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By: Akash Bhardwaj Kriti Jain Kanika Gupta Nitin Dokania Rahul Jain Rohit Kothari
Insurance is a contract between two parties whereby one party
called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event.
Reinsurance is understood to be that practice where an original
insurer, for a definite premium, contracts with another insurer (or insurers) to carry a part or the whole of a risk assumed by the original insurer. In short : Transfer of a certain portion of risk exposure to another company.
Historical Perspective Capacity Product Development Mortality Guidance Capital Management Tax Planning Risk Management Underwriting Guidance .
History as a whole .
especially marine insurance. 1852 The earliest reinsurances first appeared in transport.History cont…. Inspired by the Hamburg fire of 1842 December 22. 1842 -Invitation to deliberate on the founding of a reinsurance company in Cologne Cologne Re Statutes drafted in 1843 April 8. 1846 -Cologne Re founded Cologne Re first treaty -Oct./Nov. .
Reinsurance Pre-1900’s 1846 Cologne Re founded 1863 Swiss Re founded 1880 Munich Re founded 1886 Frankona Re founded .
the insurer under the General Insurance Corporation should invest his money in the following way: 20% of the investments should get diverted to Central Government Securities. 30% of the investments should be in state government and other guaranteed securities. 10% of the investment should be done in the infrastructure and the social sector. .IRDA Regulations on Investment According to the IRDA regulations. 5% investment should be made in the housing sector and state government loans.
Practicing fair business ethics and practices. 3. CMD – Mr. 4. Enhancing profitability & financial strength. Yogesh Lohiya . Applying state of art technology.Building long term mutually beneficial relationship with business partners. 2. Mission 1.GIC Re– General Insurance Company GIC Re Vision To be a leading Reinsurance and risk solution provider.
formed by GIC National Insurance Co. Formation of IRDA in 2000 GIC re-notified as Reinsurer and its supervisory role ended over subsidies. Ltd. Ltd.HISTORY Nationalization of Insurance Business Later 4 fully owned Co. Ltd. United India insurance Co. The Oriental Insurance Co. General Insurance Buss. The New India Assurance Co. Ltd. (Nationalization) Amendment act 2002 .
Analyze and Present Indian and International Insurance Data and Trend Analysis. Accept treaty and facultative business from Indian companies. including new ones to be introduced. Organize and manage Market Pools and arrange for their excess of loss protection. Collect. . Develop automatic capacity for products and lines of business.Salient Features Receiving Obligatory Cessions from all non-life insurance companies.
Secure the best possible protection for the reinsurance costs incurred. . Develop adequate capacity. Simplify the administration of business.Reinsurance Arrangements Maximize retention within the country.
Net Premium Earned 2007-08 Domestic International Net Premium Earned 2008-09 Domestic International 27% 73% 38% 62% .
3% 8% Health 16% Misc 9% Fire 14% Premium Earned in % Motor 42% Cargo 4% Hull Life 2% 0% .A Engg.Net Premium – Indian Business (2008-09) Liability 2% P.
06 52.69 21.00 2489.06 Incurred claim 914.24 198.) Earned premium Fire Engineer.87 28.41 1.56 Incurred claim 729.77 -1.33 253.clai m ratio 78% 59% 122% Misc.51 238.11 76% 7% 74% 75% .01 382.56 262.73 193. Marine 817.91 Incu.78 65.04 56.65 86% -98% 109% 71% 130.Segment wise claim experience 2007-08 National (Cr.48 1758.90 10.25 99.) Earned premium 936.44 163.81 Incu.69 111.04 0.39 1379.claim ratio 112% 66% 143% Foreign (Cr. & Others Life Aviation Motor 1606.27 339.
. “Takaful” Islamic way of insurance.UK.Future Outlook of GIC Obligatory cession reduced. European. Afro.Asian Market New London office. Caribbean & worldwide Aviation Business.
