Evolving role of a Reinsurance Broker
The reinsurance broker key function it is to bridge the reinsurance needs of the reinsured and reinsurer to secure reinsurance terms agreeable to both parties. The reinsurance broker often will assist the reinsured in planning and developing its reinsurance program, put together the reinsurance proposal (called the placing information) and relevant premium and loss statistics to present to the reinsurance market when soliciting for reinsurance support, propose to the reinsured the reinsurers terms and conditions, and place firm orders reinsurers on the reinsurer’s behalf, and prepare the reinsurance slip and, eventually, the reinsurance contract wording, that will be presented reinsured to bind the agreement.
Who does the reinsurance Broker Represent in a Reinsurance Arrangement
The general rule is that the reinsurance broker serves as the ceding insurer’s agent. But there are aspects of the reinsurance broker’s duties that may be viewed as acting, in part, on the reinsurer’s behalf.
A determination of agency will depend on the contractual relationships entered into and the facts surrounding the relationships. The scope of any agency may be spelled out in any written brokerage agreement, or the reinsurance broker may be appointed through Broker of Record Letter (BORL) specifically the party theseeks the services of the reinsurance broker.
Evolving Role of the Reinsurance Broker to the Reinsured and Reinsurance Market
Reinsurance Expertise and Technical Advice
Fact-find and provide insurers with independent advice on designing and placing reinsurance programs. This technical expertise can include developing risk modelling, profiling and enterprise risk management. Brokers also having binding authority and may underwrite risk on behalf of the reinsurance company especially on facultative placements.
Re insurance Brokers also offer with a wide range of reinsurance solutions and are qualified to recommend the solutions that best suit the need of the client/reinsured. They have experience managing claims recoveries losses and providing technical expertise in negotiating claims settlements with reinsures.
Market Intelligence and Data
An experienced broker is able to gather and monitor data to provide trends and opportunities for both insurers and reinsurers. Their understanding of how a reinsurer operates and make decisions will help greatly in getting insurers’ risks accepted.
Cross-border Access for Reinsurance Solutions/Capacities
Reinsurance brokers tend to be able to access the various reinsurance markets better, especially if they have international operations at these locations. Reinsurance brokers are also partner with other reinsurance brokers overseas to access certain reinsurance markets where they have no presence.
Delegation of reinsurance claims processing and recovery from securities, so that insurers can focus purely on the direct policyholders’ needs, this also creates peace of mind for the ceding insurer.
Finalizing Reinsurance Contract Wordings
Ensuring Contract Certainty Guidelines are adequately met and both parties have clarity on the terms and conditions of the policy. Additionally, to provide documentation for both parties. They actively participate in negotiating for terms favorable for both cedant and reinsurers.
Administration of Reinsurance Contracts and Settlement of Balances (Premiums, Claims, Fees)
Preparation of quarterly statements for treaties and submission within the agreed treaty time lines is essential for both the reinsured and reinsurance participants. Treaty and facultative placements require that the cover notes, reinsurance slips and reinsurance agreements are generated and agreeable to all parties in the reinsurance agreement.
Filter Reinsurance Risks to suit Reinsurers’ Risk Appetite and Portfolio Objectives
This is akin to a sniper having a spotter right by his side at all times to guide the reinsurance underwriter in where best to ‘take a shot’ at and underwrite a risk. Reinsurance brokers have knowledge and expertise in different classes of insurance, they advise on which risks to accept and those to avoid because of their risky nature.
Obtaining the most competitive rates and terms for the client
One of the fundamental role of the broker is to negotiate and procure the most competitive premiums, rates and terms for their client. This could be achieved by bundling different businesses together for the reinsurers and could even help in encouraging reinsurers to accept a risk which it might have declined. They also have connections with different reinsurers on the globe, it enables them to solicit for the best terms for risks.
Maintaining the Reinsurance Relationship
Once the reinsurance has been placed, the reinsurance broker will act as a go between the reinsured and the reinsurer for the administration of the reinsurance contract. First, the reinsurance broker will make sure that the formal contract documentation is all prepared and signed by each party. Subsequent addenda or other changes to the reinsurance agreement will all flow through the reinsurance intermediary. The reinsurance intermediary’s contract wording specialists handle the documentation aspect of the reinsurance arrangement.
Even before the contract wording is finalized, all reports, premiums, loss payment requests, loss payments, and reserve information pass through the reinsurance intermediary as part of its duties in maintaining the reinsurance relationship during the life of the reinsurance contract. Reinsurance accounting and claims specialists at the reinsurance intermediary will be responsible for these tasks.
Duty to Disclose
One of the most important aspects of the reinsurance intermediary’s role during the placement of a reinsurance contract is to make sure all the material information about the underlying risk is disclosed to the reinsurer. The reinsurance Broker should not pick and choose what it believes is relevant information from what the ceding insurer has supplied, but must present to the reinsurers all of the information obtained from the ceding insurer. The reinsurance broker must promptly transmit any questions, concerns, or requests for more information from the prospective reinsurer to the ceding insurer. Where all the information is flowing through the reinsurance broker about the proposed reinsurance deal, full and prompt disclosure is essential.