Why you need reinsurance
Individuals and businesses will purchase insurance to reduce their exposure to loss. Insurance companies do the same by purchasing reinsurance. Reinsurance is the transfer of risk between insurance companies.
Reinsurance exists as a risk control measure, employed by insurance companies to protect their balance sheet. By agreeing to share the risks and rewards of their underlying insurance contracts, an insurance company can reduce its overall exposure to loss, down to an acceptable level. The reinsurer in exchange receives premium income on business that the insurer has written.
The interest of both the insurer and the reinsured are aligned in relation to the underlying business. In reinsurance, the reinsurer follows the fortunes of the reinsured and vice versa. If the reinsured writes profitable business, the reinsurer will benefit from the positive results. If the business written is unprofitable, then the reinsurer will also suffer its impacts.
The reinsured is also exposed to the results of its reinsurer. If the reinsurer’s operations are healthy, then the reinsured can count on the protection and support of its reinsurer, should coverage be triggered. However, if the reinsurer fails, the insurance company will be left having to pay for losses which were not intended.
Reinsurance can be transacted on individual risks, or on an insurance carrier’s entire book of business. There are numerous ways to achieve reinsurance protection. Each contract type is designed to address a specific need. There is no one size fits all solution. Something that works for one customer may not work for another, even when they both share similar attributes.
Transacting reinsurance, and obtaining proper coverage, is essential for the long-term survival of risk bearing entities. If poor underwriting results, or individual catastrophic losses, can affect your balance sheet, reinsurance becomes an important tool in your arsenal to withstand adverse outcomes. If you are not reinsured, then the repercussions can be tragic. The accumulation of losses, or a catastrophic event, can cripple your business or cause it to fail.
That is why, when it comes to reinsurance, you must know what you are doing. A mistake can have devastating consequences. Working with reinsurance professionals will give you the best support for structuring the right reinsurance program. It can help you achieve comprehensive protection at competitive rates.
Risk Reinsurance Holdings, Inc. is a reinsurance brokerage company whose purpose is to find the right reinsurance solutions for you. We work with you to understand your reinsurance requirements and the solutions available to address them. We can help develop a reinsurance program on your behalf. Reinsurance may not prevent losses from occurring in the first place. However, it is one of the best tools to address incurred losses and protect your balance sheet.
Risk Reinsurance Holdings’ main objectives
As reinsurance brokers, we act as an intermediary between you and reinsurers to help negotiate the best possible terms and conditions for the contract. We aim to find support from top-rated reinsurers offering broad coverage at competitive rates. Our objectives are described as follows:
Structure a comprehensive reinsurance program
Finding the right solution, to address your loss exposures, may entail combining different types of reinsurance. Structuring a comprehensive reinsurance program is an essential element toward achieving protection from adverse underwriting results. This is where a reinsurance broker, such as Risk Reinsurance Holdings, Inc., can help.
If you do not have the right reinsurance protection in place, you may face the burden of paying for losses that were not previously considered. The same may happen if your reinsurer becomes insolvent.
There are many factors to bear in mind when analyzing your loss exposures. Even more so when considering the reinsurance solutions needed to address them.
We bring knowledge, experience, and a network of industry associates together when transacting reinsurance. We aim to find the best reinsurance solutions on your behalf.
Find competitively priced reinsurance support
If you are not a reinsurance professional, actively engaged in the industry, it is unlikely that you will understand the marketplace or know its players. Knowing who to approach for support on a given risk is an important part of transacting reinsurance. It can have long term implications for you and your operations.
Not knowing the marketplace can lead you to purchase coverage at higher costs. Resulting in you overpaying for a product that can be substituted with equal or better alternatives. If you do not periodically review your reinsurance program and the changes to the marketplace, you can overpay for reinsurance for many years.
Help reinsurers and cedants successfully write reinsurance contracts, observing best practices
As with insurance, reinsurance is an industry predicated on the principle of utmost good faith. This is an obligation establishing that all parties to the reinsurance contract must act with complete honesty and disclose all relevant facts.