REINSURANCE PRICING G E N E R A L C O N S I D E R AT I O N S Difficult and sometime impossible to get credible loss experience low claim frequency and high severity nature of many reinsurance coverage. Length time delays between the occurrence. reporting & settlement of many covered loss events Leveraged effect of inflation upon excess claim .
Cost of Reinsurance to the Cedant The Reinsurer’s Margin Brokerage Fee Loss investment Income Additional Cedant expenses Reciprocity .
and complexity of the coverage. information availability. loading (as a % of RP net of RCR & RCF) RTER = Reinsurance’s target economic return (as a % of reinsurance pure premium) . PVRELC RP (1 RCB RCF ) x(1 RIXL ) x(1 RTER ) Where RP = Reinsurance premium PVRELC = PV of RELC (Reinsurance estimate of the reinsurance expected loss cost) RL = Reinsurance Loss RCR = Reinsurance ceding commission rate ( as a % of RP) RBF = Reinsurance Brokerage Fee (as a % of RP) RIXL= Reinsurance internal exp. A flat rate reinsurance pricing model.Reinsurance Pricing Method The pricing formula a reinsurance actuary would use depends upon the reinsurer’s pricing philosophy.
The reinsurer sells directly to the buyers of reinsurance. Reinsurer’s account executive manages relationship between the ceding company & the reinsurer. Reinsurance Brokers .Reinsurance Distribution Direct Writer .The reinsurer accepts business offered through reinsurance brokers or intermediaries. which usually represent a specified percentage of the reinsurance premium. . Ceding company is in direct contact with the reinsurer. Reinsurers pay commission in return. Ceding company is in direct contact with the reinsurance broker.
capacity and financial conditions. personal relationship with the reinsurer.COMPARISON DIRECT WRITING Offers ceding company a BROKERAGE MARKET Brokers know the market close. Can furnish in-depth information and advise about policy forms. Ceding companies places business with fewer reinsurers. simplifying accounting procedures Payment of large losses may be handled more quickly place and have access to appropriate facilities. Maintain own staff so ceding company may be able to do with less staff. .
Malaysia Re and Kuwait Re The New Insurance Bill was on track and would be placed before the Upper House in December :Seeks to pursue FDI limit from 26% to 49% . Best Re.Current Developments Minimum capitalization of Rs5000 Cr required to set up branches FDI cap is 26% Minimum capitalization for Joint Venture is only Rs 200 Cr Swiss Re and Munich Re have set branches in India London-based global reinsurance giant Lloyd’s returns New entrants. Slovenian Re. including Asia Capital Re.
Cont… compulsory reinsurance from 20 % to 10% from April 2007. General Insurance Corporation (GIC Re). has acquired the distinction of being the only reinsurer among significant players worldwide to report profits in `08-09. Global presence of GIC . the state-owned national reinsurance company.
.Scenario 2009-10 Firming of rates by Regular players Entry of new players capturing about 30-35% of market share Average reinsurance rates increased to 5-10% Indian market facing difficulties in renewing treaties specially proportional ones Decline in business by 50%.
CHALLENGES FOR REINSURANCE IN INDIA .
The financial man said. the changing needs of clients. growth. and profitability are the three challenges keeping reinsurance people awake nights. "The industry must face up to investor demands for higher returns." The broker said. and changes in the competitive marketplace . "The biggest challenge confronting reinsurers today is the ability to price the product properly. "The Internet." The economist said.
CHALLENGES Difference between price charged by international reinsurer & domestic ones leading to price affordability issue Absence of competition Tight regulations regarding reinsurance Lack of large capital base required Limited insurance penetration Quasi monopolistic condition Operational challenges Socio economic challenges .
WHAT INDIA NEED TO DO? Domestic companies increase their capacity More disciplinary watch on insurance sector More information gathering is needed Pooling of financial & technical resources Joint ventures. alliances & partnerships Developing standard accounting system Creating investment opportunities Research & development .
THANKING YOU .
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