英文_美世_盖伊·卡彭特报告被添加到精算师协会教学大纲中_11页_2mb

Structured Reinsurance Impact on Health Product Pricing Summary

Introduction to Risk-Based Capital (RBC)

RBC evolved as a regulatory framework to monitor insurer solvency more effectively, replacing fixed capital standards by considering specific risks like underwriting, interest, and credit risks. It assesses an insurer's financial health using a ratio of capital to risk exposure, enabling tailored capital requirements instead of a uniform minimum.

What is Structured Reinsurance?

Structured reinsurance is a customized form of quota share reinsurance that transfers specific risk exposures to reinsurers, reducing the ceding company's capital requirements by addressing underwriting risk. It allows insurers to optimize capital usage, enabling growth and innovation while maintaining regulatory compliance.

Key Benefits of Structured Reinsurance

• Capital Efficiency: Reduces the capital needed for health products by transferring risk, freeing up capital for other uses. For example, ceding 60% of premium can lower capital requirements significantly for certain products like employer stop loss.
• Pricing Impact: Helps lower profit and growth margins by replacing internal capital costs with cheaper reinsurance costs, potentially reducing overall premium costs for insurers.
• Strategic Value: Offers arbitrage when the reinsurance cost is less than the company's cost of capital, making it a valuable tool for improving financial performance and supporting sustainable growth.

Impact on Capital Requirements

Structured reinsurance decreases the capital stack funded by the insurer, with a maximum limit of funding 44% of the capital stack. At higher targets like 300% RBC, it can be capital-neutral or efficient, depending on the product. For instance, employer stop loss shows up to 1.03% reduction in profit margin, while others achieve neutral or efficiency gains.

Effect on Health Product Pricing

• Reduces the combined profit and growth charges needed to maintain capital ratios, leading to lower pricing costs.
• Examples show that structured reinsurance can shave margins (e.g., 0.51% net delta for comprehensive medical) while supporting growth, making products more attractive to insurers aiming for a 10% premium increase and 15% return on capital.

Value Proposition and Recommendations

Structured reinsurance provides a cost-efficient solution for managing capital and risk, potentially lowering insurance costs. Insurance executives should adopt structured reinsurance, fostering innovation and awareness to unlock efficiency. Companies can position themselves for long-term success by combining reinsurance with strategic pricing adjustments.

For further details, contact the Guy Carpenter Health Structured Risk Team.