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Chapter 6 Reinsurance programmes 6/17

C1B Specific information concerning the proposed reinsurance
The key information that should be made available to the reinsurer will typically include all or some of
the following items:
• Class or classes of business to be covered. There should be a clear indication to the reinsurance
underwriter of the precise risks to be protected by the reinsurance. If possible, the nature and extent
of original coverage should be outlined and, with a new client, examples of original policy wordings
would be advantageous.
• A breakdown by premium income and aggregate exposure in the territories for which cover is being
sought.
• Original policy sums insured. Details of the sums insured or EML limits of liability being issued by the
reinsured, including any deductibles that are applied to the original policies.
• Risk profile. As well as details of the different sums insured that are being underwritten by the
reinsured, this should also indicate the composition of the portfolio.

Be aware
In the case of a property account, the risk profiling exercise would show whether it consists of simple, commercial
or industrial risks or a combination of them all. Risks would also be allocated to bands into which sums insured fall.

The risk profile should indicate whether the portfolio consists entirely of direct insurances or whether
there is an element of inwards reinsurance business, as this may present the potential reinsurer with
significant additional unknown accumulation exposures. Finally, the relationship between any
hazardous and non-hazardous risks in the portfolio should be made clear and what, if any, special
perils or risks may be covered. If the proportion of inward reinsurance business written is significant,
potential reinsurers may require separate profiles for this class of business. This would certainly be
the case if the reinsured purchased an excess of loss cover which was to include protection for its
inward excess of loss writings.
• General experience. There may be concerns about the insurer’s experience in the particular class or
classes of business that it is proposed the protection will cover. Positive information confirming the Chapter
overall experience of the company to manage its accounts and its claims as well as the individual Reference copy for CII Face to Face Training
experience and competence of the actual underwriters can be beneficial in negotiating the required 6
reinsurance.
• Premium income. The development of the insurer’s premium income is a measure of its business
activity and exposure. This information should be provided for the account to be protected over the
past five to ten years, together with an estimate for the current and next year.

Question 6.5
Why would a reinsurer be interested in the pace at which an insurer’s account had developed?

• Claims experience. This information more than any other, forms the basis of the negotiations on the
price of the reinsurance. Claims experience influences the premium required by non-proportional
reinsurers and the commission that proportional reinsurers will be prepared to allow. Any claims
details must be sufficient to enable the reinsurer to assess what its future liabilities may be. It would
not be adequate to advise whether the particular reinsurance being placed has had any losses or not.
This could be misleading if the insurer has recently increased its general underwriting policy,
increased its original policy limits or changed its underlying proportional arrangements, all of which
would require the reinsured to provide ‘as if’ loss figures. In the case of non-proportional
reinsurances, claims which previously were settled below the deductible may now be considerably
greater due to the effect of inflation or changes in law and attitude of courts in settling compensation
claims.

Be aware
It may be necessary to obtain details of all claims that have affected the portfolio or at least all claims larger than,
say, 50% of any proposed reinsurance deductible.