Optimising life reinsurance strategy under risk-based capital measures

The recent introduction of new economic- and risk-based reporting and solvency frameworks across the insurance industry is increasingly encouraging life insurers to focus much more than previously on risk, value, and capital management of their portfolios. These new frameworks include the European Insurance CFO Forum Market Consistent Embedded Value Principles (MCEV Principles), Solvency II, the Swiss Solvency Test (SST), and internal economic capital and rating agency capital measures. Risk-based frameworks offer more incentive to develop strategies that align with risk tolerance and optimise economic value on a risk-adjusted basis.

As life insurers adapt their business models to modern risk management frameworks, reinsurers must also adapt their offerings to meet the evolving needs of their life insurance clients. This report explores the possible impact of risk-based economic frameworks on a life insurer’s reinsurance strategy.