Hi In the chapter on reinsurance, p.16 I would like to know whether deposits back is the same as Sum at Risk reinsurance on original terms basis. Hence, am I right to say that * Original terms and Risk Premium reinsurance * Can both be offered as Quota Share or Surplus * And the relevant proportions can be applied to either the Sum Assured or the Sum at Risk??? Thanks
Hi, We think original terms (O/T) with deposit back is different from reinsuring just the sum at risk (SAR) because, under O/T, even with deposits back, the claims are still split based on the full claim amount, not just the SAR. Also, under O/T deposit back, the assets that are “deposited back” (i.r.o. the reinsurer’s share of reserves) are still owned by the reinsurer, and so there is still a liability for the insurer in respect of them (e.g. on reinsurer default). This is not the case if only the SAR is reinsured. So I agree that Original terms and Risk Premium reinsurance can both be offered as Quota Share or Surplus. However under O/T, the proportions are applied to the full the Sum Insured (SI), whereas under risk premium, the proportions are applied to the Sum at risk. For health products, the SAR could be the full SI or it might be approximated to the full SI, as discussed in the Notes. Regards