The reinsurance company expects to receive all the information necessary to conduct an analysis of the risk, to reach an underwriting decision. The ceding company expects that, if a covered loss occurs, they will be indemnified for the damages suffered.
If the principle of utmost good faith is breached, then the reinsurance contract is not worth the paper it is printed on. That is because a breach will invalidate the policy when it is called to respond.
Reduce your insurance company loss exposures
At its core, reinsurance entails the spread of risk amongst insurance companies. This is done to better address their exposure to loss. We help you deploy a reinsurance program to protect your operations. Reinsurance can stabilize the peaks and troughs of your underwriting results, making for more predictable outcomes year over year. It also adds protection from potentially catastrophic events.
Whether your portfolio entails a low frequency, high severity risk profile; or a high frequency, low severity one, reinsurance is a useful method to deal with the losses incurred. It can lower the expected loss amount and improve results year over year.
Protect your insurance company balance sheet
The end goal of reinsurance is to safeguard your company’s balance sheet, and bottom line. The reinsurer will indemnify you for the insurance losses that are covered under the reinsurance contract. It is an important contribution that can impact your results.
Losses that are paid by reinsurance are losses that your company will not have to cover from its cash reserves or other assets. Thus, it protects the policyholder surplus. This is the balance sheet item that represents an insurer’s net worth. We can help you structure the right reinsurance program to help your company achieve its objectives.
Provide underwriting support
Reinsurers have underwriting experience across many classes of business and territories. That experience can be put to use by insurers to help them write new business, which both the ceding company and the reinsurer will want to be profitable. Their alignment in said objective benefits both.
The reinsurer will help the ceding company set appropriate coverage terms, conditions, and pricing. This can mean the difference between writing an account profitably or not. We work with you and the reinsurance underwriters to reach the best possible terms.
Help achieve successful claim settlements and loss recovery
Responding to claims is the most important aspect of the insurance and reinsurance business. Reinsurance is a promise made by a reinsurer to indemnify the reinsured for the losses covered under the contract. The success of the industry is predicated on its ability to efficiently respond and solve claims.
The claims settlement process can be a complex endeavor, especially in reinsurance. The insurer may have the authority to settle claims, or the reinsurer may want to exercise that role. The reinsurance contract will describe the claims settlement process. It will also define procedures for dealing with claims that meet a predefined severity threshold.
All claims must be investigated either by the ceding company or the reinsurer. Losses must be quantified, and their circumstances must be compared to the coverage provided. All this to determine if the individual losses are covered. The underwriting results for the coverage term must then be analyzed to determine the performance of the reinsurance contract.
Insurers and reinsurers count on teams of professionals to settle claims and analyze the overall underwriting results. The goal is for the reinsurance contract to operate profitably for all parties involved.
Your reinsurance broker can support with claims settlement processes during the life of the reinsurance contract. He is the point of contact between you, your reinsurer and all the other parties that may become involved.
Basis of coverage
Reinsurance protection can be achieved in different ways. A reinsurance program can be structured to protect a ceding company on a proportional or on a non-proportional basis.
Proportional Reinsurance
Proportional reinsurance refers to the type of protection where the ceding company and the reinsurer agree to participate in the contract according to pre-established shares. Both parties will divide all premiums collected and losses suffered at previously defined percentages. Proportional reinsurance may also be referred to as quota share reinsurance. The parties involved in the contract will bear its results, either positive or negative, according to the criteria set when it was originally written.
Non-Proportional Reinsurance
Non-proportional reinsurance is any type of reinsurance outside the proportional structure. It is commonly referred to as excess of loss reinsurance. In this type of coverage, the ceding company will bear all losses up to a predetermined threshold beyond which the reinsurer will begin to indemnify the reinsured. If a loss does not reach the predefined threshold, then the loss would be shouldered entirely by the ceding company.
