Presentation on theme: "W Geneva December, 2007 World Meteorological Organization Basics of Catastrophe Reinsurance."— Presentation transcript:
W Geneva December, 2007 World Meteorological Organization Basics of Catastrophe Reinsurance
W 2 Catastrophes and Insurance The same catastrophe event affects many people – and is the cause of loss under many insurance policies at the same time. –defeats statistical independence –losses aggregate from the same cause Catastrophes create a separate class of insurance risk for insurance companies.
W 3 Catastrophe Excess of Loss Reinsurance Outline Sample Agreement ReinsuredInsurance Company XYZ CoverageProperty, physical damage and business interruption losses arising from a single Event. TypeIndemnity Excess of Loss Period12 months 1 January 200Q – 31 December 200Q LimitUp to US$125,000,000 UNL excess of US$100,000,000 UNL. PremiumUS$xx,xxx,xxx Other Conditions Definition of Event Definition of UNL Exclusions etc.
W 4 Catastrophe Excess of Loss Reinsurance Example Hypothetical Loss Total of Losses in an EventUS$ 209,000,000 AttachmentUS$ 100,000,000 Recoverable from Cat XLUS$ 109,000,000 Remaining LimitUS$ 16,000,000 Please note: The Reinsured may have purchased layers above and layers below this layer US$125,000,000 xs US$100,000,000. Together the layers form a catastrophe excess of loss program (e.g. $700,000,000 xs $50,000,000 in four layers).
W 5 Reinsurance and Catastrophe Risk Motivation to purchase reinsurance The purpose of catastrophe reinsurance is to limit the capital required to meet major catastrophe risks. Hypothetical Program: For catastrophe losses >US$50,000,000 the Reinsured will not have to have more risk capital available than US$50,000,000 - unless the loss is >US$750,000,000.
W 6 Catastrophe Risk and Insurance Miscellaneous Points 1.Risk Modeling 2.Other means of Risk Transfer Pro rata Reinsurance Index and parametrically based Reinsurance/Derivatives 3.National Catastrophe Pools and Programs
W 7 Financing Catastrophe Risk Transfer of Catastrophe Risk
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