結構化風險-我們可以拉動多少杠桿？.pdf

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1、2022 ARTHUR J.GALLAGHER&CO.2023 CARe Reinsurance SeminarC-22:Structured Risk:How Many Levers Can We PullRaj Bohra FCAS Gallagher Re22022 ARTHUR J.GALLAGHER&CO.2The Casualty Actuarial Society is committed to adhering strictly to the letter and spirit of the antitrust laws.Seminars conducted under the

2、 auspices of the CAS are designed solely to provide a forum for the expression of various points of view on topics described in the programs or agendas for such meetings.Under no circumstances shall CAS seminars be used as a means for competing companies or firms to reach any understanding expressed

3、 or implied that restricts competition or in any way impairs the ability of members to exercise independent business judgment regarding matters affecting competition.It is the responsibility of all seminar participants to be aware of antitrust regulations,to prevent any written or verbal discussions

4、 that appear to violate these laws,and to adhere in every respect to the CAS antitrust compliance policy.CAS Antitrust Notice2022 ARTHUR J.GALLAGHER&CO.Structured Quota ShareManaging Capitalization42022 ARTHUR J.GALLAGHER&CO.Quota Share Reinsurance as Capital Management ToolFinance growth Generate c

5、apital relief,improve capitalization scores(i.e.,BCAR)Competitive pricing,when compared to other forms of capital,plus the flexibility of reinsurance Reduces premium required capitalAvailable reinsurance options run the continuum of cost/benefit Traditional/UnlimitedCostly under favorable scenarios

6、Structured/LimitedCost effective Available reinsurance capacity from highly rated reinsurers mitigates execution risk Well-understood contract and terms Deep structured reinsurance marketCapital issues faced by Insurance Companies Statutory accounting and regulatory capital models have conservative

7、biasesAccelerate capital requirementsAccelerate expense and defer income recognition Significant upfront capital contributions requiredDepresses ROEs during the start-up phase A Quota Share will lower otherwise required capital by sharing economics with reinsurer52022 ARTHUR J.GALLAGHER&CO.Capital B

8、enefit of Structured QS Reinsurance Quota Share reinsurance acts as a from of capital Reduces and/or delays capital contributions otherwise required Reduces premium capital charges in AM Best BCAR capital model Structured Quota Shares are most often compared to debt financing whereas Traditional Quo

9、ta Shares are more comparable to equity Structured fixed cost in upside scenarios,limit on downside protection Traditional proportional sharing of economics both upside and downside Cost of“capital”is the reinsurers margin relative to capital benefit in AM Bests BCARCeded cost of capital=()62022 ART

10、HUR J.GALLAGHER&CO.Structured quota share vs.debt financingStructured QS72022 ARTHUR J.GALLAGHER&CO.7Common contract features used to lower cost and limit risk include:Experience Accounts returns excess profit to cedant Similar to 100%profit commission at ELR or better Sliding scale ceding commissio

11、n or loss corridors losses in a specified range are retained by cedant 60%-70%corridor used in the example on the next slide Limits reinsurers downside to balance upside retained by cedant Loss ratio caps losses in excess of the cap are retained by the cedant e.g.,the reinsurer will not be responsib

12、le for losses in excess of a specified amount 100%LR used in the example on the next slideStructured Quota Shares are subject to the same accounting and risk transfer rules as Traditional Quota Shares and all other reinsurance contracts:Any limitations on recoveries(loss ratio or occurrence)must be

13、reflectedAny experience related features must be currently accrued(profit commissions,loss corridors)Structured deals exceed accounting risk transfer guidelines and fully qualify for reinsurance accounting and capital reliefStructured QS Typical Coverage Terms82022 ARTHUR J.GALLAGHER&CO.Margin Compa

14、rison:Structured vs.Traditional QS-60.00%-50.00%-40.00%-30.00%-20.00%-10.00%0.00%10.00%20.00%30.00%40.0%50.0%60.0%70.0%80.0%90.0%100.0%110.0%120.0%Reinsurer MarginSubject Loss RatioTraditional QS(36%Fixed CC)Structured QS(6%Margin,6-point Corridor,100%LR Cap,FWA w 100%PC)but less downside protection

15、 if results are unfavorableStructured QS has a lower cost under favorable results6%margin same at ELR of 58%LR,Structured QS margin flat through 6-point Corridor to 64%LR-36%at 106%LRCapped beyond24%at 40%LR0%at 64%LR-42%at 106%LR2022 ARTHUR J.GALLAGHER&CO.Multi-Year Excess of LossManaging XOL Reten

16、tions102022 ARTHUR J.GALLAGHER&CO.Structured Multi-Year XOL with Profit CommissionImproving Cost Benefit on High Activity Working LayersBest for High ROL layers with poor cost-benefit relationshipTakes advantage of diversification over time most effective in high loss activity areasReinsurers often