There is no one size fits all solution for all scenarios. Nor is there a better overall structure between those that we have discussed above. The best structure to protect a reinsured will depend on the expected underwriting results, during the reinsurance policy’s term. After the coverage term ends, the actual results will have to be compared to the expectations. The performance of the reinsurance contract will have to be analyzed to determine if it met its objectives.
The most important metric of success for a reinsurance contract, for a reinsured, is its final impact on its bottom line. Bearing a higher level of losses may not be bad, if it means that the ceding company was able to retain more premium. Ceding more premium may not be bad if it means that the reinsurer will indemnify the reinsured for a greater portion of relevant losses. Again, there is no one size fits all solution. Our job is to apply what we know of past results, and our best estimation of the future, to find a reinsurance structure that will best respond to the real outcomes.
The reinsurance coverages we offer.
Beyond having reinsurance coverage provided on a proportional or non-proportional basis, there is a second point of consideration that is just as relevant. That is whether reinsurance contracts are negotiated on a risk per risk basis or if they cover all the business that an insurance company writes. That is the distinction between the next two types of reinsurance which are facultative and treaty reinsurance.
Facultative reinsurance
Facultative reinsurance is reinsurance that is negotiated on a risk per risk basis. For each individual risk that an insurance company wishes to write, and reinsure, they must approach reinsurers for support. The reinsurer in turn is able to negotiate coverage terms and conditions individually for each policy. This can be considered ad hoc reinsurance i.e. reinsurance negotiated for a specific purpose on an individual risk. To understand facultative reinsurance, one must understand its alternative which is treaty reinsurance. Under treaty reinsurance, the reinsurance contract defines the business that the reinsured must cede and that which the reinsurer must accept, and the parties involved are bound by that which is established in the treaty.
The way that facultative reinsurance is transacted is similar to how primary insurance negotiations are conducted. Each individual risk is analyzed, and terms are set accordingly by the reinsurer in the hopes of writing the account profitably. The reinsurer has the liberty to quote the terms it deems fit. It may also decline the offer to participate in the risk.
Analyzing risks individually can be an expensive endeavor for insurers and reinsurers, therefore facultative reinsurance is generally used for risks that are large, unique, complex, or that do not otherwise fit within the ceding company’s treaty.
We can assist with a wide variety of risks. We count on the support of underwriters to provide competitive coverage terms. We also have the infrastructure to handle complex risks thanks to our partnerships. Hereunder are some of the classes of business that we may help you write, that may require reinsurance support on a facultative basis.
Property, Energy and Construction Reinsurance
Property, energy, and construction risks face many of the same exposures and underwriting considerations. Each line of business will have unique characteristics. Property reinsurance is a line of business that will normally fall within the scope of a ceding company’s treaty. However, when property risks are large or complex, they are likely to be excluded from the treaty.
The complexity of energy and construction reinsurance, and the size of the property risks that require facultative coverage, allows these types of risks to be grouped together.
Third Party Liability Reinsurance
As with property reinsurance, third party liability reinsurance is a line of business that will normally fall within the scope of a ceding company’s treaties. However, if a risk is large, unique, complex, or does not otherwise fit within the cedant’s treaty, or if the original insured is in a type of business deemed hazardous, facultative reinsurance coverage will have to be arranged.
There are many different types of policies that may fall within the classification of third-party liability reinsurance. Such policies may include public liability (also known as general liability), products liability, and professional liability (also known as errors and omissions) reinsurance. There are other types of liability policies, such as cyber liability, but those are discussed elsewhere in this page.
Aviation and Space Reinsurance
Aviation is a line of business where individual risks have the potential to bring about catastrophic losses. Proper underwriting in this line of business requires expert knowledge of aviation and the aircraft being insured. A reinsurer can assist in this line of business by:
- Offering the underwriting support necessary to analyze and write the aviation account,
- Participating in the risk to reduce the insurer’s total exposure to loss, and
- Indemnifying the reinsured for the covered losses that they incur.
