The basic purpose of reinsurance is to provide sufficient coverage against insured events while avoiding the expense of excess coverage. However, from a broader corporate financial perspective, reinsurance should be viewed as a form of capital. Reinsurance creates value when it substitutes for more expensive sources of capital such as corporate debt, contingent capital, or even equity. The goal should be to increase shareholder returns while reducing earnings volatility.
Reinsurance strategies should consider costs, the risk/return profile of earnings, the impact on required capital, alternative sources of capital and costs, and the market price of risk.
MLBC guides clients in selecting and optimizing reinsurance programs by ensuring the reinsurance solution is consistent with the business strategy, projected growth, target returns, capital requirements, and other key performance metrics.
MLBC can work with clients to:
• Review and select appropriate levels of reinsurance
• Redesign the reinsurance structure and related elements to achieve optimum value
• Analyze the financial impact of alternatives