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Catastrophe Reinsurance for Life Insurance Companies

Sutton Reinsurance is not only a provider of reinsurance capacity. As a lead reinsurance market, Sutton Reinsurance often partners with intermediaries to tailor a Catastrophe Excess of Loss program that best suits the needs of the life insurance company buyer.


Product need and use:

Catastrophe Excess of Loss coverage protects an insurance company against the risk of a large loss involving several lives that could arise from a catastrophic accident.

Catastrophe Excess of Loss Reinsurance can be written on a facultative basis, for a single policy , but is most commonly a reinsurance treaty, which covers the Reinsured’s portfolio of defined classes of risks. The following notes pertain to the Cat XL treaty.


Catastrophe Reinsurance for Life Insurance Companies Subject Insurance:

The subject insurance can be any Life and Health Benefit written by the insurer and which could contribute to an accumulation of loss resulting from a catastrophic accident; Individual and Group Life, Individual and Group Accidental Death & Dismemberment (AD&D), Long Term Disability, Medical Expenses etc.


Catastrophe Reinsurance for Life Insurance Companies Design/Options:

An accident is deemed to be catastrophic when it involves more than a certain number of lives. This number of lives can be implied by the attachment point, but is usually stipulated as a Life Warranty.

Limits provided are often high and divided into layers in which one or more reinsurersstake a share.


Information Requirements:

  1. Volume of in-force business (split between individual and group).
  2. Average retained per life.
  3. Maximum retained per life.
  4. Life warranty (should be at least two and preferably three or more).
  5. Geographic distribution of business.
  6. Profile of five largest groups (number of employees, volume, maximum retained per life).
  7. Details of known concentrations e.g. flight personnel, sports teams, vacation clubs, military units, conventions and professional societies.
  8. Details of hazardous occupation groups, e.g. miners, offshore oil drilling, explosives and chemical manufacturing, firefighters, sailors.
  9. Details on corporate- or privately-owned aircraft.
  10. Five-year claims history:
    • From ground up to show how close losses have come to the attachment point.
    • Showing losses on an “as if” basis to determine which losses have or would have impacted the coverage


Information Requirements:

Information requirements are outlined in Catastrophe Reinsurance for Life Insurance Companies questionnaire from Sutton Reinsurance.