Reinsurance Management
Reinsurance is insurance risk transferred to another insurance company for all or part of an assumed liability. In other words, reinsurance is insurance for insurance companies. When a company reinsures its liability with another company, it cedes business to that company. The amount an insurer keeps for its own account is its retention. When an insurance company or a reinsurance company accepts part of another company’s business, it assumes risk. It thus becomes a reinsurer.
The insurance company directly selling the policy is also known in the industry as the insurer, the reinsured, or the ceding company. The Guidewire term for this company that directly sells the policy is insurer. An insurance company accepting ceded risks is known as the reinsurer.
Guidewire Reinsurance Management provides reinsurance for all lines of business.
Insurers procure reinsurance in the form of treaties and facultative agreements. A facultative agreement is a reinsurance agreement for a specific risk that is negotiated on an individual case basis. A treaty, on the other hand, is an agreement between the insurer and the reinsurer to provide coverage for all risks of a certain type.
Insurers group reinsurance treaties into reinsurance programs to cover policy risks in a consistent way that meets the insurer’s business goals. Insurers also group treaties into programs to ensure that they have no gaps in coverage and to ensure that they do not duplicate coverage.
An insurer typically operates several reinsurance programs. The insurer structures each reinsurance program to cover a class of risks within a monetary range. Risks that are large and rare are not usually covered by treaties in a reinsurance program. Facultative agreements handle these risks.
After the reinsurance programs are set up in PolicyCenter, PolicyCenter attaches each qualifying policy risk across all the insurer’s open policies to one and only one active reinsurance program. At this point, PolicyCenter also attaches all the treaties of that program both to the policy and to that specific policy risk.
On the policy level, a policy held by the insurer can be associated with several programs, one for each class of risks. The policy can also be attached to one or more treaties within each program.
Within PolicyCenter, these attachments of program to policy risk are then used to:
- Calculate ceded premiums.
- Calculate proportional shares on exposures for export to claims systems, such as ClaimCenter.
Within a claim system, such as ClaimCenter, these attachments can be retrieved to display the following reinsurance information associated with a claim or set of claims:
- Treaties that are associated with a specific exposure
- How exposures from one or more claims are grouped into a single reinsurance risk
- The amount that can be recovered from each reinsurer on each policy risk, itemized on a per exposure basis
PolicyCenter additionally enables creating and applying facultative agreements against individual high risks that are not covered by any of the PolicyCenter reinsurance program treaties.
See also