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

2. Agenda Why reinsurance To buy and sell reinsurance
The reinsurance market
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3. SECTION PAGE TITLE GOES HERE Why reinsurance
Part 1
SECTION PAGE TITLE GOES HERE
Why reinsurance
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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
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5. 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
Equity
Dept
Retained
earnings
Reinsurance
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6. How do we measure the results? Downside Risk Capital – One in 200 year
Example from real world
Clear the graph
Gross
Net after R/I
Change
Downside risk
Average result
- 299
- 341
- 42
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7. Risk & Reward trade-off
“Optimal strategy”
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8. SECTION PAGE TITLE GOES HERE To buy and sell reinsurance
Part 2
SECTION PAGE TITLE GOES HERE
To buy and sell reinsurance
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9. Risk Loss 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
Fakultativ eller frivillig
Pooling
Exempelvis nationella
Loss
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10. How to buy reinsurance Reinsurance contracts Treaty Facultative
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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
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12. Largest reinsurers 2011 by premium
Source: A.M. Best
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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 (?)
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14. SECTION PAGE TITLE GOES HERE The reinsurance market
Part 3
SECTION PAGE TITLE GOES HERE
The reinsurance market
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15. Long term trend for catastrophe losses
Source: Guy Carpenter, Swiss Re
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16. Guy Carpenter Global Property Cat Price Index
$35 bn
$16 bn
$10 bn
Andrew
Katrina
9/11
15 November 2018 16 16

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
London centric
Very cyclical
Experience rating
Highly specialised
CE centric
Few player
Longer term
Wording based
Highly commoditised
Highly specialised
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18. Reinsurers can build a diversified portfolio and offer lower capital charge
CA EQ
Europe
Other Regions
8.5% 6%
Japan Typhoon
4.1%
Florida
10%
Overall ROE
16.4%
Other US 8%
Japan EQ
2% - 8% UK
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19. Reinsurers cost of capital
Reinsurance pricing of natural perils Capital 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
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20. Market Drivers Dedicated 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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