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Using Reinsurance to Make Captive Structure – CICA Conference

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CICA Conference – Using Reinsurance to Make Strategic Decisions

Presenters – David Sullivan (AON Benfield), Paul McKeon (TransRe) and Brian Alvers (AON Benfield)

Graphic Of Insurance Make Strategic Decisions using reinsurance Icon
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(Re)Insurance Market Overview

The worldwide total supply of insurance services has grown to $4.2 trillion in 2014.   There has been a steady growth in supply since a sharp reduction of 29% in 2007 – 2008.

The supply has grown steadily to $575 billion in 2014.   Reinsurance supply experienced a 17% reduction in 2007 – 2008.

The US market now totals $72 billion.

The total property excess insurance demand has grown steadily for the last 20 years.  The total casualty reinsurance demand has been very flat or decreased for the same period.   In 2006, the property excess insurance demand equaled the casualty excess insurance demand.  Property reinsurance demand presently outpaces casualty by $10 billion.

Reinsurance Fundamentals

One of the more interesting points brought out in this session was thinking of reinsurance as just insurance for insurance companies.   It can also be thought of as a cost-efficient, renewable, financially secure source of capital that compares favorably versus other forms of capital. 

This is a great concise article on using reinsurance as a source of capital.

Insurers buy it for sleep at night coverage as it protects against catastrophic loss.   The insurers can fund more predictable layers.

How Can a Captive make an evaluation?

Excess insurance reduces volatility unlike using debt or equity for capital.  Measuring the capital requirements involves heavy use of financial formulas including leverage ratios and modeling.  

An actuarial study of this insurance layer is critical.  The flipside of reducing volatility is the essence of excess insurance itself.  

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Table of Contents

Related...

Reinsurance/Excess Insurance Market Hardens

Reinsurance Market No Longer Soft The reinsurance/excess Insurance Market has started to change from a commodity marketplace.  The excess insurance market is usually the bellwether

James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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