questions relate to CH12

[kiki]

Hi,

I have some questions regarding the CH12 reading, can someone please help me to understand thank you so much

1. Commutation
- page 12 impact of future investment return : is my following statement correct ?
- Policyholder receiving the money many years earlier than otherwise , therefore , it has a positive impact on the insured ; Insurer has lost the future investment return by giving money to policyholder, therefore it has a negative impact on insurer . it will then reduce the commutation amount paid from insurer to policyholder;

- page 13: can anyone help me understand the following context by giving an example ? page 13
" in the case of reinsurance business , the reinsurer looking to effect a commutation may have insured the same company that it also purchased outward reinsurance from . " how it happen in real world?

2. Insurance business transfers
- reasons for effecting an insurance business transfer is to achieving finality , there is one sentence suggested " these transfer have the advantage that the reinsurance asset is transferred along with the liabilities" . then my question is any approval /buy in from reinsurer is required in the insurance business transfer?

- page 19, policyholder notification : " in addition to providing them with sufficient information, the insurers should give policyholders adequate time to consider this information.." my question, one of the advantages of insurance business transfer is " do not require the consent of policyholders.." then why and what want to achieve by giving policyholder adequate time to consider the information?

sorry for very long post again , and thank you for your help

 

[Ian Senator]

p12: that's right.
p13: I think this paragraph is trying to say that sometimes you may get insurance and reinsurance arrangements acting concurrently, so when arranging a commutation, you might need to consider all the relevant contracts and reinsurance contracts being commuted simultaneously.
IBT: Yes, you would get the reinsurer involved during the arrangement of the IBT and then transfer everything at one go.
p19: see the 4th paragraph on that page. Basically, it doesn't require consent from policyholders once it is approved, but to get approval in the first place, it must be shown that policyholders aren't disadvantaged. If they think they may be, they can raise the issue with the court, which may then not give approval.

 

[kiki]

Thank you Ian .

for the comment "p13: I think this paragraph is trying to say that sometimes you may get insurance and reinsurance arrangements acting concurrently, so when arranging a commutation, you might need to consider all the relevant contracts and reinsurance contracts being commuted simultaneously." is that mean

eg for Reinsurer A offer both insurance and reinsurance cover, if A provide an insurance cover to policyholder B, then have reinsurance cover from the same group. if A want to commute the reinsurance policy then it will also need to commute the insurance policy at the same time? therefore this situation only occur when insurer and reinsurer are from the same group?

thank you

 

[Darren Michaels]

The nature of London Market business means that some companies may have insured and reinsured each other on different contracts, so when effecting a commutation, you would agree a net commutation to commute all inwards and outwards exposures between the two parties.