Patent Application Titled “Methods And Systems For Strategically Managing Insurance And Reinsurance Policies On Risk Adjusted Basis” Published Online (USPTO 20190370904)

2019 DEC 20 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- According to news reporting originating from Washington, D.C., by NewsRx journalists, a patent application by the inventor Eichenblatt, David L. (Atlanta, GA), filed on May 31, 2018, was made available online on December 5, 2019.

The assignee for this patent application is David Eichenblatt and Company (Atlanta, Georgia, United States).

Reporters obtained the following quote from the background information supplied by the inventors: “Generally, insurance brokers offer insurance policies or risk transfer agreements to individuals and entities to allocate and pool risk. An insurance policy is a contract between the insurer and insuree or policyholder that is designed to hedge against a particular risk(s). In exchange for the protection offered by the policy, policyholders pay a premium to the insurer. Typically, the policy will cover an event(s) that could occur and with some level of uncertainty within a policy period. The uncertainty is the risk that the insurance policy protects against. For example, in a life insurance policy, the uncertainty is the time of death of a policy holder. In another example, the uncertainty in an auto insurance policy is if/when an accident will occur and what damages will be incurred during the accident within a policy period. When an event triggers a claim of coverage offered in the policy, the insurer will pay for an agreed upon portion of the cost of the claim for the policyholder. Most insurance policies are renewable annual policies that provide coverage for claims that occur throughout that year of coverage. This allows the possibility for an insurer to pay for zero claims, a single claim, or multiple claims on any single policy within a single contracted year. Regardless for the number of claims filed, the premiums for the policy remain the same for that year. Additionally, there are also, but much fewer, multi-year coverage policies that specify single or multiple claim occurrences during the policy period in which premiums can be paid upfront or over the multi-year period.

“To protect against major claims events (e.g., natural disasters) insurance companies commonly purchase reinsurance policies for some of or all of the policies that the originating insurance company has sold to individual policy holders. The ultimate goal of reinsurance is to reduce exposure of the originating insurance company to loss incurred in a major claim event by passing part of the risk of loss to a reinsurer or a group of reinsurers. In particular, the insurance company pays, or shares, the premium to the reinsurance company in exchange for the reinsurance company sharing a percentage of the risk for the reinsured policies. The two basic types of reinsurance agreements are facultative reinsurance which is negotiated separately for each insurance policy that is reinsured and treaty reinsurance in which the reinsurer agrees to cover a specified share of all the insurance policies issued by the originating insurance company or a subset of policies that fall within a class or subclass per pre-agreed underwriting guidelines.

“There are two main types of treaty reinsurance, proportional and non-proportional. Under proportional reinsurance, the share of the risk assumed by the reinsurer is defined by a percentage for each separate policy and the reinsurer will receive the stated percentage of the premiums for being obligated to pay the stated percentage of any claims. One form of non-proportional coverage is excess of loss Reinsurance. Under Excess of loss coverage, the reinsurer will only cover the losses that exceed the primary insurance company’s retained limit. However, what makes this type of contract unique is that it is typically applied to catastrophic events. It can cover the insurance company either on a per occurrence basis of for all the cumulative losses within a specified period.

“Under non-proportional reinsurance the liability of the reinsurer is based on the aggregate claims incurred by the originating insurance company such that such that the reinsurer will not get involved unless the total claims suffered by the originating insurer in a given period time exceeds a threshold value, with the exceeding value being covered by the reinsurer.

“Other types of reinsurance include risk attaching basis, loss occurring basis, and claims-made basis. Under risk attaching basis, all policy claims that are established during the effective period of the reinsurance coverage will be covered, regardless of whether the losses occurred outside the coverage period. Conversely, no coverage will be given on claims that originated outside the coverage period, even if the losses occurred while the reinsurance contract is in effect. Loss occurring basis is a type of treaty coverage where the insurance company can claim all losses that occur during the reinsurance contract period. The important factor to consider is when the losses have occurred and not when the claims have been made. Claims-made basis is a policy covers all claims reported to an insurer within the policy period irrespective of when they occurred.

“Typically, an originating insurance company originates and underwrites individual risks (e.g., policies) and concurrently reinsures out a majority of these risks to a group of reinsurers that signed up in advance under a quota share treaty arrangement up to an aggregate limit. Both the originating insurance company and the contracted reinsurers, in a typical quota share reinsurance treaty agreement, bear the risk of unknown specific or individual risks parameters for the duration of agreement period. Additionally, participating reinsurers are responsible for the agreed upon risk from the start of the policy through the end of the term of the policy. Thus, reinsurers sign up for an unknown specific risk pools of individual policies and number of risks or quantity to be sold. These added risks impact invested returns.”

In addition to obtaining background information on this patent application, NewsRx editors also obtained the inventor’s summary information for this patent application: “There is a need for improvements for how, when and combination of offerings of insurance policies are offered to reinsurers to optimally manage risk/reward from the current system that has not changed since the benches of Lloyds of London. The present invention is directed toward further solutions to address this need, in addition to having other desirable characteristics.

