RMI 3567 Exam 3 Questions and Answers(A+ Solution guide)

Name four examples of alternative capital - Answer-Pension Plan Endowments Hedge Funds Alt. Asset Manager what is it called when a reinsurer transfers risk to another reinsurer? - Answer-Retrocession who is the reinsurer who the additional risk is ceded to? - Answer-Retrocessionaire Who is the primary or reinsurer who transfers the risk? - Answer-cedent Where are the top insurance markets? - Answer-US China Japan What is the US insurance market driven by? - Answer-property and casualty insurance What are the Japanese and Chinese insurance markets driven by? - Answer-Life Insurance Why is life insurance more prevalent in developing countries? - Answer-it helps the population accumulate wealth What are current trends in the insurance market? - Answer-mergers and acquisitions lower return What are three factors contributing to the overall competitiveness in the market? - Answer-1) declining prices 2) increasing commissions 3) reductions in premiumWhat drives mergers and acquisitions activity? - Answer-Competitiveness Lower returns put increased pressure on underwriters which in return will cause what three things to occur? - Answer-1. More conservative UW 2. More diversification 3. Increase international reach Where do sources of new risk capital originated from? - Answer-Secondary Markets What are four risk transfer mechanisms? - Answer-1) Cat Bonds 2) Insurance Linked Securities 3) Collateralized reinsurance 4) Sidecars What contributed to the decrease in reinsurance pricing? - Answer-- abundance of capital - diversification in the market following the 2005 losses What has an abundance of capital done to the market? - Answer-created more capacity within the market driven RoL to pre 9/11 level What could potentially drive up rates in the reinsurance market? - Answer-natural disasters What were the three events that led to significant changes in the reinsurance market? - AnswerHurricane Andrew 1992 9/11 Hurricane Katrina, Rita and Wilma 2005 What reinsurer was formed after Hurricane Andrew? - Answer-Bermuda became hub for property catastrophe reinsuranceRenRe was formed What companies were created after 9/11? - Answer-Arch Capital AXIS Allied World Endurance What companies formed after Hurricane Katrina, Rita and Wilma? - Answer-Validus Flagstone Harbor Point How are recent events going to impact the pricing of reinsurance in 2019? - Answer-Natural disasters have been known to drive rates up, however due to the availability of capital and the increase in capacity the rate increase will be insignificant. How did the Bermuda market form? - Answer-emerged out of liability crisis of the mid 1980's as the world's most pre-eminent offshore reinsurance market What led to the creation of RRG's and Captives? - Answer-children falling off swings Why were people skeptical of the Bermuda market? - Answer-political risk restrictive infrastructure high cost operating environment Why do US lawmakers not like the Bermuda market? - Answer-Bermuda has a tax advantage that the US does not have What disrupted the Bermuda market? - Answer-Insurance Linked Securities (ILS) Do international insurers prefer multiple solvency standards or one? - Answer-One because it is more simpleharmonized way of regulation easier/cheaper What are the three RBC property-liability risk classes? - Answer-1. asset risk 2. credit risk 3. underwriting risk What are the three pillars of Solvency II? - Answer-1) Quantitative Requirements 2) Governance & Supervision 3) Disclosure & Transparency What mergers have occurred with companies in Bermuda? - Answer-AIG - Validus XL Catlin - AXA Axis - Novae The pattern of publicly traded Bermudian to be purchased in the last 3 years have led to what? - Answer-jobs disappearing operational shrinkage The Final Class of insurers formed after Hurricanes KWR why? - Answer-Because the market recognized that long-term permanent capital was not the most profitable way to approach reinsuring short-tail risks When was the EU founded? - Answer-1957 Who were the initial 6 countries that were in the European Union? - Answer-West Germany France ItalyBelgium Netherlands Luxemburg Economically, what is the EU responsible for? - Answer-The Euro external trade negotiations overseeing the single market competition policy EU budget