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.
This 38 percent increase can be attributed to the substantial sustained losses reported by a few respondents, along with an overall trend toward generally higher retained losses
, the survey notes.
For example, an aggregate catastrophe cover would pick up the accumulation of retained losses
above either a dollar or loss ratio retention.
Where retained losses
have a differential effect on how we use loss prevention and control measures, other disruptions to rational risk management strategies can occur.
The obvious purposes of an actuarial report include a reserve estimate to support the company's financial statements and an estimate of retained losses
for the upcoming year to support the company's budgeting process.
* Sets a minimum level of retained losses
of $25 billion and maximum federal liability of $200 billion.
"MANAGEMENT OF RETAINED LOSSES
REMAINS THE BIG ISSUE, ESPECIALLY WORKERS' COMPENSATION.
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., and Providence, R.I.
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).
Under such a treaty, for example, XYZ Re, in exchange for an agreed-upon premium, could agree to reimburse ABC P&C as and to the extent that ABC's retained losses
from a single event (for example, one hurricane) exceeded $5 million.