“In accordance with example embodiments of the present invention, a computer implemented method for accumulating and allocating insurance risk is provided. The computer implemented method includes executing computer readable instructions, which when executed by a processor, are configured to perform functions that include aggregating, by an insurance originator. The plurality of insurance policies include an aggregate of risks covered by the plurality of insurance policies, an aggregate of premiums paid by policy holders of the plurality of insurance policies, a first term of coverage for a multi-term coverage of the plurality of insurance policies, and a second term of coverage for the multi-term coverage of the plurality of insurance policies. The method also includes purchasing, by the insurance originator, one or more reinsurance policies for a at least a portion of the plurality of insurance policies, covering, by the insurance originator, an entirety of the aggregate of risks during the first term of coverage, and receiving, by the insurance originator, the entirety of the aggregate of premiums during the first term of coverage. The method further includes covering, by the insurance originator, a first percentage of the aggregate risk during the second term of coverage and receiving, by the insurance originator, a second percentage of the aggregate premiums during the second term of coverage.

“In accordance with aspects of the present invention, also includes covering, by a reinsurer of the one or more reinsurance policies, a third percentage of the aggregate risk for the portion of the plurality of insurance policies during the second term of coverage and receiving, by the reinsurer of the one or more reinsurance policies, a fourth percentage of the aggregate premiums for the portion of the plurality of insurance policies during the second term of coverage.

“In accordance with aspects of the present invention, the first percentage and the third percentage combine for one-hundred percent and the second percentage and the fourth percentage combine for one-hundred percent. The first percentage and second percentage can be 10% and the third percentage and fourth percentage can be 90%. The first percentage and second percentage can be 20% and the third percentage and fourth percentage can be 80%. The first percentage and the second percentage can be disproportionate from the third percentage and the fourth percentage. The first term of coverage for a multi-term coverage of the plurality of insurance policies can be one year and the second term of coverage for the multi-term coverage of the plurality of insurance policies can be two years.

“In accordance with aspects of the present invention, the method can further include bundling, by the insurance originator, the plurality of insurance policies into groups based on risk categories for selection by a reinsurer. Each bundle can include multiple risk categories with predetermined risk percentages for each of the policies included within the multiple risk categories. The plurality of insurance policies can be single occurrence policies. The plurality of insurance policies can be multiple occurrence policies. The aggregating, by an insurance originator, the plurality of insurance policies can be performed through a cloud computing infrastructure.

“An insurance warehouse system is provided. The system includes a non-transitory computer readable medium having stored thereon computer readable instructions, which when executed by a processor, are configured to perform functions that include aggregating, by an insurance originator, a plurality of insurance policies. The plurality of insurance policies include an aggregate of risks covered by the plurality of insurance policies, an aggregate of premiums paid by policy holders of the plurality of insurance policies, a first term of coverage for a multi-term coverage of the plurality of insurance policies, and a second term of coverage for the multi-term coverage of the plurality of insurance policies. The functions also include purchasing, by the insurance originator, one or more reinsurance policies for at least a portion of the plurality of insurance policies, covering, by the insurance originator, an entirety of the aggregate of risks during the first term of coverage, and receiving, by the insurance originator, the entirety of the aggregate of premiums during the first term of coverage. The functions further include covering, by the insurance originator, a first percentage of the aggregate risk during the second term of coverage and receiving, by the insurance originator, a second percentage of the aggregate premiums during the second term of coverage.

“In accordance with aspects of the present invention, the functions also include covering, by a reinsurer of the one or more reinsurance policies, a third percentage of the aggregate risk for the portion of the plurality of insurance policies during the second term of coverage and receiving, by the reinsurer of the one or more reinsurance policies, a fourth percentage of the aggregate premiums for the portion of the plurality of insurance policies during the second term of coverage.

“In accordance with aspects of the present invention, the first percentage and the third percentage combine for one-hundred percent and the second percentage and the fourth percentage combine for one-hundred percent. The first percentage and second percentage can be 10% and the third percentage and fourth percentage can be 90%. The first percentage and second percentage can be 20% and the third percentage and fourth percentage can be 80%. The first percentage and the second percentage can be disproportionate from the third percentage and the fourth percentage.

“In accordance with aspects of the present invention, the first term of coverage for a multi-term coverage of the plurality of insurance policies is one year and the second term of coverage for the multi-term coverage of the plurality of insurance policies is two years. The functions can also include bundling, by the insurance originator, the plurality of insurance policies into groups based on risk categories for selection by a reinsurer. Each bundle can include multiple risk categories with predetermined risk percentages for each of the policies included within the multiple risk categories. The plurality of insurance policies can be single occurrence policies. The plurality of insurance policies can be multiple occurrence policies.”

