Reinsurance Asset Management

The Problem

Run-off companies/syndicates and run-off accounts are failing to accurately identify reinsurance recoveries and other amounts due – such as loss funds.

Why there is a problem

When companies and syndicates either, cease trading or, stop underwriting sections of their accounts, there is an increasing tendency to utilise the services of third-party companies to administer the run-off. These contracts are competitively and aggressively sought after with the result that the client achieves what appears to be a “good deal”.

Often, the transaction will include the transfer of employees to the run-off administrator. In general, the prospects for the transferees are not perceived to be good and many will leave to join “live” operations. As a result much knowledge is lost and this contributes to deterioration in the quality of the administration and, in particular, opportunities are missed or over-looked as regards reinsurance recoveries. Additionally, there are a number of factors that can make such reinsurance management difficult:

  • Complex reinsurance programmes;
  • Facultative reinsurance;
  • Manual identification and calculation of recoveries;
  • Loss funds;
  • Restructuring of departments (leading to lost knowledge);
  • Corporate merger or acquisition;
  • Dependency on cross-departmental communication; and,
  • Changes in IT systems.

The Solution

Through experienced analysis of key information, and the application of advanced data analysis tools, we are able to identify the existence of unidentified recoveries.

Experience

This year we have been instructed on a number of assignments that involved reviewing run-off operations and/or reinsurance programmes. In each case we identified reinsurance recoveries that had been overlooked, and also incorrect premium adjustments. The values ranged from $50,000 to $7,500,000. We also identified Loss Funds that had been “left” with brokers/agents and not properly accounted for; These Loss Funds totalled many millions of pounds/dollars.

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