Reinsurance Market (Chapter 9) Flashcards
(24 cards)
What 2 experiences have caused insurers to be reluctant to place all of a programme with a single reinsurer?
Consolidation of the reinsurance market & reinsurance failure
What are the requirements for an international reinsurance market?
Political Stability, Geographical location, Quality transport system (Local & International), Developed communication systems, Highly qualified personnel, Office space at competitive prices, Multi-lingualism, Stable legal & regulatory environment, Liberal attitude by authorities, Quality of life, Time zone, Foreign presence, Strong national insurance industry, Centralisation, Tight economic controls & developed financial centre, Strong currency, Arbitration facilities
What are the 2 divided components of the London Market?
Lloyd’s & the London Market Companies
What is the unit that the London Market Companies have formed together?
the International Underwriting Association (IUA)
What is the IUA?
The IUA is the representative organisation for international and wholesale insurance and
reinsurance companies trading through London.
Under the EU Reinsurance Directive where are EU reinsurers regulated?
by their ‘home state’ and
are granted a passport to write business throughout the EU.
What are the 4 EU-Wide reinsurance regulatory regime introduced by the Solvency II?
- improved consumer protection;
- modernised supervision;
- deepened EU market integration; and
- increased international competitiveness of EU (re)insurers
How many Pillars does the Solvency II directive have?
3 Pillars
Solvency II: Pillar 1
Financial resources, SCR & MCR solvency requirements
Solvency II: Pillar 2
Governance, controls
Solvency II: Pillar 3
Disclosure & regulatory reporting
What is a Captive?
A special purpose vehicle managing and financing risks from its non-insurance parent company.
What is the function of a captive?
Provides insurance to its parent and operates like a commercial insurer.
How is a captive regulated?
Requires capital and is regulated as a captive (not an insurer) in its domicile.
How is the ownership of a captive?
A form of self-insurance where the insurer is wholly owned by the insured.
It what instances will a Captive be used?
Beneficial for businesses with predictable losses or when traditional insurance is unavailable or costly (e.g., cyber risks).
What is the market response to a Captive?
Captive formations often accelerate in response to a hard insurance market.
What are the 2 types of captive?
pure captives and sponsored captives
What are ‘Pure Captives’?
Writes business for 1 single company or group/association of companies having the same exposures
What are ‘Sponsored Captives’?
Owned & controlled by parties unrelated to the insured’s & do not necessarily pool the insured’s risk (Insured could be insurers, investors etc)
What does a hard market attracts?
New entrants
What does a soft market discourages?
New entrants
How is the market Capacity in both a ‘soft market’ and a ‘hard market’?
high during a soft market and low during a hard market
