Page 324 - M97TB9_2018-19_[low-res]_F2F_Neat2

11/34 M97/February 2018 Reinsurance

As the reinsurer’s exposure is excess of the reinsured’s retention, IBNR tends to be a larger factor for the
reinsurer. The particular problems that it presents to the reinsurer are:
• The past claims experience of a reinsured is not fully developed. This means the reinsurer must make
an assessment of the IBNR and IBNER claims in order to have a representative past claims experience
for the calculation of the excess of loss reinsurance premium.
• The reinsurer must reserve for all its liabilities. Therefore, for proper reserving it must not only reserve
for the claims that have been reported but also make an assessment of those not reported but that
will emerge at some point in the future, in the form of reserves for IBNR and IBNER.

Consider this…
Consider how past experience of the portfolio or the industry as a whole helps a reinsurer to be able to assess the
IBNR factor required to ensure its own reserves are adequate. It also helps it to ensure that, where excess of loss
premiums are calculated on the basis of the reinsured’s own past claims experience, allowance is made for IBNR.

It is important that the conditions underlying IBNR are minimised, which means achieving prompt
Important that the
conditions underlying notification of claims and securing accurate claim estimates. Reinsurers seek to do this in the two ways:
IBNR are minimised
By the extended claims The clause places a contractual obligation upon the reinsured to report claims to the
reporting clause reinsurer immediately the value exceeds a specified percentage of the retention, such as
50% or 75%. The clause also specifies categories of injuries that must be reported
immediately to the reinsurer, irrespective of the reinsured’s estimate of the claim or the
liability.
The effect of the clause is that reinsurers are informed of a claim that is likely to impact
the treaty soon after the reinsured has received information on the claim. The reinsurer
may instigate enquiries immediately to verify the reserve, and if it is concerned about
the reinsured’s valuation, it is open to the reinsurer to add an additional case reserve.
By technical claims audits The claims specialist of the reinsurer will visit the reinsured, examine the case files and
determine the claims reserve in those cases where the claim has the potential to exceed
the treaty retention. The reinsurer will often agree with the reinsured the claims
settlement procedure in order to bring about the most economical settlement. Reference copy for CII Face to Face Training

Reinforce
You have now reached the end of this chapter on casualty reinsurance. Before you move on, review the key points
that follow – and revisit sections in the chapter to reinforce what you have learned.

11
Chapter