Transcript Document 7886356

ICAR Conference
Bucharest– October 1st 2007
Situation regarding the development of
Guidelines on Risk Management, Asset
Allocation and Operation of Romanian
Catastrophe Scheme ( PAID)
Making better reinsurance decisions…
Agenda
• Introduction – Summary of AC9 project
• Current working assumptions
• Draft structure based on current working assumptions
• Overview of Modelling assumptions
• Required outputs of the AC9 Project
• AC 9 planned timetable
• Issues to be addressed by consultancy
• What should Romanian Insurers do next?
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Introduction – Summary of AC9
• AC9 Consultancy Project is funded by World Bank to:
“Development of Guidelines on the Risk Management, Assets Allocation
and Operation of Romanian Catastrophe Insurance Scheme (PAID)
•
Willis Re has been selected via a competitive tender process to support the
development of PAID by assisting in the development of these guidelines
•
The guidelines need to be developed in advance of the inception of the compulsory
insurance law. This requires urgent and close co-operation with insurers.
•
A need to ensure the operating procedures of the compulsory insurance scheme are
effective and efficient for insurance organisations and other related parties.
•
PAID will become a significant part of the Romanian insurance landscape from 2008
onwards. A major opportunity to grow insurance penetration across Romania: There
are approximately six months to prepare.
•
PAID is attracting worldwide attention to the Romanian insurance industry. Successful
implementation will further enhance the reputation of the Romanian financial services
sector throughout international markets
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Current working assumptions
•
Authorised Romanian insurance companies will distribute policies and collect
premiums. 100% of exposure arising from PAID policies will be reinsured by
insurance companies to PAID
•
Insurance companies will receive a commission of up to 10% of the original gross
premium on every PAID policy sold.
•
Insurance companies will provide details of policies sold on to PAID and remit
premiums in respect of policies sold to PAID.
•
Insurance companies will provide PAID with details of policies sold in a preagreed
spreadsheet format to allow PAID to efficiently consolidate policy data and track their
aggregate exposures
•
In the event of any claims the insurance company responsible for selling the policy
will settle the claim. PAID will provide funds to the insurance companies on receipt of
claims advices in a preagreed spreadsheet format.
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Draft structure based on current working assumptions
Policyholder
PAID
Authorised
Insurance
Company
IT
interface
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External
Reinsurance
and Government
Overview of Modelling assumptions
• Modelling outputs will provide indications of the likelihood and size of
potential losses
• Penetration rates: Willis will model 100% basis and various other
scenarios e.g. 20% penetration, 40% penetration etc.
• Initial capital of PAID - to be confirmed ( dependant on various
considerations)
• Loans available to PAID the amounts and conditions - to be confirmed
• Reinsurance structures – to be confirmed by the Consortium of
Reinsurance brokers
The key assumptions are the modelling outputs and the penetration rates
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Required outputs of AC9 Project
• Develop a Customised Dynamic Financial Asset model
for PAID
• DFA tool to be able to analyse the financial viability of
PAID to changes in the direct cover
• Recommend optimal Asset Liability Management Policy
• Design a risk management structure including
reinsurance on the basis of the DFA modelling outputs
• Prepare cost effective operating procedures
• Provide Training
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Review of plan timetable
• Deliverables are as advised in the revised inception
report:
• Inception report - 1st August 2007
• Report on the production of customised DFA model 15th October 2007
• Report on optimising PAID policy, risk and capital - 15th
November 2007
• Deliverables report and outputs - 15th November 2007
• Final report -15th August 2008
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Issues that need to be addressed by consultancy
• The following are points that have been raised by the Insurance
Industry and which need to be addressed
• No underwriting risk – but we are insurers not agents!
• Commission of 10% too small
• Unknown associated costs and claims settlement costs
• Details of claims handling procedures
• Interrelation between compulsory policy (PAD) and Facultative
Policies
• Concerns of adjustment process after a BIG catastrophe
• Development of a Database
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What can Romanian Insurers do in preparation?
• Instigate dialogue with the CSA
• Feedback through Willis Limited and the AC9 consultancy
• Prepare sales force in the light of your Company business
plan
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