18.4.1 Reinsurance policy
The reinsurance policy provides protection against technical claims and benefits risks in the various insurance portfolios of both the Life and Non-life insurer.
Reinsurance is within REAAL NV applied for risk (traditional reinsurance) and capital management purposes. Traditional reinsurance is then mainly used to safeguard the result. The capital oriented reinsurance solutions have the objective to optimise the capital position of the insurer. The reinsurance policy covers both aspects.
The reinsurance policy is determined based on risk analyses for the various portfolios, the size of the portfolios, the nature of the technical claims and benefits risks, the results, the risk aversion and the financial strength of the company. The risk of terrorism is reinsured through the Netherlands Terrorism Risk Reinsurance Company (NHT). In order to align the cover in the policy and the reinsurance cover through the NHT, the cover for the terrorism risk in the policy has been limited to the maximum capacity of the NHT, i.e. € 1 billion.
18.4.2 REAAL Life reinsurance
REAAL NV has a thoroughly integrated reinsurance programme for the mortality and disability portfolio. Just like last year, separate reinsurance contracts were purchased for the individual and group portfolios in 2013. The catastrophe reinsurance contract was concluded group-wide for the various sub-portfolios.
REAAL NV purchases reinsurance per separate risk from a relatively high level upwards (see table below). In view of the risk profile and the size of the portfolio, the retention of both the mortality and disability risks can be considered to be in accordance with the underlying portfolio.
The structure of the 2013 reinsurance programme has not changed as compared to the 2012 programme. The various sub-portfolios are reinsured by means of reinsurance contracts for the individual portfolio, for the group portfolio and for the catastrophe risk. Furthermore, a reinsurance contract is in place for the disability portfolio. The retention of the mortality reinsurance contract of the individual life portfolio of REAAL has been proportionally reinsured by two quota share contracts. The retention of reinsurance contracts for mortality and disability both for individual as for collective risk amount € 1.5 million of risk capital.
As mentioned here above there are two quota share reinsurance contracts in place for REAAL’s individual life portfolio. The quota share reinsurance contract on risk capital concluded as of October 2009 is in force for the product groups risk, offset mortgages and unit-linked policies. The quota share reinsurance contract that took effect as of 1 January 2011 reinsures both risk capital and provisions, and applies to the traditional savings portfolio. As of 1 January 2013, both quota share contracts were adjusted to further optimise the equity situation. The reinsurance percentage has been increased compared to 2012. The solvency trigger that applies to the 2011 reinsurance quota share will gradually increase on 1 January 2014 and 2015 and will be back in accordance with the definition and underlying assumptions. For 2014 there are no modifications in the retention and the capacity of the various contracts.
The life reinsurance contracts and the disability portfolios were concluded at reinsurance companies that have at least an AA- rating (S&P).
Life insurance retention
2013 2012
In € thousands REAAL Zwitserleven REAAL Zwitserleven
Coverage:
Mortality (quota share - risk capital) per risk; savings mortgages. risk and unit linked portfolio
9% N/A 19% N/A
Mortality (quota share - gross) per risk; savings insurance portfolio 8% N/A 19% N/A
Mortality (risk capital) per risk; individual portfolio 1,500 N/A 1,500 N/A
Mortality (risk capital) per risk; group portfolio N/A 1,500 N/A 1,200
Disability (risk capital) per risk; individual portfolio 1,500 N/A 1,500 N/A
Disability (risk capital) per risk; group portfolio N/A 1,500 N/A 1,200
Catastrophe per event 15,000 2,000 15,000 2,000
18.4.3 REAAL Non-life reinsurance
The Non-life insurance operations have set the retention of the reinsurance contracts in line with the size of the various portfolios. The reinsurance programme makes no specific distinction between the various sales channels, but large risks are reinsured at segment level.
In addition to the regular protection of the portfolios, REAAL Non-life has a catastrophe contract for covered natural perils (storm, hail) and accumulation within the fire portfolio.
The 2014 reinsurance programme is largely a continuation of the programme as it was in 2013. The capacity of the catastrophe programme is somewhat reduced in accordance with the slightly decrease of the underlying exposure. The retention of the catastrophe programme is again € 35 million for 2014. From 2014 onwards, in case of fire in addition to the regular retention per event a one year retention applies to the sublayer of € 3 million. The retentions in the other contracts remain unchanged compared to 2013. As regards Accidents, the reinsurance capacity was expanded with € 5 million in connection with the underlying exposure. In the other segments, the reinsurance capacity for 2014 remains the same as the capacity in 2013.
The Proteq Non-life portfolio is reinsured within the reinsurance programme of REAAL Non-life.
Non-life insurance retention
In € thousands 2013 2012
Coverage:
Fire per risk 1,000 1,000
Motor third-party liability per risk 2,500 2,500
Personal / business liability per risk 1,000 1,000
Accidents per risk 750 750
Transport per risk 1,000 1,000
Disability (risk capital) per risk 1,500 1,500
Catastrophe per event 35,000 35,000
The Non-life insurer pursues an active policy with regard to placing its reinsurance contracts. A distinction is made as to the panel of reinsurers in the property programme (Fire and Catastrophe) and in the casualty programme (Motor, General Liability and Accidents). The minimum rating of the reinsurance panel is A- for property. In the casualty
programme, the claims settlement is characterised by its long lead time. Because of this long-term nature, the continuity of the panel is the main consideration in the placement of this programme. For this reason the insurer applies within those programmes an higher minimum rating. Currently, the panel is composed of minimum A+ companies.
18.4.4 Incoming disability reinsurance
REAAL Non-life has an incoming reinsurance contract that covers a portfolio related to the WAO (Law on Disability) disability pensions. This contract has not been renewed since 2004 and is located in run-off. The gross claims reserve at the end of 2013 amounts to € 44 million (2012: € 59 million), after retrocession, the provision amounts to € 25 million (2012: € 34 million).