Conference R in Insurance 29062015 Indra LOLJEEH Technical Advisor Analytics at QBE Re liqberecom Agenda Reminder about reinsurance treaties MAXL ID: 1030007
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1. Pricing of MAXL treatiesConference R in Insurance – 29/06/2015Indra LOLJEEH – Technical Advisor Analytics at QBE Re – li@qbere.com
2. AgendaReminder about reinsurance treatiesMAXL treatiesPricing of MAXL treatiesStructure of the pricing programConclusion
3. AgendaReminder about reinsurance treatiesReinsurance basic treatiesAggregate clauses in reinsuranceMAXL treatiesPricing of MAXL treatiesStructure of the pricing programConclusion
4. Traditional reinsurance
5. Quota-ShareCession rate: for all risks
6. SurplusCession rate: for all risks where is called the surplus line
7. Excess of lossNotation: C xs D original claim amount
8. Stop lossNotation: C xs D
9. Aggregate clauses in reinsuranceAAD: Aggregate Annual DeductibleAAL: Aggregate Annual LimitLink with Stop-Loss treaties These elements are the basis of most currently existing reinsurance structures
10. AgendaReminder about reinsurance treatiesMAXL treatiesConcept of MAXL treatiesIllustration/ExamplePricing of MAXL treatiesStructure of the pricing programConclusion
11. Concept of MAXL treatiesMultiline:Reinsurance treaty covering several lines of business at the same timeCommon protection for several portfoliosAggregateStructure that contains aggregate clauses (MAAD/MAAL)These clauses are applied on a global leveleXcess of LossNon-proportional structureProtection against medium/high claims
12. MAXL Example
13. MAXL ExampleInterior PriorityEligible Claim Activity
14. Advantages of such structuresImproved protection against medium sized claimsTowards frequencyTowards changes in legislationProtection of insurer’s global resultsCan cover several lines of business at the same timeCheaper than lower XL coverOptimization of the reinsurance structure (Solvency II)
15. AgendaReminder about reinsurance treatiesMAXL treatiesPricing of MAXL treatiesCollective risk model / Monte-Carlo methodsProblems inherent to MAXL treatiesCorrelationsLines of business (ST/LT)TimeWhat R brought to us Structure of the pricing programConclusion
16. Theory behind the pricing of MAXLCollective Risk model: Independency between frequency and severityDetermination of the loss distribution of the eligible layersDetermination of the frequency distributionsAggregation of the loss distributionsUse of copulasDependency structure between the lines of business ?Dependency above thresholds ?Long tail vs. Short tail businesses ?Use of Monte-Carlo simulationsSimulation for each line of businessAggregation to obtain aggregate loss distribution
17. Problems inherent to such methodsTime-consuming process Need for an efficient softwareMany underlying structures possible Need for program flexibilityStill some developments needed for the copula part Need for a modular programDifficult to take account of some distributions (CAT Softwares)
18. Problems inherent to such methodsTime-consuming process Need for an efficient softwareMany underlying structures possible Need for program flexibilityStill some developments needed for the copula part Need for a modular programDifficult to take account of some distributions (CAT Softwares) R is our savior !!!
19. AgendaReminder about reinsurance treatiesMAXL treatiesPricing of MAXL treatiesStructure of the pricing programConclusion
20. Structure of the pricing program
21. Global distribution
22. AgendaReminder about reinsurance treatiesMAXL treatiesPricing of MAXL treatiesStructure of the pricing programConclusion
23. Advantages of R in our caseIdeal for simulation based tools Simplification of the audit processProgram easy to modify and improvePackages already existingPossibility for further analysis on dataGraphsSensitivity analysisReporting
24. Questions?