The growing need for retroactive reinsurance
Primary insurers face an ongoing challenge in optimising their risk and capital situation. This requires a sharp focus on maintaining adequate levels of technical reserves – both for ongoing business and run-off. Retroactive reinsurance addresses these challenges by the use of Loss Portfolio Transfer (LPT) or Adverse Development Cover (ADC), or a combination of both solutions, to optimise capital, facilitate operational efficiencies and provide balance sheet relief when you need it. The main reasons organisations like yours invest in retroactive reinsurance are to enhance balance sheet certainty, enjoy solvency capital relief, get rating capital relief, improve capital efficiency, access additional capital and to protect the business plan.
How retroactive reinsurance mitigates your reserve risk
Typically, your reserve risk includes the risk of accelerated claims pay-outs and adverse development risk – whether incurred but not reported (IBNR) or incurred but not enough reported (IBNER). It grows when risks taken on in an insurance business accumulate faster than run-off obligations from the past can be resolved, which disproportionately impact results in a given financial period. Our retroactive reinsurance solutions protect organisations like yours from adverse reserve development and free up capital for more profitable application elsewhere in your business.
How you can benefit from retroactive cover
Retroactive reinsurance is a powerful capital and risk management solution, either on a stand-alone basis or in combination with other measures.
Coverage (attachment point, limit, etc.) can be flexibly geared to your needs.
The effect of a retroactive cover on your capital position will be immediate and sustainable.
Protect your capital
On top of providing capital relief, retroactive reinsurance ensures protection against potential adverse reserve development.
With all claims handling activities remaining in your hands, you continue to be the one that interacts with your clients.
Our retroactive reinsurance solutions protect organisations like yours from adverse reserve development and free up capital for more profitable application elsewhere in your business.
No two businesses are the same which is why each retroactive solution is different
We specifically tailor your retroactive solution around your business goals to optimise your risk protection efficiency as well as your capital structures and costs. And when your specific situation changes due, for example, new government regulations, shifting markets or a merger, our structured solutions let you adjust quickly with minimum discomfort.
Retroactive Reinsurance Solutions
Reserve risk consists of
- Adverse development risk (IBNR/IBNER)
- Risk of accelerated claims payouts
- Retroactive reinsurance
- Net unpaid claim reserves
1. „Quota share“ on reserves
- Reinsurer participates proportionally on future claims payments
- Typically proportional transfer of upside and downside potential
- Structure mainly used to harvest reserve redundancies, capital relief (factor-based models) or run-off portfolios
2. „Aggregate excess of loss“ cover on reserves
- Reinsurer assumes future claims payment above a specified retention
- Cedent can retain upside potential
- Structure typically used as „sleep easy“ cover, often combined with „no claims“ bonus
Tailormade retroactive insurance solutions
- All our retroactive insurance solutions are structured on a case-by-case basis, adapted to the needs and targets of our clients
- Additional features such as co-insurance, an in-the-money financing component or a loss corridor can be included
- Further items such as funds-withheld agreement or profit commission can also be considered
Advantages of working with Munich Re for retroactive cover
Turnkey reinsurance-based corporate finance solutions from a single source
A flexible approach using instruments proven successful by clients around the globe
Continuous exploration of new solutions for specific motivations arising in changing markets
Support from custom-built Deal Teams interconnected with experts and Client Managers of Munich Re
Streamlined client interfaces that ensure close cooperation and short response times
Talk to our experts