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PRESENTED BY:
SIDRA MUNIR AYESHA YASIN SADIA AKBAR HADIA HUSSAIN MADIHA AFZAL SHUMAILA GAFOOR TAYYABA RAFIQUE Mi09MBA002 Mi09MBA008 Mi09MBA014 Mi09MBA037 Mi09MBA041 Mi09MBA045 Mi09MBA049
ORGANIZATION SELECTED:
ATLAS GENERAL INSURANCE COMPANY
TOPIC:
REINSURANCE ARRANGEMENTS AT ATLAS INSURANCE COMPANY
Introduction
During the past few years there has been a quickening of interest internationally in the major aspects of reinsurance history, theory and practice. The peculiar development of the national and international economy of the European countries since the World War has apparently made reinsurance the backbone of the whole of private property insurance. This accounts far the greatly extended literature on the subject in recent years. Classic doctrines of risk, theorems in the calculus of probabilities, principles of insurance law, long neglected, are being brought forward by writers on reinsurance. There is vitality and depth in recent reinsurance literature which has been lacking in the literature of the direct lines for many a decade.
Fundamentals
In the most widely accepted sense, reinsurance is understood to be that practice where an original insurer, for a definite premium, contracts with another insurer (or insurers) to carry a part or the whole of a risk assumed by the original insurer. By insurers we mean all persons, partnerships, corporations, associations, and societies, associations operating as Lloyd's, inter-insurers or individual underwriters authorized by law to make contracts of insurance. We may define insurance as an agreement by which one party, for a consideration, promises to pay money or its equivalent, or to do an act valuable to the insured, upon the happening of a certain event or upon the destruction, loss or injury of something in which the other party has an interest. The insurance business is the business of making and administering contracts of insurance.
Purposes of Reinsurance
Reinsurance achieves to the utmost extent the technical ideal of every branch of insurance, which is actually to effect (1) The Atomization (2) The Distribution (3) The Homogeneity of Risk Reinsurance is becoming more and more the essential element of each of the related insurance branches. It spreads risks so widely and effectively that even the largest risk can be accommodated without unduly burdening any individual. One of the major purposes of reinsurance is to permit the original insurer at least to break even on his transactions.
History of Reinsurance
The earliest reinsurances first appeared in transport, especially marine insurance, at a comparatively late date (14th or 15th centuries). Marine insurance in antiquity was conducted chiefly by individuals, more or less in a speculative manner, without a statistical foundation and without retrospective data on loss experience. Single ships and their cargoes in ancient times often had a value disproportionately large to other private holdings, and the whole of the private fortune of an insurer often hung on the outcome of a single voyage or marine adventure. The perils of the sea were greater also, considering the rudimentary state of the shipbuilder's art. It can readily be understood why marine underwriters wanted someone to share their risks. After having effected insurances, whether on the ship, on the cargo or on both, or on the lives of the captain and crew, an underwriter often would become worried and try to sell parts of his contract to others and necessarily at a higher rate. At first risks on parts of voyages were assigned to others, usually the more dangerous parts.
and others concerned in bottomry and respondent contracts. In later years, these Chambers or Exchanges of Insurance became corporate bodies and instead of remaining confined to the original function of regulating and registering insurance made by others, actually undertook an insurance business themselves. With the establishment and functioning of Lloyd's in 1710, there was a marked decline in the transaction of insurance business through these Chambers or Exchanges. There is a suggestion of reinsurance practice in the "Antwerp Customs" of 1609. Some mention of reinsurance practice is to be found also in the "Guidon de la Mer," a code of sea laws in use in France from a very early date. These marine regulations were consolidated and published at Bordeaux in 1647, and at Rouen in 1671. The author of the consolidations was said to have been Cleirac. With the shift of centers of commerce from the south, south west and west of Europe to the north, England's foreign trade grew. Marine insurance followed in its wake. Some underwriters found they could effect reinsurance with others. Underwriterswere accustomed to assign parts of risks to others at lower rates, and these reinsurers had hopes of finding other persons who would take parts of these risks at still lower rates. This traffic in premium differences was so greatly abused that in 1746 it was forbidden. (19 Geo. II, c 37, Section 4). Under this statute, reinsurance was permitted only if the party whose risk was reinsured was insolvent, bankrupt or in debt and if the transaction was expressed in the policy to be a reinsurance. The statute was more or less of a dead letter and was repealed by 27 and 28 Vict. c 56, Section I on July 25, 1864.
PROJECT
Research Questions
The questions that were asked by me and other group members regarding the reinsurance arrangements of ATLAS GENERAL INSURANCE COMPANY were as follows;
Now below we will discuss all the answers that we get from the sources.
But the reinsurance business they place is with international reinsurance companies not the reinsurance companies in Pakistan. That will be explained further in next sections of project.
Facultative Reinsurance
It is a type of reinsurance in which each risk is covered or reinsured individually taking its individual particulars in mind Now we will see that how it is used in Atlas General Insurance Company
Use at Atlas Insurance Facultative Reinsurance is used by the company where it is not being covered by the Treaty reinsurance arrangements of the company. The risk exceeding the treaty reinsurance is placed under facultative type off reinsurance. It is mostly in fact entirely placed outside the country, The reason behind this fact is that our Pakistani reinsurance companies are not authorized for Facultative reinsurance arrangements. So the payments of premiums to Reinsurance companies are made by the way the way of Remittances in foreign bank accounts.
