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Ch16 - Reinsurance

M

mossie

Member
Hi,

Could someone please help with my query below?

p3 - section 2.1, 2nd paragraph: what is normally used as a measure when they say the ’size of the insurer’ (e.g. by assets, NAV, annual premium etc)? how is it different from 'size of its portfolio'?

Many thanks!

M.
 
Hi Mossie

The size of insurer could be measured by a variety of things including the measures you said as well as contracts inforce, total sum assured etc. It could also be part of a wider group.

For most insurers it will have various portfolios (blocks of business) that it is considering reinsuring.

The 'larger' the insurer, the less need for this as it may have diversification from other areas of business or sufficient internal capital to absorb any loss. Although obviously large insurers still need reinsurance too, perhaps more so where the portfolio in question has volatile claims or is a new product.

Hope this helps.
Sarah
 
Sarah Byrne said:
Hi Mossie

The size of insurer could be measured by a variety of things including the measures you said as well as contracts inforce, total sum assured etc. It could also be part of a wider group.

For most insurers it will have various portfolios (blocks of business) that it is considering reinsuring.

The 'larger' the insurer, the less need for this as it may have diversification from other areas of business or sufficient internal capital to absorb any loss. Although obviously large insurers still need reinsurance too, perhaps more so where the portfolio in question has volatile claims or is a new product.

Hope this helps.
Sarah
Click to expand...

Thanks Sarah!
So does it mean there is not a 'normal' measure of size but depends on the context? Are there situations where it is more appropriate to use one measure over another?
 
Yes, there are a variety of different measured you could consider. I don't have any specific examples of when one thing might be more appropriate, but just consider the use of the measure and suggest something sensible if necessary in the exam.
 
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