> Reinsurance Cost / Benefit – Expected recoveries compared to cost of reinsurance.
> Solvency Projection – Projection of solvency ratio over the business planning period.
> Scenario Results – Impact on solvency position and profitability of differing structures.
The primary challenge was to assess the proposed revision to the reinsurance structure and quantify the impact on the company’s solvency position.
Once the base projection was assessed, a model was built to test the impact of alternative reinsurance strategies.
Key Goals:
Why It Matters:
An optimised reinsurance program reduces retained risk, stabilises financial performance, and supports long-term growth without breaching solvency requirements.
A 90% quota share arrangement reduces retained risk and provides capital relief effectively.
An optimised reinsurance program reduces retained risk, stabilises financial performance, and supports long-term growth without breaching solvency requirements.
Layered coverage XoL protects from the impact of large natural catastrophe events and individual large losses using specific excess and limits.
Reinstatement clauses ensure continued protection after claims, maintaining coverage stability.
The combination of quota share, and excess of loss aligns with risk appetite by reducing overall exposure, protecting the business from large losses and providing capital relief.
Base Model Projection
We developed a forward-looking financial and solvency projection based on the company’s approved business plan and three-year long-term plan. The model produced projected accounting and regulatory balance sheets, together with the associated Solvency Capital Requirement (SCR) and solvency ratio across the planning horizon.
The opening SCR was aligned to the latest submitted regulatory position. Future SCR calculations were derived using the business plan assumptions and the company’s approved risk calibration approach. Catastrophe risk was a major driver of the SCR which was assessed by estimating the required extreme loss at each valuation date and modelling its net impact on own funds under varying reinsurance structures.
The modelling framework incorporated flexible, parameter-driven inputs, enabling efficient comparison of alternative reinsurance arrangements and their influence on solvency and financial outcomes.
Key Modelling Assumptions
Stress test methodology
For each stress scenario, we produced updated profit and loss accounts as well as revised accounting and regulatory balance sheets. The resulting gross and net impacts were assessed alongside the expected stressed loss event used in the SCR calculation.
The analysis quantified the combined impact of each reinsurance option on profitability, balance sheet strength, and regulatory solvency. These results formed the basis for structured discussions with management to determine the reinsurance structure that most effectively supports the company’s financial objectives and risk appetite.
