Reinsurance
Arrangements
Our flexible reinsurance arrangements adapt to your needs
At Klapton Re, we pride ourselves on analytical assessment. Information and knowledge are at the core of our underwriting philosophy underpinned on underwriting discipline to sustain our deep client relationships across a broad product offering that provides reinsurance solutions.
We have a team of talented leaders and underwriters who are flexible and creative in their approach to underwriting risks while prudent decision-making. Our primary goal is centred on a commitment to service and provision of both treaty and facultative reinsurance capacity to meet cedants needs across all regions of operation. We believe that reinsurance is a relationship rather than just a product or transaction.
Whether it is a complex single risk or project that you need capacity for, or perhaps an SME product line that you need to structure, our niche expert facultative underwriters will be at hand to drive this process with you. We will be standing with you throughout the product design and reinsurance.
Suppose you require a specific or tailored approach to the best treaty structure better to serve the insurance company and yield profitability and growth. In that case, our expert treaty underwriters will be at hand to review, assess, and provide the best structure to suit the specific needs. The treaties range from an excess of loss protection, quota share, surplus, facultative obligatory, or a combination for the best reinsurance arrangements at a cost-effective rate.
Flexible Insurance for Insurance Companies
Facultative Reinsurance
This risk transfer mechanism accords both the reinsured and the reinsurer of the freedom to place, accept, or reject a risk. The cedant makes the risk offers to the reinsurers on a case-by-case basis, and both parties are free to act in their own best interest when considering the risk
Facultative reinsurance is the oldest and original form of reinsurance and can be arranged on a proportional and non-proportional basis.
- Used in all classes of business.
- Used where the risk is significant and exceed the capacity of the ceding company.
- They are used where the risk is excluded from obligatory treaties.
- Used to obtain capacity where the volume is small and does not justify treaty arrangements.
- Used to expertise and experience reinsurers on risks of a unique nature.
- Used where the insurer does not want his treaty contracts to be overburdened with heavy risks.
- The insurer is free to offer a risk to a reinsurer but is not compelled to cede the business.
- The reinsurer is free to offer risk or reject the business offered.
- The cover is arranged at the point of risk acceptance by the insurer and cover for that individual risk and applies to one insurance policy only
- Each risk is a separate reinsurance contract and is offered individually, with full details provided.
- The reinsurer is free to state the terms on which they will accept the risk.
- It enables small companies with limited capital and expertise to write significant risks beyond their capacity using the expertise and capacity of large companies
- It protects the cedent’s other treaties from adverse underwriting results
- Facultative risks are considered by underwriters whose judgement and experience can be used to improve the risks and reduce the exposure
- It increases the insurer’s competitive edge within its chosen market.
- It allows both parties to develop a successful and professional relationship
- It helps in creating and maintaining a balanced portfolio and homogeneity of exposure through level retentions
- The original underwriter has the freedom to pick and choose the desirable risks for their retention.
- It enables the spread of risk over a wider number of underwriters and geographical scope.
- Under facultative reinsurance, losses are immediately in cash. No quarterly statements are issued.
- Uncertainty
- Delayed acceptance
- Delay in issuing a policy
- Full disclosure of underwriting information may result in loss of business.
- Time pressure as facultative cover may be required within a short time, while the reinsurance procedures may take time to accomplish
- The right to reject or accept risk on merit
- The reinsurer expects the profits in the short and long run.
- There is a lot of administrative work involved leading to the high cost of doing business
- It isn’t easy to administer due to protracted negotiations, wordings and accounts submissions
- A contract or certificate is issued to confirm each transaction
- Commissions are lower due to the difficulties cited above
Treaty
Reinsurance
A treaty is an agreement invariably in writing between a ceding company and one or more reinsurers whereby the ceding company agrees to cede and the reinsurer to accept the reinsurance of all the risks written by the ceding company which fall within the terms of the treaty agreement.
- A treaty is usually an annual contract whose terms and conditions are negotiated at the beginning of the contract period before the original risks are accepted
- A treaty provides an automatic cover, and the insurer is guaranteed a definite amount of insurance protection on every risk which it accepts
- A treaty covers many risks of a particular type or a class or in a geographical scope
- The obligatory nature of the treaty requires the insurer to cede and the reinsurers to accept cessions that fall within the terms of the agreement.
A formal treaty document will contain the following information whose details
- The period of the agreement
- The monetary limits and mode of operations
- The classes of business covered, territorial scope and risks excluded, and
- The method of calculation and payments of premiums and claims.
- The insurance company is free to select, rate and settle claims as it wishes. The reinsurer cannot intervene, except in the case of grave negligence or fraud.
- Treaty reinsurance increases the capacity of the insurance company to write business
- Treaty reinsurance provides catastrophe protection since the treaty covers the entire group of businesses. The cedant is protected if many policies are involved in a single occurrence
- There are no individual risk scrutiny by the reinsurer as acceptance is automatic once the risk falls within the provisions of the treaty
- Under treaty reinsurance, accounting procedures are simplified. Statements of accounts are prepared and submitted quarterly
- Treaty contracts lead to long term relationship
- The cedant get a ceding commission, which supplements his income and gets additional profit commissions if the business is profitable.
- Homogeneous and many
- There is no freedom of choice since both parties are tied into the contract.
- Premiums may be ceded to the reinsurer on small and good risks, which an insurer may wish to retain for its account.