Life insurance companies face multiple risks that evolve over time and they must hold capital as a buffer against these risks. Capital management is an increasingly important topic for insurers as they look to find ways to manage their risks and the related capital requirements and to optimise their solvency balance sheets.
Given the traditionally long-term nature of the insurer’s liabilities, effective capital management can be complex. Insurers may face capital pressure due to their solvency coverage level, shareholder demands, regulatory concerns, etc. Reinsurance is one of the key capital management tools available to insurers. Several reinsurance structures are available, each with its own advantages and disadvantages and requiring experience and expertise to make optimal decisions.
In this paper, Milliman professionals explore a range of reinsurance strategies that could be used by life insurers for capital management purposes. They investigate more common reinsurance strategies along with new developments and innovative strategies that could be implemented by companies.