Use at Atlas Insurance Surplus treaty reinsurance is used at Atlas mostly for the Property Insurance. That the risk they think is of higher values or sustains high degree of risk is placed with reinsurance companies abroad.
Right now there are a number of Surplus Treaties, which Atlas insurance has placed with international reinsurance companies and are preceding. A definite percentage of each risk placed is accepted by Atlas itself and the rest is demanded or claimed by Reinsurers working abroad. Payment of premiums is made by the way of foreign currency remittances in foreign banks.
Excess of Loss
The balance of any loss which exceeds that agreed limit will be met by reinsurers, usually up to a contractual maximum that is termed as layer and the amount retained as deductible
It is basically a Non-Proportional type of Treaty reinsurance. where certain limit is retained by reinsured itself and over and above amount is to be born by reinsurers in the form of layers. If there are more than one layers then all of these layers may be accepted by the same reinsurers or may be by different reinsurers
Use at Atlas Insurance It is used at Atlas Insurance for placing the risk or reinsurance relating the Motor risks. It is also placed outside the country not in Pakistan.
Atlass Reason for Preference When we went in to the fact that why is Swiss re being preferred by the Atlas Insurance, The reason we came to know was it is one of the top 5 worlds best reinsurers. Their customer relationship, claim history, financial strength, and many other facts are perfectly matching with the Atlas Insurance. Thats why it is one of the major choices of Atlas Insurance.
Hannover Ruckversicherung AG
Hannover Re, with a gross premium of around EUR 11 billion, is the thirdlargest reinsurer in the world. It transacts all lines of non-life and life and health reinsurance and has a network of subsidiaries, branches and representative offices on all five continents with a total staff of roughly 2,200. Ratings The rating agencies most relevant to the insurance industry have awarded Hannover Re very strong insurer financial strength ratings (Standard & Poor's AA- "Very Strong" and A.M. Best A "Excellent").
Atlass Reason for preference Atlas Insurance prefer the Hannover Re for the following reasons o o o o Strong market positioning - one of the leading reinsures worldwide Top rating (S&P: AA-; A.M. Best: A) ensures attractive new business Approved strategy: volume is vanity, profit is sanity Strong risk management both qualitative and quantitative
OBJECTIVES OF STUDY
All the study that we have made was made to know about following facts;
o Reinsurers Preferred
Methodological Notes
Following given are the methods and sources by which we get our data regarding this project;
Source of Data
The sources by which we collected Data o Personal Visits o Official website of ATLAS INSURANCE COMPANY
Limitation of Data
Reinsurance is a topic that is spread widely, it was not possible for us to cover the topic completely. We have limited our data up to following points
ORGANIZATION OF STUDY
The Atlas Insurance Limited (Formerly Muslim Insurance Co. Ltd) was founded in 1934 by Dr. Sir Mohammad Iqbal and is the oldest insurance company in Pakistan. Atlas Insurance made steady progress and became one of the leading company in the field of life insurance in the country. Unfortunately, it came under Government appointed management from 1961 to 1979. In the mean time, the life business was nationalized in 1972 and the company lost major segment of its business. Later in the year 2006, the name of the company has been changed from Muslim Insurance Company Ltd. to Atlas Insurance Limited. Atlas Insurance Limited (AIL) is providing efficient service to its Clients and also paying good dividends to its shareholders regularly. The equity of the company has grown from Rs. 1.6m in 1979 to Rs. 970.5 million in 2007. Investments at cost have grown from 3.4m to over Rs. 920m. In 1996 the company paid one of the largest single claim in the country of over Rs. 380.0m which speaks of the inherent strength of the company and the satisfactory re-insurance arrangements. The company enjoys full support and backing of the Atlas Group and has re-insurance arrangements with world renowned re-insurers like Swiss-Re, Hannover-Re, Tokio Marine & Nichido Fire Insurance, Sompo Japan Inc. AIL was also assigned a Financial Performance Rating of 7 on a scale of 1-9 by the world renowned Credit Rating Agency, A.M. Best Company of New Jersey,USA. To provide prompt and efficient service to clients AIL has developed a branch network all over the country. It has also developed team of professionals always striving to excel in service.
In line with the Atlas Group philosophy and commitment, Atlas Insurance is being managed in accordance with good international practices and entrepreneurial norms and customs as followed by the reputable international insurers. Atlas Insurance is a financially sound and a professionally managed company and has been awarded the "KSE Top 25 Companies Award 2005", the only insurance company selected for this prestigious award.
The company was also adjusted as one of the "Top 5 companies" in the financial sector by a joint committee of the Institute of Chartered Accountants of Pakistan (ICAP) and the Institute of Cost & Management Accountants of Pakistan (ICMAP) and was awarded the "Best Corporate Report Awards for the year 2003, 2006 & 2007. The Pakistan Credit Rating Agency (PACRA) an affiliate of Fitch Ratings Ltd, London, has upgraded Atlas Insurance Financial Strength (IFS) rating "A+". The rating denotes strong capacity to meet policyholder and contract obligations, while the risk factors are moderate, and the impact of adverse and economic factors is expected to be small.
Literature Review