Reinsurance Companies Research Articles

An equilibrium model of reinsurance pricing

Reinsurance is the insurance of insurance companies. We develop a dynamic equilibrium model for reinsurance pricing based on the supply and demand of reinsurance. In the model, an insurance company and a reinsurance company make decisions on the optimal reinsurance policy as a demander and a supplier of reinsurance, respectively. The reinsurance price is determined when the demand matches the supply. We incorporate the proportional reinsurance policy as well as investment opportunities into the framework. The high flexibility of this equilibrium pricing model paves a new way for studies of optimal reinsurance and reinsurance pricing.

Reinsurance Companies’ Knowledge Management in Bogotá Colombia

Business knowledge management is a crucial element and a quality differentiator in the services provided by organizations. However, despite their knowledge, due to the lack of strategic knowledge management, reinsurance companies in Colombia limit their organizational development, their strategies to respond to competition, and the generation of opportunities for expansion into other markets. This issue may converge in an inadequate and non-harmonic organizational culture. This paper analyzes and interprets the study categories: prevention, mitigation, transfer, acceptance, research, and appropriation of knowledge on management carried out by reinsurance organizations in Bogota, Colombia. The aim is to establish indicators that respond to the potential effects of reinsurance. The study uses a qualitative approach, descriptive scope, and case study design. From the formulation of improvement guidelines, it has been possible to establish that the companies in the reinsurance sector, taken as a unit of study, have been made aware of the importance and role of adequate knowledge management in the progress and the business projection.

A SURVEY ON MEASURING FINANCIAL DISTRESS PREDICTION USING ALTMAN Z-SCORE MODEL FOR LIFE AND PENSION COMPANIES IN TÜRKİYE

The insurance market is crucial for both the national economy and the financial market. It contributes to the country’s economy by ensuring the healthy operation of the financial industry and protecting it from risk. There are non-life, life, pension, and reinsurance companies operating in the insurance market. This study’s financial failure evaluations were conducted using financial ratios obtained from the financial statements of 17 life and pension insurance companies operating in Turkey between 2019 and 2023. In this context, the Altman Z-Score model is used to assess bankruptcy risk. The Altman Z-Score results for the relevant periods have been calculated using the model established with a total of 4 commonly used ratios, and it has been determined that insurance companies generally fall into the risky zone.

The Time-Consistent Optimal Reinsurance Strategy of Insurance Group under the CEV Model

The article introduces proportional reinsurance contracts under the mean-variance criterion, studying the time-consistence investment portfolio problem considering the interests of both insurance companies and reinsurance companies. The insurance claims process follows a jump-diffusion model, assuming that the risk asset prices of insurance companies and reinsurance companies follow CEV models different from each other. In the framework of game theory, the time-consistent equilibrium reinsurance strategy is obtained by solving the extended HJB equation analytically. Finally, numerical examples are used to illustrate the impact of model parameters on equilibrium strategies and provide economic explanations. The results indicate that the decision weights of insurance companies and reinsurance companies do have a significant impact on both the reinsurance ratio and the equilibrium reinsurance strategy.

The impact of a fair value accounting application on takaful insurance surplus: Insights from Shikan insurance and reinsurance company limited in Sudan

This study examines the impact of fair value accounting implementation on the quality of measuring, equitable distribution and enhanced disclosure of takaful insurance surplus within Shikan Takaful Insurance and Reinsurance Company Limited's financial statements. Data was collected using a two-part questionnaire and a descriptive analysis technique: one gathering personal data about respondents and the other exploring study themes across four dimensions to test hypotheses. The questionnaire was distributed to a random sample of 60 corporate employees and 54 individuals responded, reflecting a 90% response rate. Data analysis used the Statistical Package for Social Sciences (SPSS). Three hypotheses were tested: (1) a positive relationship between fair value accounting and the accuracy of takaful insurance surplus measurement. (2) A positive relationship between fair value accounting and the equitable distribution of takaful insurance surplus. (3) A positive correlation between fair value accounting and enhanced disclosure of takaful insurance surplus. Results demonstrate a positive influence of fair value accounting on surplus measurement quality, equitable distribution and improved disclosure in company financial statements. The study recommends the crucial adoption of fair value accounting practices in insurance and reinsurance companies emphasizing the necessity of maintaining commitment to fair value accounting. Additionally, promoting full disclosure of takaful insurance surplus in financial statements is highlighted as a valuable tool for attracting new policyholders.

