Reinsurance FAQs

Proportional: Share of premium and claims (with ceding commission). Non-proportional: Reinsurer only pays when claims exceed a retention.

Pricing depends on:

• Loss history and credibility.
  
• Exposure data (by peril and geography).
  
• Catastrophe modelling.
  
• Market cycle and reinsurer appetite.
  
• Treaty structure, terms and conditions

AI introduces professional indemnity and liability exposures that are hard to model. Reinsurers are pressing cedants to clarify wordings, exclusions, and claims experience. For UMAs writing tech or liability business, treaty partners will ask how AI-related risks are being assessed.

Treaty: Blanket coverage for a defined portfolio, automatic acceptance, long-term relationship. Facultative: Case-by-case reinsurance for unusual or large risks. Both are essential tools, but treaties underpin an insurer’s core risk transfer strategy.

 Reinsurance reduces insurers’ required capital under the Prudential Authority framework. However, the quality of the reinsurer (credit rating, security) is critical.

Rooftop and utility-scale solar farms are vulnerable to hail, wind, and fire. Treaty programmes increasingly carve out solar exposures or require detailed accumulation mapping. Some reinsurers seek parametric hail or solar irradiation covers to manage these risks.

Typically annually. In South Africa, renewals align with global cycles (1 January, 1 July), though some niche treaties have bespoke dates.

They allow cedants to restore treaty cover after a loss event, usually for an additional premium.

Quota Share: A fixed percentage of every risk is shared. Surplus: The cedant retains up to a set line, ceding the rest proportionally. Excess of Loss (XoL): The reinsurer pays losses above a retention. Stop Loss: Protects the cedant against aggregate losses in a given year.

Inflation drives up repair/replacement costs, making historical loss data less predictive. Currency depreciation affects reinsurance premiums (often denominated in USD or EUR). Load shedding increases machinery breakdown, fire, and BI claims. All of these affect treaty pricing, retentions, and reinsurer appetite.

Losses above the treaty cap remain the cedant’s responsibility, unless additional layers are purchased. That’s why programme design (retention, layering, reinstatements) is crucial.

• 5–10 years of loss data.
  
• Premium and exposure breakdowns.
  
• Accumulation control procedures.
  
• Underwriting guidelines and pricing logic.
  
• Portfolio management practices.
  
• Loss ratio and claims information.

The allowance reinsurers pay back to cedants on proportional treaties to cover acquisition and admin costs.

Treaty reinsurance is a standing agreement where a reinsurer automatically takes on a share of a cedant’s book of business, rather than underwriting risks one at a time. It provides certainty, efficiency, and capital relief.

Climate volatility: Floods, droughts, and hailstorms have increased frequency and severity. Energy transition: Growth in solar installations creates new aggregation risks (hail, theft, fire). AI and cyber: Emerging liability exposures from algorithmic failures and data breaches. Market volatility: Inflation, currency swings, and load shedding all influence claim costs and portfolio stability. Infrastructure weakness: Ageing stormwater and power grids amplify catastrophe risk, now linked to litigation.

• Access to global markets: Securing reinsurers with appetite for South African risks.
  
• Programme structuring: Advising on proportional vs XoL, parametric add-ons, and aggregate protections.
  
• Data positioning: Helping cedants present their portfolios credibly to global reinsurers.
  
• Negotiation: Optimising pricing and ceding commissions.
  
• Advisory: Translating international market trends (AI, climate, volatility) into local relevance.