Global reinsurance is a conference that was created to offer solutions to reinsurance and insurance professionals. They assist multinational and regional insurance companies, Lloyd's syndicates and MGAs. The conference was created back in 1990 by several companies and families. The principal founders were the global reinsurance company that is owned by the Kean family and a company based in Hadleigh, Essex called the Winchester group. Their main office branches are in the United States and London UK. They operate without specific licensees in the US and the UK even though they require licensure for establishing their offices and business premises. Its primary focus was enabling underwriters all over the world in reinsurance markets create solutions for their businesses and deliver high-quality services on innovation, flexibility, pricing and secured services for their clients (Jarzabkowski et al., 2015).
Reason for Creating Global Reinsurance Conference
Global reinsurance conference was created to provide coverage in fluctuation claims in reinsurance and insurance markets. The conference/company protects the capital base of the original/primary insurer and reduces the volatility of negative results. It also creates a more diverse portfolio of the primary insurer and primary insurance companies. Insurance markets needed capital and reliable solutions to problems that were not being provided for by the existing structures. Reinsurance conference stepped in and allocated adequate capital while providing high returns for investors in these types of markets. The returns also offered diversification for its clients. Reinsurance is bought by insurance, where they benefit from the capital relief that is provided by the reinsurance company as well assuming risks they do not wish to retain. Global reinsurance will cover the risks of these companies located in adverse geographical locations. They have primary clients who are international and at times operate through local subsidiaries they own. It increases the efficiency in reinsurance and insurance industries in using its capital base and facilitates the insurability of potential risks (Jarzabkowski et al., 2015).
Use of Global Reinsurance Conference Today
It provides financial protection to insurance companies. Insurance companies today face risks related to catastrophes like hurricanes or global financial crisis. These risks come due to a lot of factors such as loses and major uncertainties which are very common. Companies under global reinsurance are protected against any loses. Global reinsurance approach to problem-solving is opening minded. They have highly experienced staff and brokers available in many places all over the world. Their technical staff and skilled brokers work hand in hand with the client to combine details on issues and risks with pricing analysis, actuarial skills, modeling, and retention analysis to add value or meet their clients' needs (Bednarek et al., 2016)
Global reinsurance conference has a team that ensures a collaborative approach and uses their extensive investment in their practice and state of the art tools to give strategic insight to their clients. Their motto is the can-do attitude that they believe is the differentiator in world markets of today. They believe a client has the right to get the very best of services regarding quality and timelessness. The real value is what they aim to provide. Unlike ordinary insurance companies, the reinsurers target a different customer base. They also involve legal systems and broader jurisdictions that are in competition or even. Without reinsurance, insurance companies would probably charge very high rates on their policies to protect themselves against potential losses and would also be vulnerable to many risks. Like any other type of insurance reinsurance, it all boils down to a process where the client is charged a premium.
The conference operates (Bednarek et al., 2016), in the background of the insurance markets. They also have small workforces, develop strong but niche roles and have few competitors. There is specific kind of products that global reinsurance offers to its clients. These are first treaty reinsurance and facilitative reinsurance. First treaty reinsurance is a type of contract where the global insurance is obligated to accept an entire class of policies or all policies from their clients including policies that have not been put on paper. Facilitative reinsurance is a type of reinsurance where plans are specific. The reinsurer global reinsurance covers single individual policies or covers different parts with various policies brought together. They also reinsure in excess of large buildings and large companies.
The conference takes the most complex and large risks in the insurance business. They take risks that normal insurance companies would not be able to internalize. The risks taken by global reinsurance must be international. There many cases of problems in commodity markets, war, and severe recession hence their required global presence. The contacts created between the company and the ceding insurer act as an agreement of the insurance company seeking insurance and assuming the reinsurance. The conference (Bednarek et al., 2016) indemnifies their client for loses under the specific policies of their contract as I stated above. The contract is not regulated as for content since both sides are considered to be equally knowledgeable about the business and have equal powers of the bargain under the law.
Importance of Scale and Diversification
Reinsurance business thrives on risk diversification. It is a time-honored approach in risk management as well as offering solutions. Diversification is a well-accepted principle in asset management and investment in all types of markets. Investors still show interest in reinsurance companies despite falling rates in reinsurance markets. The reasons for this are cynical and structural. Investors view the factors of growth and prospects as flat. The company is also divulged with capital oversupply especially when it comes to property risks.
Reinsurance is also driven by the law of large numbers that states that the larger the number of exposed units that are exposed to loss the higher the chances that cost of loss is equal to the expected cost of loss. The benefits of diversification for the reinsurance company are very vast. It enhances the returns for insurance companies and offers protection since not all clients get affected at the same time and equally. If one client gets concerned, this is neutralized by the performance of another (Johnson et al., 2015).
The asset class from a diversified point of view balances the potential risks in investments as well as returns. In the current low investment yield environs achieving shareholder return and expectation are tough. To manage the expense ratios, it is essential for a reinsurance company to make economies of scale by diffusing semi-variable expenses over bigger portfolios of premiums. For such a large entity, capital efficiencies are evident for better access to financing regarding quantum and proportion. Clients focus heir reinsurance contracts o the company's capacity for its overall size and strategies. Achieving meaning full scale translates into more contracts and agreements with smaller companies that enable them the opportunity to compete with dominant and significant companies in cases of efficiency fronts and revenue.
The significant scale also increases consolidation in the smaller companies. This, however, creates diversification and stability across its markets. It also increases the cost of risk transfer to the insured. Primary insurance companies seek to consolidate their reinsurance as a result of his. It is a way that enhances efficiency and leverage in reducing potential costs. Although not being most profitable in recent years, global reinsurance. By applying principles of portfolio theory in their operations, reinsurance practitioners benefit greatly. Through diversification, they link different risk units to different investment assets. By doing this, they also lower the risks by adding unrelated classes of business as well as separate risks. To benefit fully from diversification the reinsurance company considers how additional risk units of other geographical; locations relate to the existing groups. Through correlation, businesses get assisted in the optimal portfolio mix. To give maximum returns efficient frontiers can also be drawn through coloration of different types of companies that are in different classes or different geographical areas.
Real Business World
In recent years Global reinsurance conference have outperformed their counterparts regarding creating economic value with over 20% return to shareholders. The number overrides most insurance companies that have 13% returns in shareholder. Their high performance is however unsustainable in long-term due to the current market conditions. The company is driven by reserve plates and catastrophic conditions. This has caused valuations of the company to lag behind those of its primary insurers (Johnson & Abe, 2015).
Jarzabkowski, P., Bednarek, R., & Spee, P. (2015). Making a market for Acts of God: The practice of risk-trading in the global reinsurance industry. Oxford University Press, USA.
Bednarek, R., Burke, G., Jarzabkowski, P., & Smets, M. (2016). Dynamic client portfolios as sources of ambidexterity: Exploration and exploitation within and across client relationships. Long Range Planning, 49(3), 324-341.
Johnson, D. A., & Abe, Y. (2015). Global overview on the role of the private sector in disaster risk reduction: Scopes, challenges, and potentials. In Disaster Management and Private Sectors (pp. 11-29). Springer, Tokyo.
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