Actuarial Notes

General Insurance: Considerations in Reinsurance Reserving

By Anthony Cappelletti · Society of Actuaries · 2025

Study guide: Exam GI-301

A study note of the Education Committee of the Society of Actuaries, dated May 2025, which includes the reinsurance sections of J. Friedland's Fundamentals of General Insurance Actuarial Analysis, Second Edition (2022) as its appendix. It observes that estimating loss reserves for a reinsurer is in many ways like estimating them for a primary insurer, because the same methods can be employed, but that the differences in application, which all relate to the data and the type of reinsurance, can be significant.

On the syllabus

1 Introduction

2 Data and the Type of Reinsurance

  • 2.1 Ceded vs Assumed Reinsurance Amounts
  • 2.2 Trend and Development for XOL Reinsurance
    • 2.2.1 Simplified Example of Trend and Development for Section 2.2
  • 2.3 Actual Factors from an Insurer and Reinsurer
  • 2.4 Specific Sections from the Friedland Textbook

3 Examples of Reinsurance Reserving

  • 3.1 Example 1 – Per Occurrence XOL Reinsurance
  • 3.2 Example 2 – Reinsured Per Occurrence XOL with increasing XOL rates
  • 3.3 Example 3 – Reinsured Per Occurrence XOL with an Insufficient Limit
  • 3.4 Example 4 – Reinsured Per Occurrence XOL and an Aggregate Stop Loss
  • 3.5 Example 5 – Reinsured Per Occurrence XOL with a Quota Share
  • 3.6 Catastrophe Reinsurance Reserving
  • 3.7 Further Comments on the Examples and Reinsurance Reserving

4 Conclusion

Appendix

  • 12.6.4 Property Catastrophe and Aggregate Stop Loss Reinsurance
  • 12.6.5 Retrospectively-Rated Policies
  • 12.6.6 Reinstatements
  • 15.8 The Development Method and Reinsurance
    • 15.8.1 Using the Development Method to Estimate Ceded Reinsurance of a Primary Insurer
      • 15.8.1.1 Quota Share Example for Auto Insurer
      • 15.8.1.2 Excess of Loss Example for Auto Insurer
      • 15.8.1.3 Relevance of Historical Data Following Change in Reinsurance Program
    • 15.8.2 Using the Development Method to Estimate Ultimate Values for a Reinsurer
  • 16.7 Frequency-Severity Methods and Reinsurers
  • 17.8 Expected Method and Reinsurers
  • 18.8 The Bornhuetter Ferguson Method and Reinsurers
  • 19.6 The Cape Cod Method and Reinsurers
  • 20.6 Berquist-Sherman Adjustments and Actuaries Working with Reinsurance
  • 21.3.5 Attachment Points
  • 21.3.6 Reinsurance Reinstatement Provision
  • 23.4 Unpaid ULAE for Reinsurers

Sources