RM357E_writeup - RM 357E A. Combined ratio from...

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RM 357E A. Combined ratio from Consolidated Operations B. Reinsurance management - Travelers Travelers uses multiple types of reinsurance to protect against losses, specifically three types. 1. Facultative reinsurance – reinsurance providing for a portion or the entirety of the insurance provided by a single policy. 2. Treaty reinsurance – reinsurance provided for a specific risk type 3. Catastrophe reinsurance – reinsurance that makes up the difference for an amount of loss in a catastrophic event. This reinsurance is used in conjunction with an agreement with a nonaffiliated reinsurer, and excludes all nuclear, chemical, biochemical and radiological losses and all terrorism losses as defined by the Terrorism Risk Insurance Act of 2002 and the Terrorism Risk Insurance Extension Act of 2005. - AIG AIG also uses various forms of risk transfer to protect against losses in the following ways: 1. Facultative to cover large individual exposures; 2. Quota share treaties to cover specific books of business; 3. Excess of loss treaties to cover large losses; 4. Excess or surplus automatic treaties to cover individual life risks in excess of stated per-life retention limits; and 5. Catastrophe treaties to cover specific catastrophes including earthquake, windstorm and flood. AIG has a Reinsurance Security Department assigned to conduct assessments of the financial status of current and potential reinsurers. C. Catastrophe exposure management - Travelers Travelers uses treaties and reinsurance to cover catastrophe exposure management, specifically: 1. Florida Hurricane Catastrophe Fund (FHCF) A state-mandated reinsurance fund to provide a partial reimbursement for insurers in their catastrophic hurricane losses. In January 2007, the Governor of Florida expanded the capacity of the FHC to $28 billion. As of 2006, Travelers participation accounts for less and 0.8% of the FHCF. 2. Northeast General Catastrophe treaty – Treaty which offers $500 million of coverage, for losses due to hurricanes earthquakes, and winter storms and freezes from Virginia to Maine.
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This note was uploaded on 09/29/2008 for the course RM 357E taught by Professor Arnold during the Summer '08 term at University of Texas at Austin.

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RM357E_writeup - RM 357E A. Combined ratio from...

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