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• Nature of the account. The reinsurer will expect that during the period of the reinsurance cover the
The reinsurer
will expect that insurer’s underwriting policy will not materially alter, except if agreed by both parties. However, it may
insurer’s underwriting be that the current portfolio is changing in comparison to previous years owing to amendments to the
policy will not
materially alter insurer’s management policy and, or perhaps because of, the needs of the original insureds. Any such
changes should be allowed for in the calculation of the current price to be applied.
• Risk profiles. An analysis of the risks within a portfolio of business which groups the policies,
aggregate sums insured and applicable premiums into specified bands should be made available.
Such a profile of the risks to be protected should reveal the number and nature of the risks (i.e.
domestic, commercial or industrial), which may be expected to produce the normal size and frequency
of loss to risk or working excess of loss covers. The risk profile is used to help decide an appropriate
retention for the reinsurer in the context of its attitude to risk and the cost of reinsurance. It also helps
in determining how much cover should be bought.
• Catastrophe perils. The extent to which a portfolio of business is exposed to natural catastrophe perils
must be considered. Any significant exposure should be reflected in the final rate calculated and
particular attention paid to the geographical spread of the business. Aggregate sums insured should
be available for every identified geographical or seismic zone, again split by the nature of the original
policies, for example, domestic, commercial and industrial.
• Underlying protections. With catastrophe protections, the existence and extent of any underlying
proportional or risk excess of loss should be considered. Any such covers reduce the insurer’s net
retained losses arising out of any one event and consequently reduce a catastrophe reinsurer’s
potential exposure to loss.
Refer to section E • Number of reinstatements. The amount of reinsurance provided by each cover may be limited or
5 for reinstatements restricted, particularly in the case of ‘catastrophe’ types of protection. The contract of reinsurance may
Chapter provide a number of reinstatements.

Be aware
Put simply, this means that a reinsurance contract offering earthquake cover of £4m with two reinstatements,
provides the insurer with cover up to £12m, subject to the terms and conditions of the contract.

In the event of a valid claim, additional premiums may be due to replace the amount of cover ‘used up’ Reference copy for CII Face to Face Training
in the claim, unless the reinstatements are free.
• Amount of cover requested. This has an effect on the final rate to be quoted. As a consideration this
varies depending on the relationship between the size of the deductible and the level of anticipated
exposure that reinsurers have assumed. If the total amount of cover required is being layered, the
extent to which a reinsurer is, or wishes to be, involved in more than one layer can be considered in
the calculation of the premium. There may be occasions when a reinsurer thinks that the top layer of a
programme is insufficient to cover the reinsured’s exposures. If the reinsured decides to buy more
vertical cover there is an implication that its exposures have increased and the reinsurer is potentially
more exposed to loss: the reinsurer may wish to protect its rating position by the imposition of a
warranty that no higher layer is carried by the reinsured.