Asymptotics for the ruin probability in a proportional reinsurance risk model with dependent insurance and financial risks

. This article studies the joint ruin problem for two insurance companies that divide claims in positive proportions (modeling an insurance and re-insurance company). The arrival times of claims are delayed by a common random time. Suppose that the two insurance companies are allowed to make risk-free and risky investments, and the price processes of the corresponding investment portfolios are exponentials of jump-diffusion processes with common jumps. Furthermore, assuming that the claim sizes and their corresponding investment return jump possess a dependence structure, this article establishes an asymptotic formula for the ruin probability.

Legal Responsibility of the Insurance Company for Unpaid Participant Claims

Insurance is a financial institution that has a vital role in the economy. Insurance protects the public from various risks, such as accidents, illness, and death. The insurance company must pay claims to insurance participants who experience losses in an insurance agreement. However, in practice, claims are often rejected by insurance companies. The purpose of this research is to analyze the legal responsibility of insurance companies for unpaid participant claims. This research uses normative legal research methods. Research data was obtained through a literature study. Research data was analyzed qualitatively using descriptive analysis methods. The research results show that insurance companies that reject insurance participants' claims can be subject to civil and criminal legal responsibility. If the participant's claim is not paid, the participant can file for bankruptcy through court. The regulations that provide the legal umbrella for protecting insurance participants consist of Law Number 8 of 1999 concerning Consumer Protection, Law Number 40 of 2014 concerning Insurance, Decree of the Minister of Finance No. 422/KMK.06/2003 concerning the Implementation of Insurance Business and Reinsurance Companies, and Financial Services Authority Regulation Number 23/POJK.05/2015 concerning Insurance Products and Marketing of Insurance Products. Legal protection for insurance policyholders as consumers are regulated in the Insurance Law and the Consumer Protection Law.

Analisis Perhitungan Retensi Optimal Reasuransi Stop Loss dengan Metode Value at Risk (VaR)

Insurance companies do not cover the entire risk of policyholders. The risk is generally transferred in part to the reinsurance company. Stop loss reinsurance is a form of reinsurance contract where there is a limit on the risk value that can be borne by the insurance company. This value is the retention value or retention limit in the reinsurance contract, which is the maximum risk or insurance value that can be borne by the insurance company. Determining the right retention value is very important. Optimizing the Value at Risk risk measure is one approach in calculating optimal retention. Optimal retention criteria were identified in this research so that optimal retention values ​​could be calculated. This research uses a large claim data sample with the Weibull distribution. Determining optimal retention depends on the distribution of claim sizes and loading factors (additional factors in the insurance policy). With a 95% confidence level, for loading factors of 10%, 15%, and 20%, the estimated optimal retention values ​​are $1,080.56, $1,393.54, and $1,567.20. This means that the risk transferred to the reinsurer is the remaining claim amount, if the claim size exceeds the optimal retention value.

