Insurance - PricewaterhouseCoopers

Reinsurance Management
GPS 230 aims to ensure that a general insurer, as part of its overall risk management
framework, has a specific reinsurance management framework to manage the
selection, implementation, monitoring, review, control and documentation of
reinsurance arrangements. These systems, together with the structures, processes,
policies and roles supporting them, are referred to as a general insurer’s risk
management framework. There must be a clear link between this framework and the
insurer’s Reinsurance Management Strategy (REMS).
The current GPS 230 requires that a general insurer:
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has in its reinsurance management framework a documented REMS, sound
reinsurance management policies and procedures and clearly defined managerial
responsibilities and controls;
submits its REMS to APRA when any material changes are made;
submits a Reinsurance Arrangements Statement (RAS) detailing its reinsurance
arrangements to APRA at least annually; and
makes an annual reinsurance declaration (RD) based on the “two-month rule” and
“six-month rule” and submits the declaration to APRA.
The concepts above; reinsurance management framework, REMS, RAS, RD and the
“two-month” and “six-month” rules are explained below.
Reinsurance management framework and REMS
The reinsurance management framework should include both reinsurance and
retrocession arrangements and have a clear link to the risk management strategy.
It should include clearly defined management responsibilities and controls, policies
and procedures to manage the selection, implementation, monitoring, review,
amendment and documentation of reinsurance arrangements of the general insurer,
and a written, board approved REMS.
The REMS should document the objectives and strategy for reinsurance
management including the risk appetite of the general insurer, the policies for setting
and monitoring aggregate retentions and upper limits on policies, the methods for
choosing appropriate reinsurance participants and the process used for setting and
monitoring the MER. Members of global groups are expected to provide details of
global reinsurance arrangements. The updated GPG 245 specifies that Category
D insurer and Category E insurer should target to cede no more than 90% of their
premium and for the other insurers the limit is 60%.
The general insurer is also required to have this reinsurance management framework
reviewed by operationally independent, appropriately trained and competent
members of staff. The frequency and scope of this review will depend on the size,
business mix, complexity of the insurer’s operations and the extent of any change
62 | Insurance facts and figures 2009