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homework_1_two examples - Name: .' A. Combined ratio from...

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Name: .' UTEID: to A. Combined ratio from Consolidated Operations r Combined ratio: ~20",0"-=4!.-- ---,2",0",0~5 ----,,2,,,,00=6,./ 1 Travelers 107.7% 101.3% 88.1% AIG 100.3% 104.7% 89.1% B. Reinsurance and catastrophe/terrorism risk management strategy Travelers: Travelers uses three types of reinsurance to manage its exposure to large property and casual losses: Facultative reinsurance Treaty reinsurance Catastrophe reinsurance: Travelers participates in several catastrophe reinsurance plans, obtained from nonaffiliated reinsurers and governmental entities. o The General Catastrophe treaty The level of financial loss determined the amount retained and the amount ceded by Travelers. Anything between $O-$lB is completely retained by Travelers, a loss between $1.0-$1.5 billion is 72.4% retained by Travelers and 27.6% by catastrophe treaty, a loss between $1.5-$2.25 billion is 44.0% retained by Travelers and 56.0% by catastrophe treaty, and anything greater than $2.25 billion is 100% retained by Travelers. o Northeast General Catastrophe treaty Reinsures for losses that arise from hurricanes, earthquakes, and winter storm or freeze losses from Virginia to Maine and the waters contiguous ...-/0 Provides $500 million of coverage subject to a $2.25 billion retention o '-1Iorida Hurricane Catastrophe Fund (FCHF) State-mandated catastrophe reinsurance fund Maximum potential industry capacity has recently increased to $35 billion for a single hurricane event Travelers participation as of June 2006 is 0.8% o 'r~ rorism Risk Insurance Program (TRIA) loss must be the result of an event that the U.S. Secretary of Treasury deems as an "act of terrorism" Reimbursement percentage is 85% at of 2007 Travelers had no terrorism-related losses in 2004, 2005, or 2006 TRIA will be up for renewal on January 1, 2008 and if the program is not renewed Travelers will be exposed to losses from act of terrorism. These losses could be material to the Company's operating results, financial conditions, and liquidity in future periods. AIG: AIG also uses various forms of reinsurance programs Facultative J ... Quota share treaties Excess of loss treaties Catastrophe treaties o AIG reduces its exposure to catastrophic risk through both reinsurance programs and aggregate accumulation r1J.9nit ring o Catastrophe reinsurance is purchased by AIG from financially sound reinsurers o lexington and AIG private client group have implemented catastrophe-related underwriting procedures and manage their books on () account level L--- 0 ~T~~- AIG also recognizes the risk inherent n the sunset of the TRIA at the end of 2007, and plans to reassess and modify its 'rfnderwriting and retention if TRIA is not renewed. Reinsurance recoverability
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This note was uploaded on 04/07/2008 for the course RM 357E taught by Professor Arnold during the Spring '08 term at University of Texas.

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homework_1_two examples - Name: .' A. Combined ratio from...

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