WHAT, ACTUALLY, IS RETAKAFUL? SOME BASIC QUESTIONS Istanbul, November 2012 Ludwig Stiftl.
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Transcript of WHAT, ACTUALLY, IS RETAKAFUL? SOME BASIC QUESTIONS Istanbul, November 2012 Ludwig Stiftl.
![Page 1: WHAT, ACTUALLY, IS RETAKAFUL? SOME BASIC QUESTIONS Istanbul, November 2012 Ludwig Stiftl.](https://reader035.fdocuments.in/reader035/viewer/2022081506/56649ef25503460f94c04653/html5/thumbnails/1.jpg)
WHAT, ACTUALLY, IS RETAKAFUL?SOME BASIC QUESTIONS
Istanbul, November 2012
Ludwig Stiftl
![Page 2: WHAT, ACTUALLY, IS RETAKAFUL? SOME BASIC QUESTIONS Istanbul, November 2012 Ludwig Stiftl.](https://reader035.fdocuments.in/reader035/viewer/2022081506/56649ef25503460f94c04653/html5/thumbnails/2.jpg)
1. Who is the ceding party? Shareholders or participants?
2. What is the basic service provided?
3. What level of pooling is appropriate?
4. Challenges ahead
Agenda
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Who is the ceding party?
Those who take the risk are the ones to cede it.
So, everything is returning to the same central question:
Are we in risk transfer?
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Participants
If (re)takaful is not transferring the risk, the participants would be liable for deficits
4
Shareholders Fund
Qard Hasan
Participants Fund
Qard Hasan repayment
Underwriting Profit
100% of surplus: Wakala
Surplus
Claims
Participants Fund
ContributionWakala Fee (p.ex. 20%)
04/20/23What, actually, is retakaful? Some Basic questions / Ludwig Stiftl
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If the participants were directly liable for deficits, losses would directly affect all retained portfolios
5
Shareholders fund
Participants Fund
Participants
Shareholders fund
Participants Fund
Participants
Shareholders fund
Participants FundParticipants
Shareholders fund
Participants Fund
Participants
Retakaful Fund
10%10%
60%40%
04/20/23What, actually, is retakaful? Some Basic questions / Ludwig Stiftl
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Agenda
1. Who is the ceding party? Shareholders or participants?
2. What is the basic service provided?
3. What level of pooling is appropriate?
4. Challenges ahead
![Page 7: WHAT, ACTUALLY, IS RETAKAFUL? SOME BASIC QUESTIONS Istanbul, November 2012 Ludwig Stiftl.](https://reader035.fdocuments.in/reader035/viewer/2022081506/56649ef25503460f94c04653/html5/thumbnails/7.jpg)
Basic Claims
Claims volatility
Expenses
What is the service provided in retakaful and reinsurance respectively?
Contribution margin
Reinsurer’s service Retakaful Operator’s service
Proportional payments
XL payments
Reinsurance commission
UW-Service/Training
Capacity management
Proportional claims compensation
XL claims compensation
Retakaful “commission”
UW-Service/Training
Capacity management
Without risk transfer, the service of a retakaful operator were less than that of a reinsurer
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Agenda
1. Who is the ceding party? Shareholders or participants?
2. What is the basic service provided?
3. What level of pooling is appropriate?
4. Challenges ahead
![Page 9: WHAT, ACTUALLY, IS RETAKAFUL? SOME BASIC QUESTIONS Istanbul, November 2012 Ludwig Stiftl.](https://reader035.fdocuments.in/reader035/viewer/2022081506/56649ef25503460f94c04653/html5/thumbnails/9.jpg)
Risk capital and diversification gains
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Modelling = Pooling risks in a portfolio
Munich Re(Group)
Munich Re(Group)
CreditCredit Non-lifeNon-life
ERGOERGO
LifeLife
RIRI
Basic lossBasic loss Large lossLarge loss Accumulation lossAccumulation loss
BLS 1BLS 1 BLS 150BLS 150 ALS 1ALS 1 ALS 50ALS 50EQ USA
(Midwest)EQ USA
(Midwest)
… …Fire treaty
Non-proportionalNorth America
Fire treaty Non-proportional
North America
… …
TS 1TS 1 TS 100TS 100Country Mutual
Stop loss
Country Mutual
Stop loss
XYZ Insurance fire
risk XL
XYZ Insurance fire
risk XL… … TS 1TS 1 TS 55TS 55UVW Mutual
Stop lossUVW Mutual
Stop loss… …
MarketMarket
Cost of capital Loading
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Diversification effect through pooling
Risk Capital 2005 AAA
0
200
400
600
800
1000
1200
1400
AAA only NL only
Risk
Cap
(mio
€) 48%
Risk Capital for
NatCat Scenarios
Basic and Large Losses
Operational Risks
Cumulative Losses
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Agenda
1. Who is the ceding party? Shareholders or participants?
2. What is the basic service provided?
3. What level of pooling is appropriate?
4. Challenges ahead
![Page 13: WHAT, ACTUALLY, IS RETAKAFUL? SOME BASIC QUESTIONS Istanbul, November 2012 Ludwig Stiftl.](https://reader035.fdocuments.in/reader035/viewer/2022081506/56649ef25503460f94c04653/html5/thumbnails/13.jpg)
Challenges
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THANK YOU VERY MUCH FOR YOUR ATTENTION
Ludwig Stiftl
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