Life & Health Reinsurance: An Insightful Introduction
Delve into the world of reinsurance, life insurance, and working in the reinsurance industry through this comprehensive guide. Discover the benefits of reinsurance, unique aspects of life insurance products, and how reinsurance works to protect both consumers and society.
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Presentation Transcript
Life & Health Reinsurance An introduction Parker Crosby, Ben Berning, Kaitlyn Pedersen
What is reinsurance? What is life insurance? What is it like to work in reinsurance? AGENDA 2 Intro to L&H Reinsurance | Seb Kleber
What is reinsurance? Insurance for insurance companies. The primary insurance risks are mortality, investment, persistency, and expense risk. Reinsurance allows one insurance company to pass some or all of these insurance risks to another insurance company. Life Insurance Products and Finance by David B. Atkinson, FSA & James W. Dallas, FSA
How does reinsurance work? Policyholder Policyholder Claims Claims Premiums Premiums Insurer Insurer Part of Claims Part of Claims Part of Premiums Part of Premiums Reinsurer Reinsurer 4 Intro to L&H Reinsurance | Seb Kleber
Benefit of reinsurance to consumers and society Provides protection Risk diversification Law of large numbers Reinsurers help set assumptions Capital efficiency Income smoothing Reduces price 5 Intro to L&H Reinsurance | Seb Kleber
Unique aspects of life insurance Two main types of insurance products Protection products (Term insurance) Savings and wealth accumulation products Underwriting Health is evaluated (medical tests, history ) Premium charged depends on health Future changes (Big data, Non-invasive) 6 Intro to L&H Reinsurance | Seb Kleber
Life insurance is a long term business Even short term plans can cover long periods, for example the most popular term product is 20 year term Whole Life policy pays on the death of the life insured whenever it occurs in the future. Direct companies cannot cancel the policy, so they expect the same from a reinsurer 7 Intro to L&H Reinsurance | Seb Kleber
How does reinsurance work? Indemnity vs. Assumption Automatic vs. Facultative Excess vs. Quota Share Retention example Types of Reinsurance Contracts Coinsurance vs. Yearly Renewable Term (YRT) 8 Intro to L&H Reinsurance | Seb Kleber
Indemnity vs. Assumption Indemnity reinsurance Policyholder has no contractual relationship with the reinsurance company Contractual relationship between the insurance company and reinsurer remains Reinsurer reimburses ceding company for claims Assumption reinsurance The permanent transfer of insurance liabilities Reinsurer takes over direct companies role Essentially the sale of a company or block of business 9 Intro to L&H Reinsurance | Seb Kleber
Automatic vs. Facultative Automatic reinsurance Business meets predetermined characteristics Reinsurer must accept reinsurance of those policies Terms predetermined in a treaty Facultative reinsurance Voluntary (shopped) or policy doesn t meet automatic requirements (capacity) Terms negotiated separately for each policy Reinsurer underwrites the risk 10 Intro to L&H Reinsurance | Seb Kleber
Excess vs. Quota Share With an Excess / Quota Share treaty, the ceding company retains a constant dollar amount / percentage of each policy up to a maximum. $2,000,000 C e d e d R e t a i C e d e $1,000,000 n e d d R e t a i n e d QUOTA SHARE EXCESS 11 Intro to L&H Reinsurance | Seb Kleber
Retention example Maximum client retention is $1,000,000 for both Excess and QS Quota share is 40% Policy Size Retention Reinsurance $500,000 $500,000 $0 Excess Share $2,000,000 $1,000,000 $1,000,000 $500,000 $200,000 $300,000 Quota Share $2,000,000 $800,000 $1,200,000 12 Intro to L&H Reinsurance | Seb Kleber
Coinsurance vs. YRT Coinsurance YRT Risk sharing Reinsurer shares in all risks of the policy Reinsurer shares in mortality risk only Reinsurance premium A proportionate share of the original policy premium Portion of claims and expense reimbursement Typically follows mortality pattern (not policy premiums) Portion of claims Reinsurance payment Rate guarantee Guaranteed to the same extent as original policy Not typically guaranteed Other Ceding company gets a credit for the reserves held by the reinsurer 13 Intro to L&H Reinsurance | Seb Kleber
Protection against adverse fluctuations Insurers are concerned with both the number of claims and the total amount of claims payments Level of claims will vary greatly by product type, underwriting, and market An insurer will set its retention so that it will not risk insolvency as a result of adverse claims experience 14 Intro to L&H Reinsurance | Seb Kleber
Setting assumptions Reinsurers can help clients determine the cost of the underlying risk being covered Experience studies Protective value studies Research Alignment with underwriting practices Alignment with claims processes 15 Intro to L&H Reinsurance | Seb Kleber
What is Reinsurance work like? Life Reinsurance Consulting Insurance Day to day work experience Pricing Client Markets Valuation Experience Studies 16 Intro to L&H Reinsurance | Seb Kleber
General advice How do you know if actuarial science is the right fit? Attend company presentations Interview and ask questions Take an exam or two Job shadow 17 Intro to L&H Reinsurance | Seb Kleber
Questions? 18 Intro to L&H Reinsurance | Seb Kleber
