RA Reinsurance

AndrewLAndrewL
in CIA.IFRS17-2

To evaluate RA for reinsurance, we are told that:

  1. We either use cost of reinsurance or the difference in position from purchasing reinsurance.
  2. Then we are also told to use either Quantile, CoC, Cat modeling or Proportional scaling.

But how 1) relates to 2)?

Thanks!

Comments

  • bennybees1bennybees1

    I'm not sure but I think #2 are just quantitative methods listed to measure/calculate what's listed in #1

  • AndrewLAndrewL

    Thanks @bennybees1 I do not think so though.

    For example, how would we relate cost of reinsurance to any of the methods mentioned in 2)?

  • Staff-T1Staff-T1

    All the examples above are possible approaches to determining a risk adjustment for reinsurance

  • oxalisoxalis

    @Staff-T1 , are you saying that there are 6 ways to calculate RA for reinsurance?

  • grahamgraham

    Hello @oxalis,

    Our staff member @Staff-T1 is currently on vacation and although they will still be logging in, there may be a delay in responding to your question. Apologies. Everything should be back to normal shortly after the new year.

    -Graham

  • oxalisoxalis

    @graham Thank you for letting me know, happy holidays!

  • Staff-T1Staff-T1
    edited December 2024
    You start by determining how you'd want to calculate your RA for reinsurance held.

    If it is the difference in risk position, you can use one of the 4 methods in step 2.

    Usually for the cost of reinsurance, you'd directly use the reinsurance premium as a proxy for the RA so there would be less modelling required. You only need to determine the RA percentile of the reinsurance premiums using the underlying risk distribution
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