Estimate retained losses
at higher confidence levels (to assess variability of results).
We should also have to reduce par value to wipe out retained losses
With this protection over aggregated retained losses
, the insured may also take a higher retention and save risk transfer premium dollars," says O'Brien.
7% of company's total equity, excluding Pemex policy in which retained losses
can reach 4%.
This is the lowest number for companies since 2001 and came due to lower premiums and retained losses
(especially within workers comp and D&O).
During a merger, it's important that the risk manager from the acquiring company confer with his counterpart to determine the other company's perception of risk, what model they have been using, whether they have a more conservative posture toward limits and retained losses
, and if" they have identified and dealt well with all their exposures, said Austin, now principal and consultant at Austin & Stanovich Risk Managers LLC, Douglas, Mass.
Increasing risk retention generally leads to a lower expected cost of risk (defined as the expected cost of retained losses
and the cost of risk transfer).
Consolidated financial results have been weak, demonstrated by retained losses
between 2008 and 2011 of USD 144 million.
Based on the information available and evaluations to date, Aspen estimates that its retained losses
from Hurricanes Katrina, Rita and Wilma, after recoveries from its outwards reinsurance program and the impact of outwards and inwards re-instatement premiums, are likely to be between $470 million and $535 million on an after tax basis, which includes its initial loss estimate from Hurricane Wilma of between approximately $20 million and $35 million and an increase of approximately $27 million with respect to losses associated with Hurricanes Katrina and Rita.
The latter, known as "top and drops," provide protection in either a single severe event exhausting excess-of-loss layers, or in an accumulation of retained losses
from several events.
If the policy costs $700,000, and still leaves the policyholder with a hedged risk having discounted expected retained losses
of $900,000, which requires capital support of an additional of $2 million, then the ECOR after insurance can be estimated as:
Premiums decreased slightly while retained losses