Page 73 - Reinsurance Management IC85

The Insurance Times

realised will relate to the level and form of the
retention. Thus, the fixing of retention is the primary
factor in planning reinsurance protection. The factors
to be considered in fixing retentions are:
a. Assets, capital, free reserves and solvency.
b. Size of portfolio, premium income and

profitability.
c. Reinsurance type and cost.
d. Corporate strategy.

a. Statutory solvency regulations may compel
insurers to maintain a minimum ratio between
assets and premium income. A number of large
losses can affect the assets. Retentions are
fixed on individual classes of business after the
company decides to what extent it will expose
its capital and free reserves. Normally, the per
risk retention in main classes lie between 0.5%
and 2.5% of capital and free reserves. Per
event loss retention is about 3 times the risk
retention.

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