hybrid insurance structures “helping each other”
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12 November 2012. Hybrid Insurance Structures “Helping each other”. Zainal Abidin Mohd Kassim, FIA Istanbul 2012. Structure of Stock Insurance Companies. Leverages on the concept that There is a ‘price’ for taking on risk. For the right price there is capital willing to undertake the risk. - PowerPoint PPT PresentationTRANSCRIPT
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Hybrid Insurance Structures“Helping each other”
12 November 2012
Zainal Abidin Mohd Kassim, FIA
Istanbul 2012
2Actuarial Partners
Structure of Stock Insurance Companies
Leverages on the concept that
1) There is a ‘price’ for taking on risk.
2) For the right price there is capital willing to undertake the risk.
3) Risk can usually be mathematically modeled with some degree of certainty.
4) There is a secondary market to “off load” excessive insurance risk (the reinsurance market).
Total capital invested in insurance companies and reinsurers globally is estimated to be USD3.4trillion* and USD480 billion* respectively.
* Aon Benfield research 2012
3Actuarial Partners
Proprietary Insurers and Mutuals
While stock insurers seeks to maximize its profits, Mutuals seek to benefit its members rather than maximize its profits.
Insurance is a service. It is intangible and difficult to assess. Can buyers of insurance be really sure what he is buying is what he needs?
Difficulty for the public to compare premium rates. This asymmetry in information puts the insurer at an advantage as compared to the policyholder.
4Actuarial Partners
Hybrid Insurance Structures
Ownership
Owned by Shareholders
Owned by Policyholders
Modern Takaful
Mutuals
Risk Sharing
StockInsurers
Risk Transfer
? ? ?
5Actuarial Partners
Guarantees & Surplus Sharing
Guarantees No guarantees
Modern Takaful
Discretionary Mutuals
Policyholders share in surplus
StockCompanies
Policyholdersdo not share in surplus
6Actuarial Partners
How risks are distributed
StakeholdersOperational
RiskUnderwriting
RiskInvestment
RiskExpense
Risk
Stock insurer
Mutuals
Modern Takaful
Discretionary Mutuals
Reciprocals
Shareholders/management company
Policyholders/participants
7Actuarial Partners
Conclusion
Trust
Beliefs
Price
Convenience
Choice is driven by
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