New ReinsType - a treaty of multiple facultative contracts

[johcarter]

Description

We have a request to included a new reinsurance treaty type into which loss is ceded from multiple facultative contracts. The facultative contracts each cover a 'facility' and have varying layer terms (attachment and limit) which apply before percent ceded to the treaty, which also varies by facility. The treaty does not have occurrence terms but may be partially placed hence PercentPlaced is also used.

The implementation would involve listing each facility as a line in the scope file, and add two new fields for the facility attachment point and limit. The existing CededPercent in the scope file (used only for Surplus Share at present) would also be used.

We don't know if there is a formal name for this type of treaty as we have not been able to find any online references to the structure.

The order of calculations would be 1) Line Attachment and Limit (scope), 2) CededPercent (scope), 3) PlacedPercent (info)

Example files and calculation is attached:
fac_line_illustration_v2.xlsx

Help wanted
If you recognise this type of structure, please comment below with a suggested name for the ReinsType, any alternative field name suggestions, and any online sources of information.

Reasons for change

To represent more complex reinsurance structures that exist in the market but we have no way of representing currently in OED.

Scope of change

• Location File
• Accounts File
• Reinsurance Scope
• Reinsurance Info

Impact of change

Addition of fields would mean that validation tools would have to be updated to allow the new fields to be used.
However the additional fields would be optional, so older version of OED files will still be compatible with the updated schema including these new fields.

Data type, default values, are blanks allowed, list valid values

Field Name	Data type	Default values	Blanks allowed	Valid values
LineAttachment	Float	0	Yes	[0,)
LineLimit	Float	0	Yes	[0,)
LineCurrency*	char(3)	n/a	No	Valid 3 digit Currency Code

*Added following comment below from @IPE-Pierre

Alternative field name suggestions are welcome, given this type of structure has not yet been formally identified.

They should not, however, be labelled Risk Attachment and Limit, as they are not the same as risk terms in a Per Risk Treaty which applies after Percent Ceded, not before.

[IPE-Pierre]

Hi Joh,

Since, we are implementing financial terms at scope level, the LineCur should also be added.

[SeyeNasdaq]

Hi Joh,

Thank you for the description. Would it please be possible to have a slip that describes this new reinsurance type?

[johcarter]

Hi @SeyeNasdaq I don't have anything concrete which is why I can only describe the features in general terms. I think it is important to get some formal information about it before we can proceed on adding it to the standard.

(BTW I have been asking for slips since 2013 for Oasis FM development and have yet to receive a single one!)

Can anyone help formally identify this type of structure? Please share a link to this issue if you might know someone.

[johcarter]

Here are some online references I have found which may be relevant. Terminology may vary by region but mean the same thing. eg 'obligatory' and 'automatic' sound like they mean the same thing.

'Automatic' and 'Semi-Automatic' Facility
https://www.aon.com.au/australia/reinsurance/facultative-reinsurance.jsp

Facultative obligatory treaty
https://www.irmi.com/term/insurance-definitions/facultative-obligatory-treaty

Articles which refer to bespoke products which are facultative/treaty hybrids

'Facilities'
https://www.swissre.com/reinsurance/property-and-casualty/reinsurance/facultative.html
'Hybrid solutions'
https://www.guycarp.com/insights/2018/10/facultative-or-treaty-and-why-the-need-for-hybrid-solutions-gcpci-commentary.html

It sounds like these are bespoke reinsurance products tailored to clients needs, hence why they are difficult to formally identify. We could just add flexibility to the existing ReinsType 'FAC' to allow for multiple facilities with individual terms defined in the scope file.

It would work the same as in the attached spreadsheet, but the ReinsType would remain 'FAC' and we would not need to create a new ReinsType.