreading the risk Reinsurer Insured R/I Company R/I Company Insurance company R/I Company R/I Company R/I Company

  5. Equity Dept Retained earnings Reinsurance Reinsurance today = Source of capital • There are only four sources of capital for an insurance company • Reinsurance will stabilise results • More stable result = Less capital need • Reinsurance is substitute for own capital

  6. How do we measure the results?Downside Risk Capital – One in 200 year

  7. Risk & Reward trade-off “Optimal strategy”

  8. Part 2 SECTION PAGE TITLE GOES HERE To buy and sell reinsurance

  9. How to buy reinsurance Main ways of reinsurance • Proportional • Quota Share, Surplus Lines • Non-proportional • Excess of Loss, Stop Loss Risk Types of reinsurance • Treaty reinsurance • Kontraktsbunden/obligatorisk • Facultative reinsurance • Fakultativellerfrivillig • Pooling • Exempelvisnationella Loss

  10. How to buy reinsurance Reinsurance contracts Treaty Facultative

  11. Entities that buy and sell reinsurance Buyers of reinsurance • Insurance companies • Stock companies • Mutual companies • Reinsurance companies • Captive companies • Direct or reinsurance • Lloyd’s syndicates • Pools • Hedge Funds Sellers of reinsurance • Insurance companies • Stock companies • Mutual companies • Reinsurance companies • Captive companies • Direct or reinsurance • Lloyd’s syndicates • Pools • Hedge Funds

  12. Largest reinsurers 2011 by premium Source: A.M. Best

  13. Three distinct marketplaces Continental Europe London Bermuda • Dominated by a few mega • Munich Re • Swiss Re • Hannover Re • Zurich is the new hot spot • Infrastructure • Regulation • Financial stability • Lloyd’s is centre of gravity • Infrastructure • Regulation • Access to business • Rating • US market main driver • Zero corporate tax rate • Portfolio theory very important • Highly model driven • Primarily a cat market • Financial & political stability (?)

  14. Part 3 SECTION PAGE TITLE GOES HERE The reinsurance market

  15. Long term trend for catastrophe losses Source: Guy Carpenter, Swiss Re

  16. $35 bn $16 bn $10 bn Guy Carpenter Global Property Cat Price Index Andrew 9/11 Katrina 09 October 2013

  17. Division of current market place Property market PA & WC Marine/Aviation GTPL & Motor Property Cat Property Risk Natural perils only Highly model driven Strong portfolio theory High severity Low probability Exposure rating Main peril is fire Less model driven High frequency Less portfolio theory Experience rating Few players High uw capacity Bodily injury only Multiple perils Highly specialised CE centric Few player Longer term Wording based Highly specialised London centric Very cyclical Experience rating Highly commoditised Highly specialised

  18. Overall ROE 16.4% Reinsurers can build a diversified portfolio and offer lower capital charge 6% UK Other US 8% Europe 6% CA EQ 8.5% Japan Typhoon 4.1% Florida 10% Japan EQ 2% - 8% 6% Other Regions October 9, 2013

  19. Reinsurance pricing of natural perilsCapital charge depends on risk and territorial scope High Don’t know World-wide All Perils US Nationwide All Perils Peak zones Japanese EQ Cal EQ / US Wind Reinsurers cost of capital Regional Europe Limited territory Nordic area Single country Sweden Low Breath of coverage

  20. Market DriversDedicated Reinsurance Capital • Reinsurer Capital is at a record high • Reinsurance sector capital totalled USD190 billion ending third quarter 2012 • Excess capital is currently 12% over long term trend • Sandy impact very limited • USD8 billion of new capital is estimated to have entered the market post-2011

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