Long-Term Capital Planning
Protecting and optimizing capital requires a bi-lingual team in capital instruments and reinsurance. We create custom analyses for clients to directly compare the cost/benefit of reinsurance with other forms of capital. Analyses like these are only possible when members from every discipline work together to inform the loss picks and reinsurance/debt terms. In this example, we compared quota share reinsurance and debt issuance options over a 5-year period.
Options: Current = 10% quota share 1 = Quota Share of 35% 2 = Debt issuance of $60 million at 9%
3 = Combination of 20% quota share and issuance of $36 million debt at 9% 4 = Decrease 35% quota share to 30% in year 3 and to 20% in years 4 and 5
BCAR at Var 99.6 Earnings Net Income (M) Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5
Current Option 1 Option 2 Option 3 Option 4
16.5% 19.7% 26.1% 35.0% 39.7% $9.8
$33.7
$44.9
$57.7
$67.0
34.2% 32.5% 34.1% 39.4% 42.1% $(0.8)
$16.8
$24.3
$33.8
$40.3
34.2% 34.0% 36.6% 42.3% 45.1% $6.0
$31.1
$42.2
$54.9
$64.1
34.2% 33.5% 35.8% 41.5% 44.2% $3.3
$25.4
$35.0
$46.4
$54.6
34.2% 32.5% 31.6% 34.5% 40.4% $(0.8)
$16.8
$27.6
$48.1
$63.7
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