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Veretnov V. Development of non-proportional reinsurance in the Ukraine



Development of non-proportional reinsurance in the Ukraine

Veretnov V.I.

Senior teacher insurance department, Vadym Getman Kyiv National Economic Univesity

veretnov@kneu.edu.ua

+380672458555

http://vk.com/id28468743, https://www.facebook.com/volodymyr.veretnov

Insurance companies of Ukraine to protect its insurance portfolio  purchased   to reinsurance in the domestic or international insurance market. Other our insurance companies provide reinsurance service for internal and foreign insurers. The one of the most important decisions in this case is the choice relevant forms and methods for optimal reinsurance coverage.  The choice one or another form and method reinsurance mainly depends on the risk profile  of the type of insurance.

If the proportional reinsurance provide coverage on the bases surplus treaty and facultative or treaty quote share, the non-proportional reinsurance use facultative or treaty excess of loss and stop loss treaty. Despite the fact that the non-proportional reinsurance use indicator frequency of losses depending on their size looks profitable than proportional reinsurance, it is used in Ukraine and the world volumes less than proportional reinsurance.

Some scholars see in his work as a system of reinsurance non-proportional financial protection insurance organization [1, 25]. We can partially agree with this. In our opinion the combination of two types of reinsurance coverage on a proportional and non-proportional   guarantee  financial stability and solvency insurer.

Significant role in increasing the intensity of the disproportionate use of reinsurance cover individual characteristics play an insurance company, its experience, competence underwriter [2, 328]. Other important factor is policy owners and managers in their own risk retention.

If international insurance company is own risk retention from  capital  and free reserves is  0,5-1%, the for domestic insurers net retention on one risk at a rate of 10% of the legislative, in practice 1-3%. The main role of reinsurers in the market is the creation of value in managing the risks of the insurer [3, 7].  This usually helps them to their rich experience gathered statistical data on losses over long periods and for different objects and territories, which they offer as an expertise before the insurance.

Non-proportional reinsurance as a set of contracts, as part of domestic and international reinsurance market as reinsurance services in Ukraine today remains in its infancy stage. However, we see the trend increasing volumes of not only domestic and import reinsurance services but also their exports.

One design is non-proportional reinsurance protection against catastrophic losses, such as one of the real threats to spring floods in the West Ukraine it can be covered by them.  Catastrophic risks in certain limits covered by insurers and a large part of their usually transmitted to accommodate the global insurance market. All that more than hold their own insurers must cover from the state insurance funds [4, 17].

The transition from infancy to the consolidation of the reinsurance market in Ukraine marked near premises. These include the establishment of several private professional reinsurers and possibly state reinsurer. This will be preceded by the implementation of government programs of macroeconomic integration in various associations that will participate in the diversification, risk distribution in space and time.

Domestic preconditions for accelerated development non-proportional reinsurance in Ukraine may make political stability which will largely depend on its ability to national elite replies with internal and external challenges.  However, another important condition for accelerating the development of non-proportional reinsurance is the creation of the National Commission of the financial services regulatory regime with the necessary conditions for fair competition, which will constantly improve the quality and reduce the price as insurance and reinsurance services [5, 165].

For a number of private professional reinsurers or for possible state insurer, reinsurer is necessary to develop and implement relevant departments at universities master’s reinsurance program with the possibility of training in domestic and foreign insurance companies. The factors hindering the development of non-proportional reinsurance in Ukraine can be attributed captive insurers and non-classical insurance services, which involve the redistribution of tax optimization and cash flows of structures financial-industrial groups.

Financial factor hindering the development of non-proportional reinsurance is the low capitalization of domestic insurer, with necessity to constantly use retrocession. In the domestic market insurers to reduce costs for reinsurance often use the principle of reciprocity, which also prevents the development of non-proportional reinsurance.

Non-proportional, obligatory reinsurance requires skillful management of risk in determining the conditions of such clauses in contracts as insurance in case the reinsurance, the amount of equity retention volume coverage, the number and volume of renewals, aggregate deductible, cash loss, etc. For the development of an optional of non-proportional reinsurance contract on the basis of excess of loss is necessary to create a large private reinsurers professionalism and may even state reinsurer able to leave on their own hold big risks [6].

According to the strategy of development of the insurance market of Ukraine for the period up to 2020 is provided as a creation of all necessary conditions for fair competition and the organization of a powerful state-owned insurance company, one of whose goals is domestic and export reinsurance.

The use of innovative information technology, in particular the Ukrainian Exchange of reinsurance “Fly Re” optimization against the insurer and the reinsurer for facultative excess of loss contracts, as it allows the insurer to conduct a tender, get quotes from reputable reinsurers risk and select the best to exchange cover note.

Another direction of of non-proportional reinsurance in Ukraine lies in the coverage of individual risk point on an optional basis, are not covered by the relevant obligatory reinsurance contracts.

In the development of Ukraine of non-proportional reinsurance with reinsurers play a significant role both domestic and international reinsurance brokers, which  constantly  advice  their insurers   spend for them specialized and general seminars on different classes of insurance business.

In conclusion, it is worth noting the non-proportional reinsurance as a necessary element of reinsurance, needs a comprehensive, systematic approach, as a method of risk coverage for the insurer, as  a reinsurance services for reinsurer, and some of the domestic and international insurance market.  Its software will significantly accelerate the development of non-proportional reinsurance in Ukraine.

 

  1. Pentikanen T., Bonsdorff H., Pesonen M, Rantala J., Ruohonen M. Insurance Solvency and Financial Strength. Finnish Training and Publishing Co, Helsinki,1989,- p.25.
  2. Ubezpieczenia gospodarcze/Pod red.T.Sagowskiego.-Wydanie drugie,zaktualizowane I rozszerzone.- Warszawa:Poltext,2001.-390p.
  3. Understanding reinsurance: How reinsurers create value and manage risk. Zurich: Swiss Re, 2004. – P.4-8.
  4. Waterman Chris. Still Stable// Global Reinsurance.- 2005.-February-P.12-18.
  5.  Williams C.A. Principles of risk Management and insurance. T.2.-Mavlem,Pensylwania, USA,.1981-172p.
  6.  Gabi Blomberg, Willfred Schnabel – GPF Cologne. – The Value of Non-Proportional  Facultative Reinsurance. A Closer Look at an Innovative Product. – https://www.facworld.com/FACworld.nsf/doc/Np2will
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