Again, aviation is a unique line of business that requires expert knowledge. The aviation reinsurance market is also involved with covering risks in space. In aviation insurance you have hull, liability and other coverages for aircraft and helicopters. In space insurance you have coverage for spacecraft during launch and in orbit.
Ocean Marine and Transportation Reinsurance
The perils of the sea are unique and hazardous. They require specialized knowledge of the risks involved and the vessels covered. The accumulation of values within a ship can cause catastrophic losses for any insurer involved in this business. Reinsurance becomes essential as it is a means for insurance carriers to reduce their overall exposure to loss. Reinsurers can also provide the underwriting support necessary to review and write the business.
Marine and transportation insurance are closely tied together. A vast amount of the world’s cargo is transported by sea. The risks the cargo being transported faces are much the same as those of the vessels carrying it. Reinsurance treaties may be in place for transportation and marine insurance. However, it is common for large transportation and commercial marine risks to be transacted on a facultative reinsurance basis.
Special Risks Reinsurance
For unique and specialized risks, there are insurance and reinsurance solutions available to satisfy them. Special risks reinsurance may entail some of the coverages we discussed above, such as aviation and marine reinsurance. There are others that have not been mentioned. Risks such as animal mortality, cyber, active assailant, and terrorism and political violence reinsurance also fall under the category of specialty risks. For the risks mentioned, and more, there are reinsurers ready to offer support.
Other Reinsurance Risks
There are many other risks for which coverage is available. We can offer our support in finding the right reinsurance solutions on your behalf. If you face a need for reinsurance coverage, we will offer our support to satisfy it.
Treaty reinsurance
Treaty reinsurance can be thought of as a master contract between an insurer and its reinsurer. It is negotiated for all written business, during a given term, that fits some established criteria. The reinsured is obligated to cede and the reinsurer to accept all the relevant business that is written by the insurer (that falls within the scope of the reinsurance contract). There are two ways by which risk is transferred under treaty reinsurance. It can be done on a proportional on non-proportional basis.
Proportional Reinsurance Treaties
Proportional reinsurance treaties entail the spread of risk between the insurer and the reinsurer on a fixed percentage split. That means that the relevant risk, losses, and premium are divided between the ceding insurer and its reinsurers according to fixed percentages. There are different ways to structure a proportional reinsurance treaty. These include quota share and surplus share treaties.
Non-Proportional Reinsurance Treaties
Non-proportional reinsurance treaties entail the retention of risk and losses by the ceding insurer up to a predetermined threshold, after which the reinsurer will indemnify its reinsured for covered losses. The reinsurer will charge a premium based on the risk it is covering, with the hopes of making a profit.
If losses do not reach the reinsurance support layer, then the reinsured will not be indemnified.
Reinsurance support can be structured as a comprehensive reinsurance program. Reinsurers can continue to be brought in to support a risk until it is fully covered. They would be called to indemnify the ceding insurer when the loss falls within their respective layers.
There are different ways to structure a non-proportional reinsurance treaty. This type of contract is commonly referred to as excess of loss reinsurance. The ceding company’s retention can be set on a per risk basis or on the aggregate.
Where coverage is available.
United States, the states where we are licensed
Risk Reinsurance Holdings, Inc. is licensed by the Florida Department of Financial Services as a general lines and surplus lines agent. We can transact insurance and reinsurance business throughout the state. Florida is our company’s state of domicile and where we are licensed as resident insurance and reinsurance brokers.
We are also able to transact insurance business in other states. Risk Reinsurance Holdings, Inc. is currently licensed in New York.
Our goal is to grow our company’s footprint and expand our product offerings to more states and territories. We keep a list of the jurisdictions where we are licensed to transact insurance in our page titled “Risk Reinsurance Holdings, Inc. – Active Insurance Licenses”.
