To understand the reinsurance picture, we often recommend a ‘granular’ investigation – one that involves a line-by-line analysis of coverages. It is one thing to have bought reinsurance for a particular purpose, but you need to know precisely how it would work in practice and feed the information into the overall calculations.
When accompanied by a mapping out of inherent underwriting risk, it is possible to measure a company’s total reinsurance needs and the price it should be willing to pay to acquire cover. How management responds to this information will, of course, depend on a range of other considerations such as willingness to retain risk.
