1. Life & Health Reinsurance An introduction Parker Crosby & Ben Berning

2. Intro to L&H Reinsurance | Seb Kleber AGENDA What is reinsurance? What is life insurance? What is it like to work in reinsurance? 2

3. 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

4. Intro to L&H Reinsurance | Seb Kleber 4 How does reinsurance work?

5. Intro to L&H Reinsurance | Seb Kleber Benefit of reinsurance to consumers and society 5 Risk diversification Law of large numbers Provides protection Reinsurers help set assumptions Capital efficiency Income smoothing Reduces price

6. Intro to L&H Reinsurance | Seb Kleber 6 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 (DNA, Consumer data)???

7. Intro to L&H Reinsurance | Seb Kleber 7 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

8. Intro to L&H Reinsurance | Seb Kleber 8 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)

9. Intro to L&H Reinsurance | Seb Kleber 9 Indemnity vs. Assumption Policyholder has no contractual relationship with the reinsurance company Contractual relationship between the insurance company and reinsurer remains Reinsurer reimburses ceding company for claims Indemnity reinsurance The permanent transfer of insurance liabilities Reinsurer takes over direct companies role Essentially the sale of a company or block of business Assumption reinsurance

10. Intro to L&H Reinsurance | Seb Kleber 10 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

11. Intro to L&H Reinsurance | Seb Kleber 11 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.

12. Intro to L&H Reinsurance | Seb Kleber 12 Retention example Maximum client retention is $1,000,000 for both Excess and QS Quota share is 40% Policy SizeRetentionReinsurance Excess Share $500,000 $0 $2,000,000$1,000,000 Quota Share $500,000$200,000$300,000 $2,000,000$800,000$1,200,000

13. Intro to L&H Reinsurance | Seb Kleber 13 Coinsurance vs. YRT CoinsuranceYRT Risk sharingReinsurer shares in all risks of the policy Reinsurer shares in mortality risk only Reinsurance premium A proportionate share of the original policy premium Typically follows mortality pattern (not policy premiums) Reinsurance payment Portion of claims and expense reimbursement Portion of claims Rate guarantee Guaranteed to the same extent as original policy Not typically guaranteed OtherCeding company gets a credit for the reserves held by the reinsurer

14. Intro to L&H Reinsurance | Seb Kleber 14 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

15. Intro to L&H Reinsurance | Seb Kleber 15 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

16. Intro to L&H Reinsurance | Seb Kleber What is Reinsurance work like? Day to day work experience – Pricing – Client Markets – Valuation – Experience Studies 16 Life InsuranceReinsuranceConsulting

17. 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

18. Intro to L&H Reinsurance | Seb Kleber Questions? 18

19. Thank you