Turning to the other form of reinsurance, treaty is considered generally to be the "go-to" coverage solution for portfolios of risk. Challenges associated with treaty reinsurance may include:
- Minimum and deposit premiums
- Unnecessary coverage
- Limited sideways coverage (reinstatements and occurrence caps).
"As a result of the limitations of each of the coverage options, a reinsurance solution that draws on both facultative and treaty enables insurers to purchase reinsurance cover that meets the specific and unique needs of their profiles," Fleming explains. "Guy Carpenter introduced a customized alternative to facultative and treaty reinsurance - GC Hybrid Solutions."
Hybrid solutions constitute any type of reinsurance protection that falls outside of the traditional treaty or traditional facultative arenas. The hybrid solution options include:
- Auto carve-outs
- Renewal rights facilities
- Probable maximum loss bust carve-outs
- Net retention buy-downs
- Excess capacity layers
- Automated facultative facilities
- Peril specific carve-outs
- Terrorism coverage and specialty lines.
"GC Hybrid Solutions, with fixed pricing and set capacity," Fleming says, "frees cedents from the administrative burdens of facultative and provides protection for unexpected events.
Exposure rated facilities allow companies to only pay for limits that are utilized and provide insurers and reinsurers the financial and economic means to expand into new products that may bring profitable growth, such as wildfire, terrorism, high hazard occupancy and specialty covers."
Fleming adds, "GC Hybrid Solutions is able to match coverage to a client's underwriting guidelines, with solutions to cover over 80 to 90 percent of subject portfolios while keeping the number of Special Acceptances, or 'market approval' requests to a minimum."