17、have dedicated teams for this productTypically written with single or limited reinsurerCan help bridge view of loss cost between cedent and reinsurer112019 ARTHUR J.GALLAGHER&CO.112021 ARTHUR J.GALLAGHER&CO.Multi-Year Excess of LossPotential Solution to Increasing CAT XOL CostsOverlying LayersUnderl

18、ying Layers(30%ROL)RetentionStructured SolutionMulti-Year XOL with PC to leverage on diversification over timeHow it works:2-to-3-year periodUpfront Premium same or marginally higher than TraditionalCumulative notional Experience AccountMargin 30-50%/PC 50-70%Annual Limits matching Traditional with

19、additional Term Limits share across yearsEarly cancellation option if profitable122019 ARTHUR J.GALLAGHER&CO.122021 ARTHUR J.GALLAGHER&CO.Multi-Year Excess of LossAttractive cost-benefit with profit commission on good experience,guaranteed terms and capacity on poor experience,all while providing id

20、entical annual coverage as Traditional.High ROL layers=poor cost-benefitLarge component of loss activity self-funded via high upfront and reinstatement premiumTime diversification lowers volatility charge,diversification most effective on high loss activity areasProduct with high Profit Commission o

21、n good experienceBudget stability and security over time with strategic capacity providerNot exposed to market volatility or post-loss adjustmentBottom Layers Commensurate Protection for Cost?Efficient SolutionIdentical to TraditionalSame annual coverageSimilar or marginally higher upfront ROLSignif

22、icant Profit CommissionPotentially substantial cost savings with PC up to 70%+Guaranteed Pricing&CapacityRegardless of loss experienceNo post-loss adjustmentCash flow BenefitUpfront payment of only RI margin instead of full Deposit PremiumPotential Solution to Increasing CAT XOL Costs 132021 ARTHUR

23、J.GALLAGHER&CO.13Motivations&Adaptations An approach not a productLeveraging on time diversification for better cedant economics without compromising on reinsurers.In turn can achieve similar premium with significant PC.The time element reduces volatility which in turn reduces margin requirement.Sig

24、nificant PC possible given modelled loss activity compounded by tightened distribution over time.Reinsurers,however,are unlikely to openly acknowledge above expect default position to include loading on upfront premium in their favour.The flexible augmentation of risk-reward profile to sit in betwee

25、n traditional and self-retention should in itself be a valuable,differentiating option.Works well when there is discrepancy between client and reinsurer view of expected loss leveraging the gap.Also when the client is already in some mindset for higher risk retention voluntarily or otherwise.Above a

26、spects compound in a hardening market whereby clients have increasingly limited options outside of straightforward risk-adjusted loadings.“Vanilla”MY Pure EfficiencyRisk-Reward Tradeoff142019 ARTHUR J.GALLAGHER&CO.142021 ARTHUR J.GALLAGHER&CO.Transaction StatisticsHighly varied in application(Paid)R

27、OLAverage 50%Majority 30-70%Profit CommissionAverage 50%Majority 30-70%R/I Margin=1-PCCustomization of Premium,Limits&Margin subject to goals and constraints0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%Transacted ROL vs R/I MarginROLPCDurationVast majority 3 yearsUp to 5 yearsR/I Margin152021 ARTHUR

28、J.GALLAGHER&CO.2-Year CAT XOL with 3 Limits over Term“Cat 32”Illustration2-year periodUpfront Premium same or marginally higher than TraditionalMargin 30-50%/Profit Commission 50-70%Annual Limits matching Traditional at 2 occurrence limits,Term Limits set at 3 occurrence limitsIllustrative TermsCove

29、red BusinessSubject PoliciesTBDGeographic ScopeTBDSubject PremiumTBDBrokerGallagher ReStructured TermsProductMulti-Year Excess of LossReinsurerTBDEffective Term2 annual periodsPremiumTBD per Annual PeriodReinstatement PremiumTBDMargin,Funds TransferredA percentage of the Premium,Settled on a Funds T

30、ransferred basisFunds Withheld AccountPremium less Margin,to be retained by Company on a cumulative Funds Withheld basisInterest CreditX%,applied to Funds Withheld Account each year until CommutationCoverageAttachment PointTBD,each OccurrenceOccurrence LimitTBDAggregate Limit3 Occurrence Limit per T

31、ermAnnual Limit2 Occurrence Limit per Annual Period162022 ARTHUR J.GALLAGHER&CO.General Disclaimer for all Analytical WorkThis analysis has been prepared by Gallagher Re on the condition that it shall be treated as strictly confidential and shall not be communicated in whole,in part,or in summary to

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