Quota-share and stop-loss/excess-of-loss reinsurances are two important reinsurance strategies. An important question, both in theory and in application, is to determine optimal retentions for these reinsurances. In this thesis, we study the optimal retentions of quota-share and stop-loss/excess-of-loss reinsurances under ruin-related optimization criteria. We attempt to balance the interest for a ceding company and a reinsurance company and employ an optimization criterion that considers the interests of both a cedent and a reinsurer. We also examine the influence of interest, dividend, commission, expense, and diffusion on reinsurance retentions.

"A thesis submitted in partial fulfillment of the requirements for fellowship in the Insurance institute of America, incorporated." / Bibliography: p. 87-88.

"A thesis submitted in partial fulfillment of the requirements for fellowship in the Insurance institute of America, incorporated." / Bibliography: p. 87-88.

The core assets of reinsurance organisations lie in the knowledge, skills and experience of knowledge workers. The source of competitive advantage within the reinsurance industry lies in managers’ ability to harness and foster discipline, willingness and innovation amongst knowledge workers. Innovation is a key challenge in knowledge intensive firms and it is therefore critical that executives find ways of encouraging an environment that is conducive to sharing ideas, building trust and motivating superior performance. The loyalty and retention of knowledge workers have become key managerial challenges.This research is intended to provide an insight into the development and implications of the psychological contract amongst knowledge workers within the reinsurance industry in South Africa. In understanding the nature of the psychological contract, it is intended that employers will be able to identify how and when psychological violations take place, the extent to which they impact productivity and the implications for knowledge workers’ propensity for departure. The research will provide an insight into the alignment of knowledge worker values and perceived organisational and industry values. Furthermore, this research will provide the basis for establishing a model for remedial and restorative contracting with a view to redefining new psychological contracts in order to achieve optimal performance from knowledge workers within our industry. / Dissertation (MBA)--University of Pretoria, 2010. / Gordon Institute of Business Science (GIBS) / unrestricted

This thesis covers the history of short term reinsurance in South Africa from 1950 to 1985 and shows how it developed from a very limited market in which insurers generally relied on British and European professional reinsurers to a viable local market albeit with strong foreign support. The study demonstrates that the local reinsurance market grew in parallel with the development of the South African economy and the consequent need for extensive cover arising from the country's industrial expansion. It considers the different problems of the two waves of locally established reinsurers and the different circumstances prevailing in the two distinct eras of South African short term reinsurance. The conclusion reached is that, notwithstanding the varied results of individual reinsurers and the collapse of two local reinsurance companies, the market performed well and succeeded in meeting the needs of the South African short term insurance market

This dissertation investigates the relationships between reinsurance activities and primary insurers' financial performance in U.S. property-liability insurance market from several perspectives. The first essay investigates the relationship between ceding insurer performance and the affiliation, domicile, and authorization of its counterparties. Specifically, we provide empirical evidence that ceding insurer financial performance is positively related to the use of affiliated reinsurance, the use of foreign reinsurance, and the use of affiliated reinsurance that is ceded to the low-tax, lightly-regulated domiciled counterparties; and negatively related to the use of unauthorized reinsurance. These results are consistent with the cost of information asymmetry theory. The second essay investigates reinsurance counterparty relationships in U.S. property-liability insurance. Firm-specific characteristics determinants of counterparty relationships are examined. We also analyze the relationship between firm performance and reinsurance counterparty relationships. We find that concentration in reinsurance counterparties, especially in unaffiliated counterparties, is adversely related to insurer performance due to higher information asymmetry. On the other hand, relationship with foreign counterparties is positive related to performance, suggesting the foreign reinsurers may have a favorable position in terms of tax treatment, specialized service, among other factors. / Business Administration/Risk Management and Insurance

The first part of the dissertation aims to determine whether and how variances in reinsurance relationships impact insurers' financial performance during the sample period of 2002-2012. Such impact on insurers' financial performance is measured by accounting measurements of ROA and ROE and by the efficiency scores (cost, revenue, and profit) estimated using data envelopment analysis (DEA). This essay analyzes how the usage of captive reinsurance affects life insurers’ firm performance using multivariate regression model. Results show that firm performance is negatively related to captive reinsurance arrangements. The second essay analyzes the value effects of mergers and acquisitions (M&As) in the global insurance industry by conducting an event study of M&A transactions that occurred during the period of 1990-2014, including two M&A waves before the financial crisis and the M&A activities after it. Our results show that (1) M&As are value-enhancing for both acquirers and targets over the whole sample period; (2) for acquirers, within-border transactions are more likely to be value-enhancing, while for targets, both cross-border and within-border transactions are value-enhancing; and (3) for acquirers, the cross-industry M&As are more likely to be value-enhancing, while for targets both cross- and within- border M&As are value-enhancing. / Business Administration/Risk Management and Insurance

