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Reinsurance Treaty Recapture Provision

Background and Purpose

In 2012, the Reinsurance Section initiated a research project on the topic of reinsurance treaty terms and provisions.  The result of that project was an extensive report that provided an inventory of the provisions typically found in reinsurance treaties, along with background information and commentary on each provision.  Various provisions related to recapture were included in the inventory.

The ability to recapture business ceded under a reinsurance treaty is an important consideration when negotiating treaty terms, and can have significant financial implications for the ceding company, the reinsurer and other related parties (e.g. retrocessionaires, 3rd party financers). The provisions related to recapture have been a topic of significant interest given market and industry changes that have resulted in actions by direct-writing companies and reinsurers.  As such, this study will focus on better understanding these particular reinsurance treaty provisions.

The purpose of this project is to increase awareness of the importance of recapture provisions, identify the common structures, practices, and/or solutions in reinsurance treaty construction and negotiation for these provisions, illuminate how these provisions relate to and potentially impact other treaty provisions, and illustrate how recapture treaty terms have evolved over time.  The project will consider these elements as relates to practices in North America. The knowledge from this research will assist individuals involved in reinsurance treaty negotiations identify enhancements to current treaty development processes and language, as well as potentially reduce the length of time needed to complete negotiations.

Research Objective

The Reinsurance Section is seeking a researcher(s) to compile an inventory of life reinsurance recapture treaty provisions and terms across the industry, highlighting the reasons the specific provision is of particular importance to direct-writing companies and/or to reinsurers, and how current practice has differed from the past.  Additionally, the researcher(s) will identify the underlying objective each party to the transaction is aiming to achieve with the recapture provision, what obstacles have been encountered and what solutions have been found.

While the specific approach will be agreed with the Project Oversight Group (POG), utilizing the 2012 research project's approach would yield the following process. The researcher(s) would facilitate a survey of reinsurance treaty specialists from both direct companies and reinsurers discussing important reinsurance treaty provisions and terms. The specialists (approximately five direct life insurance company representatives and five life reinsurance company representatives) would be recruited by the Society of Actuaries, in conjunction with the researcher(s) and POG.  Each would individually prepare their list of important issues related to recapture that they would like to discuss along with examples of recapture treaty provisions that have or have not been utilized as they had intended or hoped in the past.  The researcher(s) will work with the specialists to compile and finalize the recapture provision issues to be discussed at a one-day in person meeting which will be held near Chicago at the SOA office.  Each specialist would participate, under the guidance of the researcher(s), in this one-day meeting, sharing their information with the rest of the group and having an open, nonadversarial, non-binding discussion around each issue.  The researcher(s) would then summarize the findings of the group in a comprehensive report to be made available to the SOA membership.

Proposal

To facilitate the evaluation of proposals, the following information should be submitted:

  1. Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
  2. An outline of the approach to be used (e.g. interviews, literature search, model, etc.), emphasizing issues that require special consideration. Details should be given regarding the techniques to be used, collateral material to be consulted, and possible limitations of the analysis.
  3. A description of the expected deliverables and any supporting data, tools or other resources.
  4. An outline of which recapture provision(s) the researcher(s) anticipate inventorying and which obstacles/issues they expect will be addressed relating to these.
  5. Cost estimates for the research, including computer time, salaries, report preparation, material costs, etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.
  6. A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions.  The Reinsurance Section is interested in completing this project in a timely manner.  Suggestions in the proposal for ensuring timely delivery, such as fee adjustments, are encouraged.
  7. Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.

Selection Process

The Reinsurance Section has appointed a Project Oversight Group (POG) to oversee the project.  The POG is responsible for recommending the proposal to be funded.  Input from other knowledgeable individuals may also be sought, but the POG will make the final recommendation, subject to Reinsurance Section leadership approval. The SOA's Research Actuary will provide staff actuarial support.

Questions

Any questions regarding this RFP should be directed to Ronora Stryker, SOA Research Actuary (phone: 847-706-3614; email:  rstryker@soa.org).    

Notification Of Intent To Submit Proposal

If you intend to submit a proposal, please e-mail written notification by September 4, 2018 to Jan Schuh.

Submission Of Proposal

Please e-mail a copy of the proposal to Jan Schuh.

Proposals must be received no later than September 18, 2018. It is anticipated that all proposers will be informed of the status of their proposal by the end of October 2018.

Conditions

The selection of a proposal is conditioned upon and not considered final until a Letter of Agreement is executed by both the Society of Actuaries and the researcher.

All activities of the research and participants will be subject to oversight and approval of legal counsel.

The Reinsurance Section reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available. The Reinsurance Section also reserves the right to redirect the project as is deemed advisable.

The Reinsurance Section plans to hold the copyright to the research and to publish the results with appropriate credit given to the researcher(s).

The Reinsurance Section may choose to seek public exposure or media attention for the research.  By submitting a proposal, you agree to cooperate with the Reinsurance Section in publicizing or promoting the research and responding to media requests.

The Reinsurance Section may also choose to market and promote the research to members, candidates and other interested parties.  You agree to perform promotional communication requested by the Reinsurance Section, which may include, but is not limited to, leading a webcast on the research, presenting the research at an SOA meeting, and/or writing an article on the research for an SOA newsletter.