Purchasing, Selling and Structuring Risk in the New Environment

Preparing for the Future of Finite and Structured Risk (Re)Insurance

Tuesday, September 27, 2005

About

Current Investigations Are Not the Death Knell of Finite and Structured Risk (Re)Insurance

Finite risk reinsurance, also referred to as financial risk and structured risk reinsurance, has been at the heart of recent insurance industry investigations. The insurance industry is moving swiftly to clarify the boundaries for using finite risk reinsurance, measuring risk transfer and accounting for and disclosing the financial aspect of these deals to shareholders and regulators. Although more rigorous risk transfer and disclosure guidelines are imminent, industry leaders and commentators say that finite risk reinsurance products are here to stay.

Years of misuse and taking liberties within the finite risk reinsurance world have lead to a raft of subpoenas and several expanding probes in the industry. The controversy has come down to problems in measuring and accounting for the use of a product that by nature is dominated by the notion of time value of money and risk transfer, which can be subject to opinion. Incorrectly documenting finite and structured risk (re)insurance deals can lead to the appearance of smoothed earnings and distortion to financial statements.

The evolving result of recent industry investigations is tougher rules on disclosure and accounting guidelines, including: i) the Sarbanes-Oxley-like requirement that Chief Executives be held accountable for the legitimacy of these transactions in certain states, ii) new model insurance laws drafted by the NAIC and iii) the possibility of a dual regulatory system for the insurance industry, similar to that in banking. The consequences for noncompliance with these new rules can lead to monetary penalties, suspension or even revocation of an insurer's license.

To help you navigate in the new finite risk reinsurance market, American Conference Institute's Preparing for the Future of Finite and Structured Risk (Re)Insurance publication will provide you with the very latest developments, strategies and practical advice you need to avoid stepping into alleged wrongdoing when purchasing, selling or structuring loss mitigation deals.

In-house counsel, managing directors and senior executives from leading companies and firms including US RE, Aquarius Capital Solutions Group, Willis Risk Solutions, Beecher Carlson, Towers Perrin, Mound Cotton Wollan & Greengrass and National Association of Insurance Commissioners provide practical guidance on:

  • Identifying the fundamental differences between the finite products and traditional reinsurance products
  • Staying current through senior regulators' insight on new and developing changes to insurance and accounting guidelines
  • Identifying solutions to the intricacies and complexities in finite and structured risk (re)insurance deals through practical case studies

Contents & Contributors

About

Current Investigations Are Not the Death Knell of Finite and Structured Risk (Re)Insurance

Finite risk reinsurance, also referred to as financial risk and structured risk reinsurance, has been at the heart of recent insurance industry investigations. The insurance industry is moving swiftly to clarify the boundaries for using finite risk reinsurance, measuring risk transfer and accounting for and disclosing the financial aspect of these deals to shareholders and regulators. Although more rigorous risk transfer and disclosure guidelines are imminent, industry leaders and commentators say that finite risk reinsurance products are here to stay.

Years of misuse and taking liberties within the finite risk reinsurance world have lead to a raft of subpoenas and several expanding probes in the industry. The controversy has come down to problems in measuring and accounting for the use of a product that by nature is dominated by the notion of time value of money and risk transfer, which can be subject to opinion. Incorrectly documenting finite and structured risk (re)insurance deals can lead to the appearance of smoothed earnings and distortion to financial statements.

The evolving result of recent industry investigations is tougher rules on disclosure and accounting guidelines, including: i) the Sarbanes-Oxley-like requirement that Chief Executives be held accountable for the legitimacy of these transactions in certain states, ii) new model insurance laws drafted by the NAIC and iii) the possibility of a dual regulatory system for the insurance industry, similar to that in banking. The consequences for noncompliance with these new rules can lead to monetary penalties, suspension or even revocation of an insurer's license.

To help you navigate in the new finite risk reinsurance market, American Conference Institute's Preparing for the Future of Finite and Structured Risk (Re)Insurance publication will provide you with the very latest developments, strategies and practical advice you need to avoid stepping into alleged wrongdoing when purchasing, selling or structuring loss mitigation deals.

In-house counsel, managing directors and senior executives from leading companies and firms including US RE, Aquarius Capital Solutions Group, Willis Risk Solutions, Beecher Carlson, Towers Perrin, Mound Cotton Wollan & Greengrass and National Association of Insurance Commissioners provide practical guidance on:

  • Identifying the fundamental differences between the finite products and traditional reinsurance products
  • Staying current through senior regulators' insight on new and developing changes to insurance and accounting guidelines
  • Identifying solutions to the intricacies and complexities in finite and structured risk (re)insurance deals through practical case studies

Contents & Contributors


RECENT SEC ENFORCEMENT CASES
Andrew M. Calamari, Securities and Exchange Commission

DEFINING THE DIFFERENCE: FINITE AND STRUCTURED RISK (RE)INSURANCE VERSUS TRADITIONAL REINSURANCE
Andrew J. Barile, Andrew Barile Consulting Corporation, Inc.

FINITE RISK REINSURANCE - A USEFUL TOOL
Joseph M. Fedor, U.S. RE Corporation

HOW TO EVALUATE, MEASURE AND ENSURE "REASONABLE AND SIGNIFICANT" RISK TRANSFER
Bruce D. Fell, Towers Perrin

A RATING AGENCY'S VIEW ON THE STATE OF FINITE AND STRUCTURED REINSURANCE
Keith M. Buckley, Fitch Ratings

REINSURANCE DOCUMENTATION AND DISCLOSURE ISSUES
Richard H. Hershman, FTI Consulting, Inc.

CHANGES TO SSAP #62 PROPERTY & CASUALTY REINSURANCE
Michael Moriarty, National Association of Insurance Commissioners

FINITE RISK REINSURANCE - AN INDUSTRY PERSPECTIVE
Tal P. Piccione, U.S. Re Companies, Inc.

NEW INSURANCE AND ACCOUNTING GUIDELINES
Albert J. Pinzón, Mound Cotton Wollan & Greengrass

CASE STUDIES – STOP LOSS TREATY (ACCIDENT & HEALTH REINSURANCE)
Michael L. Frank, Aquarius Capital Solutions Group

EXCESS OF LOSS CASE STUDY
Carl Groth, Willis Risk Solutions

FINANCE AND STRUCTURED RISK (RE)INSURANCE CASE STUDIES
Rob Glicksteen, Beecher Carlson



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