Determinants of the quality of financial management of insurance companies

This study is devoted to the analysis of the statistical relationship between the efficiency of an insurance company and a number of factors characterizing the structures of its assets. Efficiency in the study is considered as a metric that evaluates the quality of an organization’s management, which is the one of the most important characteristic of its financial stability.The empirical analysis was carried out using data from the financial statements of insurance companies for the period from 2017 to 2020 of the group of leaders in terms of insurance premiums of the Expert RA rating agency based on the results of 2020. Life insurance companies, reinsurance companies and mutual insurance companies were excluded from this list due to the specifics of their business and financial statements.For the companies included in the final sample, an assessment of overall efficiency was built. The methodology of its calculation is formulated and developed in [3, 14, 15]. It is based on Data Envelopment Analysis (DEA). The partial efficiency indicators obtained for a certain set of DEA model specifications are aggregated into several indicators using the principal component analysis method (PCA). It is important that there is a positive correlation between the overall efficiency indicator and the partial efficiency indicators.The first principal component acts as an indicator of overall efficiency, the others allow one to identify its sources. This makes it possible to compare companies that have the same overall efficiency.Further, for all representatives of the final sample, a regression model of the statistical relationship of overall efficiency with the characteristics of the asset structure was built. The model specification was performed based on the MFP (Multivariable Model-Building with Fractional Polynomials) algorithm [16, 17], which allows to adapt the specification of the regression model to the properties of the data and identify nonlinear statistical relationships.The results of the evaluation of the model allow us to assert that the general and, accordingly, all partial performance indicators have a statistical relationship with the selected characteristics of the asset structure. The nature of the relationship is predominantly nonlinear. The results obtained in the work can be useful in forming a strategy for managing the financial stability of an insurance company, as well as for potential partners and investors in solving the task of benchmarking.

Reconstruction of Life Insurance Agent Work Contract Regulations Based on Justice Value

The purpose of this research is to analyze the weaknesses of Life Insurance Agent Work Contract Regulation and how to reconstruct the regulation of the Life Insurance Agent work contract regulation based on the value of justice, namely as in the Insurance Law No. 40 of 2014, Article 1320 of the Civil Code, Article 1338 of the Civil Code and 1313 of the Civil Code using a constructivism paradigm, through direct interviews with informants empirically supported with studies literature through theoretical steps. The results of this study show that the Weaknesses that arise in the life insurance agent work contract regulation with the study of Islamic law, namely in carrying out the contract is not transparent so that the agent and the insurance company when facing problems, are only decided unilaterally and not based on the contract. Therefore, the Reconstruction of the regulation on a life insurance agent work contract regulation based on the value of justice, namely that in entering into an agreement with a life insurance company with a work contract, it is not in accordance with Article 1313 of the Civil Code and Article 1338 paragraph (1) of the Civil Code because in practice the life insurance company provides a letter notification of the update without the knowledge of the agent, which resulted in unilateral termination of employment. Dispute resolution in insurance agreements can be carried out through litigation and non-litigation channels. If the principle of good faith is not fulfilled, the insurance agreement can be canceled. Regulations for financing agent agreements in Indonesia use a system of deliberation and mutual cooperation, while in various countries they use an arbitration system in a court. Regulation of the Financial Services Authority Number 69 /Pojk.05/2016 Concerning the Conduct of Business of Insurance Companies, Sharia Insurance Companies, Reinsurance Companies, and Sharia Reinsurance Companies.

RETAKAFUL CONTRIBUTIONS MODEL USING MACHINE LEARNING TECHNIQUES

Driven by the need to manage risk by the newly created Moroccan Takaful operators, the Moroccan Insurance and Social Welfare Control Authority has authorized the Central Reinsurance Company to create a ReTakaful window for the purpose of reinsuring Takaful operations. Nevertheless, the main challenge is determining the appropriate ReTakaful model for the Moroccan Islamic insurance sector by ensuring compliance with Shariah. With this in mind, this article aims to determine the optimal ReTakaful contributions model for the Moroccan Takaful industry via Machine Learning algorithms. We select the best model by comparing the performance of each algorithm. The achieved results of this study demonstrate the potential of using Machine Learning algorithms to compute ReTakaful contributions that are more suitable for Takaful operators and more optimal for the ReTakaful operator.

The investment and reinsurance game of insurers and reinsurers with default risk under CEV model

On the premise of considering the interests of insurance companies and reinsurance companies at the same time, this paper studies the investment and reinsurance game between them. Suppose that the compensation process faced by an insurance company is described by Brownian motion with drift. Insurance companies can purchase proportional reinsurance from reinsurance companies, and both companies can invest in a risk-free asset, a risky asset whose price process follows the constant elasticity of variance (CEV) model, and a defaultable bond. With the goal of maximizing the expected utility of weighted terminal wealth, the corresponding Hamilton–Jacobi–Bellman (HJB) equations are established and solved by using the principle of dynamic programming, and the analytical expressions of the equilibrium investment-reinsurance strategies of insurers and reinsurers are derived respectively. Finally, the influence of each model parameter on the equilibrium strategy is analyzed by numerical examples.