Reinsurance contract as a contract of uberrimae fidei, in contrast to ordinary commercial contracts, attracts a duty of utmost good faith requiring both parties to exercise their best effort and endeavor to help each other to make an informed decision and perform the contract concluded thereon without any dishonesty or deceit. There are various forms of reinsurance which adopt different ceding methods and have specific characters in the placing progress. The unique placing process in London subscription market of such complex and complicated reinsurance contracts by specialist brokers has to certain degree modified the operation of the doctrine of utmost good faith in reinsurance context. Moreover, from partial codification by the MIA 1906 to significant changed by Insurance Act 2015, it is fair to that the doctrine of utmost good faith has experienced one hundred years long revolution. The courts have taken many opportunities to structure the doctrine, establish rules of the tests, confine the scope and clarify remedies for qualifying breach. Such development of the doctrine itself has important affect upon its operation in reinsurance context too. Modification of the doctrine in reinsurance occurs due to several reasons. First, the special placing process in London subscription market affects the formation procedure of reinsurance contracts, consequently reshapes operation of the doctrine. Secondly, the characters of reinsurance contracts distinguished from underlying insurance would have some impact on operation of the doctrine in reinsurance context. In addition, other significant common law rules such as the principle of waiver, which is in extensive use in the reinsurance market practice, will also modify the operation of the doctrine in reinsurance context. Moreover, evolution of the duty itself, from an absolutely strict duty to a duty only requiring fair presentation, and a proposal of a new proportionate regime of remedies brings potential problems of its operation in reinsurance context. Consequently, notwithstanding there has been a long history of the doctrine and clarification of many aspects of the doctrine comes from a reinsurance cases, difficulties and problems still exist in operating such duty smoothly and directly in reinsurance like in direct insurance context. Such problems extend to every specific aspect of operation of the duty in reinsurance context, from the formation to performance, and then remedies for qualifying breach of the duty in claim stage.

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In recent years, general risk measures have played an important role in risk management in both finance and insurance industry. As a consequence, there is an increasing number of research on optimal reinsurance problems using risk measures as yard sticks beyond the classical expected utility framework. In this thesis, the stop-loss reinsurance is first shown to be an optimal contract under law-invariant convex risk measures via a new simple geometric argument. This similar approach is then used to tackle the same optimal reinsurance problem under Value at Risk and Conditional Tail Expectation; it is interesting to note that, instead of stop-loss reinsurances, insurance layers serve as the optimal solution in these cases. These two results hint that law-invariant convex risk measure may be better and more robust to expected larger claims than Value at Risk and Conditional Tail Expectation even though they are more commonly used. In addition, the problem of optimal reinsurance design for a basket of n insurable risks is studied. Without assuming any particular dependence structure, a minimax optimal reinsurance decision formulation for the problem has been successfully proposed. To solve it, the least favorable dependence structure is first identified, and then the stop-loss reinsurances are shown to minimize a general law-invariant convex risk measure of the total retained risk. Sufficient condition for ordering the optimal deductibles are also obtained. Next, a Principal-Agent model is adopted to describe a monopolistic reinsurance market with adverse selection. Under the asymmetry of information, the reinsurer (the principal) aims to maximize the average profit by selling a tailor-made reinsurance to every insurer (agent) from a (huge) family with hidden characteristics. In regard to Basel Capital Accord, each insurer uses Value at Risk as the risk assessment, and also takes the right to choose different risk tolerances. By utilizing the special features of insurance layers, their optimality as the first-best strategy over all feasible reinsurances is proved. Also, the same optimal reinsurance screening problem is studied under other subclass of reinsurances: (i) deductible contracts; (ii) quota-share reinsurances; and (iii) reinsurance contracts with convex indemnity, with the aid of indirect utility functions. In particular, the optimal indirect utility function is shown to be of the stop-loss form under both classes (i) and (ii); while on the other hand, its non-stop-loss nature under class (iii) is revealed. Lastly, a class of nonzero-sum stochastic differential reinsurance games between two insurance companies is studied. Each insurance company is assumed to maximize the difference of the opponent’s terminal surplus from that of its own by properly arranging its reinsurance schedule. The surplus process of each insurance company is modeled by a mixed regime-switching Cramer-Lundberg approximation. It is a diffusion risk process with coefficients being modulated by both a continuous-time finite-state Markov Chain and another diffusion process; and correlations among these surplus processes are allowed. In contrast to the traditional HJB approach, BSDE method is used and an explicit Nash equilibrium is derived. / published_or_final_version / Mathematics / Master / Master of Philosophy