SOA 2010 Annual Meeting & Exhibit Oct. 17-20, 2010 Session 68 PD, How to Lose a Million Bucks Without Really Trying: Oversights in Negotiating Life Reinsurance Treaties Moderator: Clark F. Himmelberger, FSA, MAAA Presenters: C. Spencer Aldridge Clark F. Himmelberger, FSA, MAAA Mark Sarlitto How to Lose a Million Bucks Without Really Trying… Oversights in Negotiating Life Reinsurance Treaties C. S C Spencer Al Alridge, id II Vice President & Deputy General Counsel, Transamerica Reinsurance Clark Himmelberger Consulting Actuary, Milliman, Inc. Mark Sarlitto Senior Vice President & General Counsel, Wilton Reassurance 1 1 Useful Resources for Managing the Reinsurance Function 1. ACLI Life Reinsurance Treaty Sourcebook 3. SOA Reinsurance Treaty Discussion Document 2. Tiller’s Reinsurance Textbook 4. NAIC Reinsurance Regulations 2 2 1 November 9, 2010 1. ACLI Life Reinsurance Treaty Sourcebook  Reference tool for creating life insurance treaties – Cooperatively developed by reinsurers and insurers – Checklist of what to include in a treaty – EXAMPLE: DIVIDENDS (Coinsurance Agreements) • Option 1: Reinsurer will not reimburse dividends • Option 2: Reinsurer will reimburse proportionate share  Where you can find it – Order from www.ACLI.com (for $1,500) $ – Tiller’s Life, Health & Annuity Reinsurance textbook appendix • Available at ACTEX, Amazon.com (for about $150) 3 3 November 9, 2010 2. Life, Health & Annuity Reinsurance 3rd Edition  Documents fundamental principles of reinsurance  Excellent reference for terminology, history  Where you can find it – Available at ACTEX, Amazon.com 4 4 2 November 9, 2010 3. SOA Life Reinsurance Treaty Discussion  Less of a checklist, more of a discussion of why a particular treaty clause is important and what it should accomplish  EXAMPLE: Accelerated Benefits – 4 paragraphs in ACLI sourcebook; 5 pages in SOA > One whole page describing potential problems you may encounter with reinsuring accelerated benefits  Where you can find it – SOA website in the reinsurance section 5 5 November 9, 2010 4. NAIC Reinsurance Regulations  Model Act on Credit for Reinsurance – Reinsurer requirements for allowing reserve credits  Credit for Reinsurance Model Regulation – Detailed guidance on implementing the Model Act  Life & Health Reinsurance Agreements Model Reg – Treaty requirements for allowing reserve credits  SSAP #61 – based off of FASB #113 – Rules on the level of risk transfer required for reinsurance 6 6 3 November 9, 2010