SUMMARY

• Presents the strategies, motives and methods practiced by the major players and suggests why corporate behaviour and internal culture may have an influence on insurance purchasing

• Examines the global behavioural aspects of reinsurance and breaks down buying patterns by organisational type and preferred strategy

• Provides inside knowledge to assist insurers in assessing their own reinsurance buying policies and to utilise the most appropriate and effective modelling techniques for specific needs

• Expert contributions from insurance, reinsurance, brokers and modelling agencies

• Includes sections on: alternative strategies, risk assessment and the role of capital, as well as a study of how transactions are now being made and efforts to create more sustainable relationships in the industry

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  TABLE OF CONTENTS

CONTENTS

Preface

ALTERNATIVE STRATEGIES OF INSURERS

1. The Evolution of Purchasing Strategy
Nick Golden of Royal and Sun Alliance Group

2. Managing Reinsurance within a Multinational Environment
Robert Stevenson of Zurich Financial Services

3. Reinsurance Buying Practices
Philippe Derieux of AXA

4. A New Rationale for Reinsurance Buying?
Herbert Sedlmair of Allianz AG

5. The Evolution of American International Group, Inc.'s Reinsurance Strategy
Chris Milton of American International Group Inc. (AIG)

RISK ASSESSMENT

6. Can Reinsurance Credit Risk be Priced?
Chris Klein of Benfield Group Ltd

7. Catastrophe Modelling
Dickie Whitaker of Guy Carpenter

8. Identifying and Controlling Emerging Risk
Reto Schneider of Swiss Re

9. Dynamic Financial Analysis: The Answer to Rational Reinsurance Purchase?
David Simmons of Benfield Group Ltd

INTEGRATION OF RISK MANAGEMENT WITH CAPITAL MANAGEMENT

10. Economic and Financial Perspectives on the Demand for Reinsurance
James R. Garven of Hankamer School of Business, Baylor University and Joan Lamm-Tennant of GeneralCologne Re

11. Alternative capital sources
Morton Lane of Lane Financial LLC

ALTERNATIVE PERSPECTIVES

12. The Future of Electronic Trading
Kathrine Huelster of inreon

13. Principles on Minimum Requirements for Supervision of Reinsurers
Reinsurance Subcommittee of IAIS

14. Supervisory Standard on the Evaluation of the Reinsurance Cover of Primary Insurers and the Security of their Reinsurers
Reinsurance Subcommittee of IAIS

15. Risk Measurement and Reinsurance
Jonathan Barber of The SERM Rating Agency, Adam Rose of Falcon Asset Management and Paul Koronka of Charles Taylor Consulting Plc

16. Academia and Insurance: Bridging the Gap
Dougal Goodman of The Foundation for Science and Technology

NB - This table of contents is provisional until final publication of the book. Small changes to chapter titles and sequence may occur.

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  QUOTES

″A very valuable contribution to the relatively limited library of material on reinsurance.″
Ross McKenzie, Chairman, Aon Re International

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  REVIEW

Reviewed by Graham Dimmock, Président, PartnerRe Paris

Not many business books can fit into the category of ″a damn good read″ but Rationale Reinsurance buying does it! In enticing some of the leading reinsurance buyers to lift the curtain on the buying strategies they have followed in recent years, the publishers have created a fascinating study of the changing reinsurance universe. As a reinsurer I appreciated the transparency of the authors of Section I. Having negotiated with some of them in the past, I found their description of rationale and process very consistent with what I had seen on the other side of the table. In particular Nick Golden's history of the development of the R&SA's buying strategies is a very well drawn and instructive analysis.

Rational Reinsurance Buying is a book which could not have been written 15 years ago. What comes across in all the book's sections is the way in which DFA and other modelling techniques have fundamentally changed the reinsurance buyer's role. The reinsurance buyer today is clearly more closely involved with the entire risk and capital management of the enterprise than his predecessors. And his/her role is still changing. Kathrine Huelster's well argued chapter on e-trading shows some of the many challenges on the horizon for the reinsurance buyer.

After reading this well presented volume one is drawn inevitably to the conclusion that the skills demanded of the reinsurance buyer have changed radically and will change still further in the future. From the seller's perspective it shows just how considered the risk management of an insurance company is becoming - it is essential reading.

″Roadmap explores reinsurance route to capital″

By James Brewer, Lloyd's List - 13-02-2003
SETTING out on the bumpy road to buy reinsurance? Much has been published on reinsurance theory, but there has been little to guide the market observer or new practitioner on the issues involved in managing such massive spending. Global reinsurance volume is reckoned to total more than $100bn a year, writes James Brewer.

Most insurers will hand between 5% and 25% of their income to reinsurers, and this is for many of them their second biggest expenditure after claims.

Nick Golden, who was first director of worldwide reinsurance for Royal&SunAlliance, has assembled advice from 16 experts in a new book dedicated to his mentor, the late Norman Robinson, one of London's great marine underwriters.

Mr Golden implemented a strategy at the UK-based insurance group credited with allowing it to replenish capital after September 11, 2001, through the purchase of a quota share reinsurance with Munich Re - one huge reinsurance deal.

Mr Golden argues that reinsurance should be viewed not as a cost, but as an alternative source of capital. Nor should the impact on the behaviour of underwriters be underestimated.

People writing purely on their own capital without reinsurance tend to be much more conservative than those who write using extensive reinsurance protection and therefore ″other people's money″.

One contributor, Herbert Sedlmair of Allianz, underlines that the events of September 2001 dramatically changed the perspective of reinsurance.