International
Through our reinsurance brokerage operations, we have the infrastructure in place to assist with international insurance and reinsurance inquiries. The insurance accounts that are transacted internationally usually entail large or very specialized risks. With the support of the (re)insurance companies, underwriters, and brokers that we work with, we can satisfy your insurance and reinsurance requirements in this area.
Working with us to get reinsurance coverage.
Risk evaluation
The first step of the reinsurance contract procurement process is to understand your current reinsurance program and its results. This entails an analysis of your company’s past results accompanied with future projections.
If you are currently reinsured, we look to review your insurance program to ensure it offers adequate protection. If you are not reinsured, then we look to analyze your coverage needs and develop a reinsurance program to satisfy them.
Reinsurance proposal preparation
Once we understand your reinsurance coverage needs, we will work with you to assemble the information required by reinsurers for risk analysis. We shall help prepare the proposal, submit it to insurers and get the process underway to get the reinsurance contract quoted.
Underwriting
After the information is gathered and the proposal is submitted to the reinsurance company, an underwriter reviews it. We work with said underwriter to make sure we have enough information to analyze the risk, set the premium, and establish the applicable terms and conditions. If anything is needed, we shall take steps to gather the outstanding information.
Coverage intermediation
As the underwriter analyses the risk and sets the corresponding premium, terms, and conditions, we strive to get the best quotes possible on your behalf. If the coverage offered is not competitive, we shall look to have the insurer improve their quote. If this is not possible, then we can look for alternatives elsewhere.
Reinsurance coverage analysis
When the insurance quotes are received, we review the terms and conditions proposed by the insurance company. We aim to determine if their offer provides adequate coverage at competitive rates. If the terms offered meet said criteria, we can finalize negotiations and put the policy in force. Otherwise, we will go back to negotiate and continue our search for the right insurance protection.
Reinsurance contract implementation
Once coverage has been accepted, and instructions to bind have been received, we shall work to get the reinsurance policy put in force with reinsurers. We shall work with them to get the contract documentation to you promptly.
Reinsurance policy management
Changes are not uncommon during the term of a reinsurance policy. We are there to ensure that the contract runs its duration smoothly. We will help resolve issues and assist with making changes that may be needed throughout the policy term.
Working with us to resolve claims
Claim submission
In the unfortunate event that a loss occurs, and it requires the involvement of the reinsurer, we are there to help you every step of the way to get the claim resolved. We will help you submit the claim to the reinsurance company to start the investigation and settlement process.
Claim intermediation
Once the claim is submitted, we shall work with you and reinsurers every step of the way to help the case move forward towards a satisfactory conclusion. When called upon, we shall work with loss adjusters and other relevant parties to do what is needed for a resolution.
Claim Resolution
Provided that all the terms and conditions of the policy were satisfied, meaning that the loss falls within the scope of coverage and is not otherwise excluded, we shall work with reinsurers to help get the claims settled and get you and your original insured on the road to recovery.
About Risk Reinsurance Holdings, Inc.
Risk Reinsurance Holdings, Inc. is an insurance and reinsurance brokerage company. As insurance brokers, we can help you understand your coverage needs and the products that are available to address them. Our goal is to find the right insurance solution on your behalf.
Joshua S. Pestano (Insurance & Reinsurance Broker | President) is the founder of Risk Reinsurance Holdings and the person responsible for all insurance negotiations at our company. Joshua is a licensed and accredited insurance broker with 10+ years of experience in the industry.
Our company helps with insurance, reinsurance, and risk management issues. We are backed by major insurance and reinsurance companies and brokers. Our infrastructure and knowledge allows us to assist with a wide range of risks.
Getting started
Negotiating a reinsurance contract is a complex endeavor. The coverages you need, for suitable protection, may be segmented across different contract types, structures, and reinsurers. A reinsurance broker, like us, can be a single point of contact to achieve comprehensive protection.
Try Risk Reinsurance Holdings today. Leverage our expertise and market access to solve your reinsurance coverage needs. Let us help get your reinsurance negotiations done right. You will find options to contact us in the section below.
Get Reinsurance Coverage
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