Reinsurance and its design provide a competitive advantage to the primary insurer to increase its profit. The effectiveness, capacity and efficiency of the local and international reinsurance market directly and indirectly control that of the local and international insurance markets respectively.
The primary insurers’ risks are not optimally diversified.
The primary insurance companies do specialize technically and geographically in
order to adventure their underwriting expertise and increase profits.
Proportional reinsurance provides capital to the insurers to underwrite more
risks and hence increase their underwriting capacity. On the other hand,
non-proportional reinsurance stabilizes the ups and downs of losses over time
and provides protection against the catastrophic events. The mobilization of
underwriting capacity on local and international scale is essential to offer
the amount of insurance cover essential for many of developing and developed
world’ risks, including catastrophe losses resulting natural disasters,
contributes to local and international economic development and stability.
The purpose of this book is to provide advanced insights
into the reinsurance theory and practice. Chapter one examines the nature, uses
and importance of reinsurance. It traces the development of reinsurance
globally and regionally specifically Africa and Tanzania. The chapter examines
the types, methods and forms of reinsurance and their uses. Chapter two
analyses the Tanzania reinsurance market, its capacity, reinsurance cycle and
its trend. It examines the participants of the reinsurance market, the accreditation
procedures for non-resident reinsurance companies and brokers. The chapter
describes the mandatory cession share to local and regional reinsurers.
Chapter three examines the nature, features and uses of
facultative reinsurance. It presents the types of facultative reinsurance, the
advantages and disadvantages to the reinsured. Chapter four analyzes the
concept and features of treaty reinsurance, the advantages and disadvantages of
it, methods and forms of arranging treaty reinsurance. Chapter five examines
the nature, features, uses and types of proportional reinsurance. It features
the factors affecting the cession, retention rates and commission rates.
Chapter six analyses the non-proportional reinsurance. It examines the
features, uses and types of non-proportional reinsurance. Chapter seven
examines pricing non-proportional reinsurance contracts. Optimization problems
in reinsurance are increasingly using modern techniques of neural networks,
telematics and other machine learning models rather than the exposure rating,
experience rating, frequency and severity probability models. This chapter
presents the machine learning programming methods and provides their difference
from the traditional pricing methods. Lastly, chapter eight analyses a
reinsurance programme design. It describes the factors which affect the design
of the reinsurance programme and the reinsurance optimization. In each of the
chapters, there are worked examples and practical exercises which enhance the
understanding of the reader.
This book is written targeting the bachelor degree and
master’s degree candidates in insurance programmes. Insurance professionals and
practitioners working in the field of reinsurance programme design and pricing
will also find this book valuable to them if they wish to revive their
reinsurance knowledge.
Author(s) Details:
Mussa Charles Juma,
Faculty of Insurance and Banking, The Institute of Finance Management, P.O. Box 3918, Dar es Salaam, Tanzania, University of Dar es Salaam, Tanzania, City University London, UK and Universiti Tunku Abdul Rahman, Malaysia.
Salum Ismail Mlaponi,
Faculty of Insurance and Banking, The Institute of Finance Management, P.O. Box 3918, Dar es Salaam, Tanzania, Strategis Insurance Tanzania Limited, P.O. Box 7893, Dar es Salaam, Tanzania, The Institute of Finance Management, Tanzania and Chartered Insurance Institute, UK.