Risk assessment is becoming a burning issue for the insurance company and reinsurance buyer. Although rare, defaults on reinsurance do occur, and the result on the balance sheet of the ceding insurer is severe: affecting not just one contract year, but all business historically. Recoveries under such circumstances are usually low, and the run-off process cumbersome.

Mr Sedlmair recommends that a vetting team check the reinsurer, looking for clues to financial strength, and ability and willingness to pay claims.

A precaution when using poorer reinsurers, or unrated captives, is to ask for a letter of credit on the amount of ceded exposures. This replaces reinsurer's risk of default with the credibility of the issuing bank.

Kathrine Huelster of e-commerce company inreon says the reinsurance industry is still some way from making the most of the electronic trading possibilities. Online trading volumes remain limited, but they are growing.

She sees evidence of several companies moving on from an early stage of testing, to committing whole books of business online.

She says any electronic marketplace must operate on a global basis and a full range of products is necessary - both treaty and facultative capabilities in a variety of different business lines.

This article is copyright Informa UK Limited and is reproduced with permission. Reproduction, retrieval, copying or transmission of this article is not permitted without the publisher's prior consent. Informa UK Ltd does not guarantee the accuracy of the information contained in this article nor does it accept responsibility for errors or omissions or their consequences. Visit the Lloyds List website at www.lloydslist.com

Asia Insurance Review, February 2003

Risk Books has launched this latest multi-contributor title Rational Reinsurance Buying in December to respond to the very difficult times faced by the insurance industry.

The book edited by Mr Nick Golden, formerly director of reinsurance for the Royal and SunAlliance Group (RSA) world-wide, boasts as being the only title on the market that compiles the very latest views from insurers, reinsurers, brokers, modelling agencies and consultants. Whether it is read by those working in the industry, or by a corporate interested in discovering the insurers' strategies, the book's all-encompassing examination of the sector will help the reader understand the methods of the multination insurers enabling them to successfully assess and manage their risk.

Comprehensive analysis into the methods used to develop profiles of risk, such as dynamic financial analysis and cat modelling, will help insurers select the correct models to best match their specific needs. This, in turn, allows for the accurate reassessment of their reinsurance buying policies and ensures purchase of the most appropriate cover.

Additionally, the global behavioural aspects of reinsurance purchasing are explored. Buying patterns are broken down into organisational type and preferred strategy as the authors suggest why internal company culture might impact upon the purchasing decision. The rare level of detailed insight provided will give reinsurers and brokers all the inside knowledge they require in order to better tailor their products towards the needs of the major players in their pursuit of adequate protection.

Rational Reinsurance Buying promotes communication between those on each side of the (re)insurance divide by advising on how to create sustainable relationships in the modern financial world. Additional sections on alternative strategies, risk assessment and the role of capital also provide the reader with comprehensive and illuminating guidance that advises on how their competitors and clients are tackling the many recent upheavals faced by the industry.

Ross McKenzie, Chairman, Aon Re International

Rational Reinsurance Buying offers an excellent insight into the reinsurance business where Nick Golden has captured his own detailed knowledge, along with other leading Industry figures, to produce a very valuable contribution to the relatively limited library of material on reinsurance.

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  AUTHOR BIOGRAPHY

Until June 2002, Nick Golden was the director of reinsurance for the Royal and Sun Alliance Group (R&SA) worldwide. His responsibilities included formulating and implementing the reinsurance strategy for the group and integrating the risk management strategy with capital management. He implemented a risk and capital management discipline that was supported by a global dynamic financial analysis (DFA) model for the group as well as each of the regional territories. By consolidating the territory DFA analysis into a global DFA model, R&SA was successful in evaluating the trade-off between regional vs global positions. His success in coordinating a global DFA discipline was instrumental in R&SA's ability to replenish capital following September 11, 2001 through the purchase of a quota share reinsurance with Munich Re, the largest single reinsurance contract ever effected. Whilst at R&SA Nick was a founder member of the TSUNAMI initiative, a UK government initiative to form a bridge between insurance and academia. This work has produced a number of research projects and consequent findings. Nick has spoken extensively on the issues faced by the global insurance industry and the support needed from academia. Nick is a fellow of the Chartered Institute of Insurers the UK.

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  CONTRIBUTORS

Nick Golden of Royal and Sun Alliance Group; Robert Stevenson of Zurich Financial Services; Philippe Derieux of AXA; Herbert Sedlmair of Allianz AG; Chris Milton of American International Group Inc. (AIG); Chris Klein of Benfield Group Ltd; Dickie Whitaker of Guy Carpenter; Reto Schneider of Swiss Re; David Simmons of Benfield Group Ltd; James R. Garven of Hankamer School of Business, Baylor University and Joan Lamm-Tennant of GeneralCologne Re; Morton Lane of Lane Financial LLC; Kathrine Huelster of inreon; Jonathan Barber of The SERM Rating Agency, Adam Rose of Falcon Asset Management and Paul Koronka of Charles Taylor Consulting Plc; Dougal Goodman of The Foundation for Science and Technology
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  CUSTOMERS WHO BOUGHT THIS TITLE ALSO BOUGHT:

  Catastrophe Risk and Reinsurance - Edited By Eugene N. Gurenko
  Alternative Risk Strategies - Edited By Morton Lane
  Asian Catastrophe Insurance - Edited By Charles Scawthorn and Kiyoshi Kobayashi
  Risk Management for Insurers - By René Doff

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