Reinsurance and retentions, volume II

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We have defined the retention of a general insurance operation as all business which is not ceded including coinsured layers of excess of loss reinsurance, and any unplaced parts of the operations reinsurance programme. We stress that we have used the word retention in its literal sense, namely, an amount retained. We consider that a company which has, for example, reinsured itself Ł90 million excess of Ł10 million has decided to retain claims excess of Ł100 million. The remainder of the paper is divided into three sections. Section 2 covers some aspects of the current reinsurance market, Section 3 a discussion of the factors that influence the reinsurance programme and retention philosophy, and Section 4 summarises the practical methods for estimating aggregate claim distributions and retentions that we have reviewed. Detailed documentation of the application of these methods is contained in the appendices.