1. Reinsurance assignment and set-off
Johan Senekal
Senekal Simmonds

2. Reinsurance pricing conditions
High order losses measured in spread loss years
Spread loss period vs corporate bond amort.
Longitudinal price differential and shape of loss distribution
NPV of reinsurance

3. Reinsurer credit risk VAR for reinsurance companies
Costing default risk into the programme
Protective mechanisms
Credit spread
Illusionary value adjustments

4. Cash flow underwriting
Climate for elusive practice
Acquisition cost of debt (i.e. premium)
rs = u/w margin * premium/ surplus + ra *(technical/premium*premium/surplus + 1)
Cash float = technical /premium
Insurer leverage = premium / surplus
conditioning

5. Moral hazard in reinsurance
disconnection of premium from expected losses
disconnection at high coverage in isolation vs portfolio theory approach
Cost of monitoring and price controls

6. Dynamic Financial Analysis
Integration of asset management with underwriting management
DFA modeled to pricing and cover afforded by double trigger contracts (New contract)
Study done by Grundl and Scheser

7. New contract Contract of traditional stop loss plus financial risk
Insurer gauge reinsurer reservation price at time of contracting
Liability cession vs premium cession
Contractual pricing using financial model (default put option cost) vs actuarial model pricing

8. New contract The contract pay-off structure
Higher coefficient of variation (up to 3x stop loss) – commensurate premium pay away
Contact viability conditions
Financial model: CAPM (no default assumption relaxed)

9. New contract NC premium = 1 / (1+rf)*[E(s) – lamda*cov(s,rm)]
Lambda = market price of risk
= E(rm) – rf/var(rm)
s = expected loss on new contract
Must adjust premium for default put option value

10. New contract
Change insurer buying reinsurance with short-term funds (I get it you get it)
Better matching
Small insurers benefit from lower capital strain if reinsurer high credit rating and better investor of hedge of loss