(Re)insurance programme design optimisation

Finding the right balance between retention and insurance

How much risk should you keep, and how much should you transfer? Our (re)insurance programme design optimisation service gives you critical insight into your historical claims profile, so that key decisions about the optimum balance of risk retention and insurance can be made on evidence. A study may result in premium savings or reduced tail risk, and it gives you a clearer picture of the risk profile of your business.

Perrenial is a London general insurance (non-life) actuarial consultancy. This work is led by Asad Khalil FIA, Managing Director and founder, who has significant experience across risk financing, technical pricing and reserving.

Our approach

We use stochastic modelling to determine the cost of risk associated with differing levels of retention. The modelling is based on analysis of your historical losses and appropriate exposure measures. Combined with industry benchmarks, it provides valuable data and a framework to help you make effective decisions about your insurance programme.

In practice, we first build a gross loss model from your claims and exposure data. We then overlay your current (re)insurance structure and the alternatives you want to consider, so that each option can be compared on a like-for-like basis.

What the analysis shows you

Our methodology enables clients to understand:

Claims banding analysis: the severity and frequency profile of incurred claims

Alternative programme structures: the effect of different levels of deductibles, aggregates and limits, in order to arrive at the optimal insurance structure

Expected retained losses: the expected cost of retained losses under the current and alternative insurance structures

Aggregate protection: the placement of aggregate loss protection to provide protection from tail losses

For captive insurers, mutuals and RRGs

Careful consideration of risk appetite and of how capital is allocated to risk can create significant opportunities for captive insurers. It is essential for captives to strike the right balance between risk and reward.

Captives, mutuals and RRGs may also need to show stakeholders that the premium spent on the current (re)insurance structure is justified. Their risk appetite may have increased over the years, and they may now want to explore the effects of opting for higher retentions. A programme design optimisation study can help tackle both.

At Perrenial, we believe that organisations that follow a structured (re)insurance programme design optimisation process can reduce their exposure to the volatility of the insurance market cycle and work towards a sustainable, lower Total Cost of Risk (TCoR).

The same approach sits at the heart of a captive feasibility study, where the aim is to propose programme structures that allow a new captive to self-insure a significant amount of risk while minimising TCoR.

Related services

Captive actuarial services: feasibility studies and ongoing support for captives

Reserving: understanding the funding needed for retained claims once a structure is in place

MGA pricing: pricing individual layers and insurance structures for large accounts

Who we work with

Captive insurers, mutuals and risk retention groups (RRGs)

Corporates and public sector entities reviewing their retentions

Lloyd's syndicates and insurers reviewing their outwards (re)insurance

For more on the data a programme study needs, read Data is key for captive formations. Asad's article on VaR or TVaR looks at how to measure the tail risk these structures are designed to manage.

Want to test your retentions?

Share your current programme and claims history, and we will discuss how a study could help.

Contact Perrenial