Reinsurance Example

This is an example of how Insurance elements can be linked together to model more complicated and exotic insurance arrangements. This model represents a single policy with a duration of five years. A claim is submitted four times per year on average, with a random claim amount (see Claim_Magnitude).

The customer's policy has a deductible of $500,000 per year, and payments under the policy are capped at $50 million per year. The insurer in this case has a contract with a reinsurer to protect it from significant losses. The reinsurance contract has a deductible of $10 million, and a maximum payout of $50 million over the five year duration of the contract.

Given this scenario, we can establish losses for all of the parties involved. Uncovered losses in the Insurance_Carrier element correspond with customer losses. Covered Losses in the Reinsurer element are the responsibility of the reinsurer, and uncovered losses in the Reinsurer element are paid by the insurance company. The losses of each party are shown in the Losses Distribution Result.

To Open the Model File:

1. Start GoldSim
2. Click on the File and select Open Example...
3. Browse to General Examples --> Financial Examples
4. Select the file called Reinsurance.gsm