Insurance industry in the scope of sustainable development

Subject. This article discusses the role of insurance sector in promoting the ESG agenda and sustainable development issue. Objectives. The article aims to determine the role of insurance in the sustainable development concept, consider the core principles of the green agenda, proposed by the UN and corresponding associations founded by it and supported in the financial sector, and review the European insurance and reinsurance companies' activities in terms of obligations arising from the sustainable insurance requirements. Methods. For the study, I used the methods of systems and comparative analyses, synthesis, and comparison. Conclusions. The insurance industry, together with other financial and non-financial institutions, supports the worldwide reduction of greenhouse gas emissions and contributes to the goal of limiting global warming to 1.5?C above pre-industrial levels. United by this target, the industry is currently moving through a voluntary regime of ESG-oriented topics to a more regulated and compulsory one that provides for more sophisticated reporting rules, disclosure, and transparency. ESG principles change insurers' risk appetite concerning both underwriting and investment aspects, making companies more sensitive to climate-related risks that, as a consequence, leads to revision of existing own risk and solvency assessments models. The path to sustainable insurance has already become visible and is performed via cut of investments from carbon-intensive industries, change of underwriting principles in terms of exit from not-green products and decrease of own emissions. At the same time, the growing awareness defines the place of climate risk in own risk and solvency assessment models.

Risk Based Capital Factors’ Impact for Reinsurance’s Business and Profitability

Reinsurance is one of important aspect from insurance business. To ruin their business, insurnaces don’t only rely on their capacity, but to their back up capacity behind them. For arising financial strength and intercalation to Indonesia’s GDP, OJK as regulatory has obligatory for insurance to ceded their insurance cession to domestic Reinsurance. Insurance business would be always linked with reinsurace due to their requirements for spreading risk (by reduce the variability of the financial costs to insurance companies arising from the claims). The prior researches give indicator that financial strenght will affect how sevice company ruin their business and profitability making. This paper aim to empirically inquire intercouse between financial strength of the company with their running business. Financial strenght for reinsurance business is the most important component due to their business characteristic, business to business. RBC as one of the parameter will be the one which impose the insurance company to lay their business. So with RBC’s component we could inquire how reinsurance’s business and profitability. This study used quantitative research method. The analysis framework is based on relationship between risk based capital’ factor in reinsurance with their business and profitability effectivity. Data will be provided secunderly by companies annual report with total 5 local reinsurance in Indonesia. And will be examined by regression model. The finding will indicate how Risk Based Capital’s factor involve business and profitability both for reinsurance company. The findings may help industry to better understand how financial power’ factor work for profitability.

Insurance industry in sustainable development agenda

Subject. The article considers the role of insurance sector in promoting the ESG agenda and sustainable development issue. Objectives. The aim is to determine the place of insurance in the sustainable development concept, to consider core principles of the green agenda proposed by the UN and organizations established with its support in the financial sector, to review the activities of insurance and reinsurance companies of the European Union as to obligations arising from the requirements of sustainable insurance. Methods. The study employs general scientific methods of systems and comparative analysis, synthesis, and comparison. Results. The paper proves the key role of the insurance market in acceptance and transmission of changes related to sustainable development, shows the main vectors, through which insurance companies are connected with the concept, including climate risk, describes the existing supranational principles and potential ways of changes at the microeconomic level, which determine the circulation of green agenda through insurance and related mechanisms. Conclusions. The insurance industry is currently moving through a voluntary regime of ESG-oriented topics to a more regulated and compulsory one that provides for more sophisticated reporting rules, disclosure, and transparency. ESG principles change insurers’ risk-appetites both on underwriting and investment sides, making companies more sensitive to climate-related risks. This leads to revision of existing own risk and solvency assessments models. The path to sustainable insurance has already become visible and is performed via cut of investments from carbon-intensive industries, change of underwriting principles as to decrease in own emissions etc.

