Training on Reinsurance & Advanced Risk Transfer Techniques.

Module 1: Proportional Refinements-Variable Quota Share & Surplus Hybrids

• Variable quota share treaties that adjust cession rates based on loss experience

• Surplus share with multiple retentions per line of business

• Hybrid first surplus + quota share for capacity and surplus relief simultaneously

• Case Study: Design a variable quota share for a auto insurer where cession rises from 20% to 40% after a 70% loss ratio

Module 2: Non-Proportional Structures-Layered Catastrophe Covers

• Working cover vs. catastrophe excess of loss (per risk vs. per event)

• Hours clauses (72/168/336) and their impact on loss aggregation

• Clash cover for multiple policies covering one insured or one event

• Hands-on Exercise: Build a three-layer cat XoL program ($10M xs $10M, $15M xs $20M, $25M xs $35M) with two reinstatements

Module 3: Catastrophe Bonds - Structure, Triggers, and Pricing

• Special purpose vehicle (SPV) structure and principal-at-risk mechanics

• Trigger types: indemnity, parametric, industry loss, and modeled loss

• Risk period, interest spread, and expected loss calculation for pricing

• Case Study: Compare an indemnity cat bond vs. an industry loss warranty for Florida hurricane risk – which has lower basis risk?

Module 4: Industry Loss Warranties & Sidecars

• ILWs as binary options paying fixed amount when industry loss exceeds trigger

• Basis risk trade-off versus speed of payment (no claims adjustment)

• Sidecars as short-term, fully collateralized quota share vehicles

• Hands-on Exercise: Given a $50B industry loss trigger, calculate ILW payout if actual industry loss is $62B with a 1.2x multiplier

Module 5: Finite Risk - Loss Portfolio Transfers & Adverse Development Covers

• Loss portfolio transfer (LPT) for existing reserves – no new risk, only time value

• Adverse development cover (ADC) protecting against reserve deterioration on long-tail lines

• Deposit accounting vs. reinsurance accounting under risk transfer testing (10-10 rule)

• Case Study: Evaluate an LPT cash flow – does it meet risk transfer under IFRS 17? Calculate the 10-10 test result

Module 6: Stochastic Modeling for Pricing Advanced Structures

• Frequency-severity models (Poisson + LogNormal/Pareto) for excess layers

• Copulas for dependency between property and marine lines in a cat event

• Return period pricing (1-in-100, 1-in-250 year events) and TVaR risk load

• Hands-on Exercise: Simulate 10,000 annual losses for a $20M xs $10M layer – find the 1-in-100 year expected loss and price with a 25% risk load

Module 7: Capital Relief Under Solvency II & US RBC

• Solvency II Standard Formula: reinsurance credit and counterparty default adjustment

• Internal model treatment of ILS and finite risk as risk-mitigating contracts

• US RBC (NAIC) authorized vs. unauthorized reinsurer collateral requirements

• Case Study: Compare capital relief from a 30% quota share vs. a $50M cat bond for a European insurer with $200M hurricane PML

Module 8: Counterparty Risk & Collateral Management

• Credit ratings (AM Best, S&P) and their impact on reinsurance recoverables

• Collateral techniques: letters of credit, funds withheld trusts, fully collateralized SPVs

• Runoff reinsurers, commutation negotiations, and dispute resolution

• Hands-on Exercise: A rated-A reinsurer is downgraded to BBB-. Draft a 3-point collateral demand letter citing treaty provisions

Module 9: Critical Clauses - Aggregation, Follow the Fortunes, and Notice

• Hours clause interpretations (72 vs. 168 hours) for consecutive storms or earthquakes

• Ultimate net loss clause – what expenses and salvage are included?

• Follow the fortunes vs. follow the settlements – scope of reinsurer’s obligation

• Case Study: Two hurricanes make landfall 90 hours apart. Under a 168-hour hours clause, one event or two? Draft an arbitration memo

Module 10: Final Workshop – Structuring a Real-World Reinsurance Program

• Scenario: Regional insurer with $500M surplus, homeowners and commercial auto exposures

• Reduce 1-in-100 year hurricane PML from $250M to $80M using cat XoL and ILW

• Protect against adverse development on auto liability (5-year tail) with an ADC

• Release capital for growth via a quota share sidecar or cat bond

• Hands-on Exercise: Teams design a layered program, calculate cost of capital saved vs. reinsurance premium, and present to “board”