The claims supplied by the inventors are:

“1. A computer implemented method for accumulating and allocating insurance risk, the computer implemented method comprising: executing computer readable instructions, which when executed by a processor, are configured to perform functions that include: aggregating, by an insurance originator, a plurality of insurance policies comprising: an aggregate of risks covered by the plurality of insurance policies; an aggregate of premiums paid by policy holders of the plurality of insurance policies; a first term of coverage for a multi-term coverage of the plurality of insurance policies; and a second term of coverage for the multi-term coverage of the plurality of insurance policies; purchasing, by the insurance originator, one or more reinsurance policies for a at least a portion of the plurality of insurance policies; covering, by the insurance originator, an entirety of the aggregate of risks during the first term of coverage; receiving, by the insurance originator, the entirety of the aggregate of premiums during the first term of coverage; covering, by the insurance originator, a first percentage of the aggregate risk during the second term of coverage; and receiving, by the insurance originator, a second percentage of the aggregate premiums during the second term of coverage.

“2. The method of claim 1, further comprising: covering, by a reinsurer of the one or more reinsurance policies, a third percentage of the aggregate risk for the portion of the plurality of insurance policies during the second term of coverage; and receiving, by the reinsurer of the one or more reinsurance policies, a fourth percentage of the aggregate premiums for the portion of the plurality of insurance policies during the second term of coverage.

“3. The method of claim 1, wherein the first percentage and the third percentage combine for one-hundred percent and the second percentage and the fourth percentage combine for one-hundred percent.

“4. The method of claim 1, wherein the first percentage and second percentage are 10% and the third percentage and fourth percentage are 90%.

“5. The method of claim 1, wherein the first percentage and second percentage are 20% and the third percentage and fourth percentage are 80%.

“6. The method of claim 1, wherein the first percentage and the second percentage are disproportionate from the third percentage and the fourth percentage.

“7. The method of claim 6, wherein: the first term of coverage for a multi-term coverage of the plurality of insurance policies is one year; and the second term of coverage for the multi-term coverage of the plurality of insurance policies is two years.

“8. The method of claim 1, further comprising bundling, by the insurance originator, the plurality of insurance policies into groups based on risk categories for selection by a reinsurer.

“9. The method of claim 8, wherein each bundle includes multiple risk categories with predetermined risk percentages for each of the policies included within the multiple risk categories.

“10. The method of claim 1, wherein the plurality of insurance policies are single occurrence policies.

“11. The method of claim 1, wherein the plurality of insurance policies are multiple occurrence policies.

“12. The method of claim 1, wherein the aggregating the plurality of insurance policies is performed through a cloud computing infrastructure.

“13. A insurance warehouse system, the system comprising: a processor; a non-transitory computer readable medium having stored thereon computer readable instructions, which when executed by the processor are configured to perform functions that include: aggregating, by an insurance originator, a plurality of insurance policies comprising: an aggregate of risks covered by the plurality of insurance policies; an aggregate of premiums paid by policy holders of the plurality of insurance policies; a first term of coverage for a multi-term coverage of the plurality of insurance policies; and a second term of coverage for the multi-term coverage of the plurality of insurance policies; purchasing, by the insurance originator, one or more reinsurance policies for at least a portion of the plurality of insurance policies; covering, by the insurance originator, an entirety of the aggregate of risks during the first term of coverage; receiving, by the insurance originator, the entirety of the aggregate of premiums during the first term of coverage; covering, by the insurance originator, a first percentage of the aggregate risk during the second term of coverage; and receiving, by the insurance originator, a second percentage of the aggregate premiums during the second term of coverage.

“14. The system of claim 13, further comprising: covering, by a reinsurer of the one or more reinsurance policies, a third percentage of the aggregate risk for the portion of the plurality of insurance policies during the second term of coverage; and receiving, by the reinsurer of the one or more reinsurance policies, a fourth percentage of the aggregate premiums for the portion of the plurality of insurance policies during the second term of coverage.

“15. The system of claim 13, wherein the first percentage and the third percentage combine for one-hundred percent and the second percentage and the fourth percentage combine for one-hundred percent.

“16. The system of claim 13, wherein the first percentage and second percentage are 10% and the third percentage and fourth percentage are 90%.

“17. The system of claim 13, wherein the first percentage and second percentage are 20% and the third percentage and fourth percentage are 80%.

“18. The system of claim 13, wherein the first percentage and the second percentage are disproportionate from the third percentage and the fourth percentage.

“19. The system of claim 18, wherein: the first term of coverage for a multi-term coverage of the plurality of insurance policies is one year; and the second term of coverage for the multi-term coverage of the plurality of insurance policies is two years.

“20. The system of claim 13, further comprising bundling, by the insurance originator, the plurality of insurance policies into groups based on risk categories for selection by a reinsurer.

“21. The system of claim 21, wherein each bundle includes multiple risk categories with predetermined risk percentages for each of the policies included within the multiple risk categories.

“22. The system of claim 13, wherein the plurality of insurance policies are single occurrence policies.

“23. The system of claim 13, wherein the plurality of insurance policies are multiple occurrence policies.”

For more information, see this patent application: Eichenblatt, David L. Methods And Systems For Strategically Managing Insurance And Reinsurance Policies On Risk Adjusted Basis. Filed May 31, 2018 and posted December 5, 2019. Patent URL: http://appft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PG01&p=1&u=%2Fnetahtml%2FPTO%2Fsrchnum.html&r=1&f=G&l=50&s1=%2220190370904%22.PGNR.&OS=DN/20190370904&RS=DN/20190370904

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