Perlindungan Hukum Kreditor Preferent Pada Perusahaan Asuransi Yang Pailit

Legal protection for policyholders, insured or insurance participants, in relation to insurance company bankruptcy, Indonesian positive law has actually provided a way out with several alternative options, namely based on the provisions of the Civil Code, the Bankruptcy Law, and the provisions of the Indonesian Civil Code. Law No.40 of 2014 stipulates explicitly that the rights of the policyholder/insured or insurance participant for the distribution of the assets of an insurance company bankrupt by court or liquidation have a higher (primary) position than the rights of other creditors. Article 52 paragraph (1) states “In the event that an insurance company, sharia insurance company, reinsurance company or sharia reinsurance company is bankrupt or liquidated, the rights of the policyholder, the insured or participants for the distribution of their assets have a higher position than the rights of other parties”. The meaning of this sentence is thar the policyholder has a position as a preferred creditor, namely a creditor whose position takes precedence over other creditors in the distribution of bankruptcy assets of an insurance company. In the distribution of bankruptcy assets, the policyholder has the right to demand priority payment of his rights in accordance with the previously agreed agreement.

Pricing reinsurance and determining optimal retention based on the criterion of maximizing social expected utility

PurposeThe authors consider the mutual benefits of the ceding company and reinsurance company in the design of reinsurance contracts. Two objective functions to maximize social expected utilities are established, which are to maximize the sum of the expected utilities of both the ceding company and reinsurance company, and to maximize their products. The first objective function, additive, emphasizes the total gains of both parties, while the second, multiplicative, accounts for the degree of substitution of gains of one party through the loss of the other party. The optimal price and retention of reinsurance are found by a grid search method, and numerical analysis is conducted. The results indicate that the optimal solutions for two objective functions are quite different. However, optimal solutions are sensitive to the change of the means and volatilities of the claim loss for both objective functions. The results are potentially valuable to insurance regulators and government entities acting as reinsurers of last resort.Design/methodology/approachIn this paper, the authors apply relatively simple, but in the view significant, methods and models to discuss the optimization of excess loss reinsurance strategy. The authors only consider the influence of loss distribution on optimal retention and reinsurance price but neglect the investment factor. The authors also consider the benefits of both ceding company and reinsurance company to determine optimal premium and retention of reinsurance jointly based on maximizing social utility: the sum (or the product) of expected utilities of reinsurance company and ceding company. The authors solve for optimal solutions numerically, applying simulation.FindingsThis paper establishes two optimization models of excess-of-loss reinsurance contract against catastrophic losses to determine optimal premium and retention. One model considers the sum of the expected utilities of a ceding company and a reinsurance company's expected utility; another considers the product of them. With an example, the authors find the optimal solutions of premium and retention of excess loss reinsurance. Finally, the authors carry out the sensitivity analysis. The results show that increasing the means and the volatilities of claim loss will increase the optimal retention and premium. For objective function I, increasing the coefficients of risk aversion of or reducing the coefficients of risk aversion of will make the optimal retention reduced but the optimal premium increased, and vice versa. However, for objective function 2, the change of coefficient of risk aversion has no effect on optimal solutions.Research limitations/implicationsUtility of the two partners: The ceding company and the reinsurance company, may have different weights and different significance. The authors have not studied their relative significance. The simulation approach in numerical methods limits us to the probability distributions and stochastic processes the authors use, based on, generally speaking, lognormal models of rates of return. This may need to be generalized to other returns, including possible models of shocks through jump processes.Practical implicationsIn the recent two decades, reinsurance companies have played a great role in hedging mega-catastrophic losses. For example, reinsurance companies (and special loss sharing arrangements) paid as much as two-thirds of the insured losses for the September 11, 2001 tragedy. Furthermore, large catastrophic events have increased the role of governments and regulators as reinsurers of last resort. The authors hope that the authors provide guidance for possible balancing of the needs of two counterparties to reinsurance contracts.Social implicationsNearly all governments around the world are engaged in regulation of insurance and reinsurance, and some are reinsurers themselves. The authors provide guidance for them in these activities.Originality/valueThe authors believe this paper to be a completely new and original contribution in the area, by providing models for balancing the utility to the ceding insurance company and the reinsurance company.

REINSURANCE ARRANGEMENTS ASSOCIATED WITH GUARANTEE LEGAL RESPONSIBILITIES

The use of diversion responsibility or reinsurance arrangements as a way for insurance companies to protect themselves from losses by cooperating with a reinsurance company. One reason for utilizing reinsurance is to distribute risk. Reinsurance becomes more understandable when insurance claims occur, and it is not possible to have reinsurance without having insurance first. The legal framework for insurance and reinsurance is explained in the Criminal Code or Law Number 40 of 2014 concerning business insurance. However, there is no provision that clearly defines what is meant by reinsurance, which can cause problems if there are insufficient answers regarding the company's reinsurance payment for losses. Therefore, legal certainty is necessary. The research objective is to determine the form of responsibility of the guarantor in reinsurance, and the normative law method is used. The Ex-Gratia Payment clause outlines the responsibility of the reinsurance company to the insured, allowing the insured to claim compensation from the insurer for reinsurance claims.

LEGAL PROTECTION OF INSURANCE POLICYHOLDERS IN CASE OF DEFAULT OF INSURANCE COMPANIES IN INDONESIA

Insurance is primarily used to evaluate all risks associated with the uncertainty of an event. Individuals and companies have never faced such uncertainty. All individuals and companies cannot survive the damaging effect of any unforeseen event. However, many insured individuals and companies experience challenges while filing legitimate insurance claims. This study aims to examine how Indonesian insurance policyholders are protected legally if insurance companies fail. The legislative framework controlling insurance policies and policyholder rights in the case of insurance company default are both examined in the study. The laws relating to the registration of insurance or reinsurance companies and the compensation mechanism according to such regulations are discussed. The methodology employed in this study was a qualitative research design with a normative juridical approach. The default cases of Jiwasraya and Bumiputera are material evidence of the inefficiency of insurance companies running their business in Indonesia. In case of default, the insurance policyholder can claim compensation through Alternative dispute resolution, healthy financial planning, the continuation of policy, and distribution of assets through liquidation, as elaborated in this study with relevant laws. The Government of Indonesia provides insurance policyholders to apply for Bankruptcy in the commercial courts if the company has refused to fulfill the contractual obligations due to a scarcity of funds. The results uniqueness comes from seeing holes in the legal system and creating suggestions for improving policy. According to the study's findings, strengthening the legal protection of insurance policyholders in Indonesia is essential for fostering confidence in the insurance industry and ensuring policyholders' financial security. Keywords : Bankruptcy, Insurance, Legal Protections, Policyholders, Resolution DOI： https://doi.org/10.35741/issn.0258-2724.58.2.43

Optimal reinsurance-investment problem for a general insurance company under a generalized dynamic contagion claim model

<p style='text-indent:20px;'>In this paper, we study an optimal management problem for a general insurance company which holds shares of an insurance company and a reinsurance company. The general company aims to derive the equilibrium reinsurance-investment strategy under the mean-variance criterion. The claim process described by a generalized compound dynamic contagion process introduced by [<xref ref-type="bibr" rid="b18">18</xref>] which allows for self-exciting and externally-exciting clustering effect for the claim arrivals and the processes of the risky assets are described by the jump-diffusion models. Based on practical considerations, we suppose that the externally-exciting clustering effect will simultaneously affect both the price of risky assets and the intensity of claims. To overcome the inconsistency issue caused by the mean-variance criterion, we formulate the optimization problem as an embedded game and solve it via a corresponding extended Hamilton-Jacobi-Bellman equation. The equilibrium reinsurance-investment strategy is obtained, which depends on a solution to an ordinary differential equation. In addition, we demonstrate the derived equilibrium strategy and the economic implications behind it through a large number of mathematical analysis and numerical examples.</p>