Appendices
1. Analysis of reinsurers' exposure
Insurers cede part of their exposure to Automobile Third Party Liability risk through Excess of Loss reinsurance treaties. The portion of claims exceeding the insurers' retention threshold therefore falls entirely to the reinsurers.
Reinsurers are brought to know almost all the sinister grave through their participation in e xcédent sinister s and are therefore able to make an analysis of the financial development of the heaviest physical records. In this regard, they have the amount of compensation paid and the level of current reserves to cover future liquidations. The conjunction of these two elements makes it possible to calculate the future development of costs for the insurance and reinsurance market in France.
In the context of market information , d es APREF reinsurers have conducted a study of one hundred cases in which disability rate is greater than or equal to 80% and which have been settled temporarily or permanently in 2005 and 2006 following a court decision or a private transaction. The results of this study show that these serious bodily injuries are compensated on average for an amount of € 3 million.
The average cost of serious bodily injury compensation has increased much more strongly than the economic indicators of the French market. Since 2001 , ie without any effect of table related to the Decree of 30 December 1996 , the indemnified tion grew by about 70% while GDP growth did not exceed 8.5%. Likewise, the change in the indemnity charge was not linked to purely economic inflation since this remained limited to an increase of 9.9%.
Here is the average distribution according to the main loss loss items for victims retaining sequelae greater than 80%. The average cost of these claims is € 3 million.
It can be seen that, over the past ten years, the average cost of compensation paid has undergone an annual inflation of 7% to 10%, this figure varying according to the observation period used and the severity of the claims.
While the Third Person position represents more than half of the total cost, its annual inflation alone exceeds 10% over the last 5 years following the combined increases in the hourly cost, the number of hours granted and the capitalization parameters. .
Through Excess of Losses treaties, reinsurers are exposed to the most significant claims , and therefore to those that suffer the highest inflation.
It is important to recall the specific cumulative effect of inflation linked to the structure of reinsurance programs. Or the case of a treaty whose threshold is set at 2 million: a claim of 3 million will be distributed between the insurer (2 million) and the reinsurers (1 million). The following year, if a claim of the same type occurs, this claim will amount to 3.3 million due to an annual inflation of 10%. The part payable by the insurer will remain maintained at 2 million while that of reinsurers will reach 1.3 million, an increase of 30% .
It p e u t measure the impact of the effect of leverage between core inflation and inflation borne by reinsurers from claims history. This varies depending on inflation and the level of the intervention threshold of the Reassur dence .
The following table shows the mechanical increase payable by reinsurers for a given inflation and retention threshold. Thus, by way of illustration, with a base inflatio n of 9% coupled with a retention of € 4 million , inflation payable by reinsurers amounts to 24%. As soon as the retention doubles, ie € 8 million, reinsurers incur a claims charge of 41%.
This leverage between core inflation and increasing the burden of Reassur ance largely successive increases in reinsurance rates.
To maintain a constant reinsurance rate over time, retention thresholds as well as insurance premiums should logically take into account changes in the cost of claims.
In addition, it should be noted that a third of the cases currently concern one or more young victims. The observed mechanical effect of inflation on items as important as the third party can only cause an increase in the load in the short or medium term.
By projecting the current inflationary trend, we should arrive in 5 to 10 years at average compensation levels of around € 6 million for sequelae above 80% of disability. With regard to extreme claims (very young victims, presence of a third party 24 hours a day, ...) these may reach or exceed 12 M € per victim.
D Other factors also contribute to this renchériss ly , including in particular :
The extension of life expectancy, which is reflected in the mortality tables used for the calculation of the Constituent Capital of Annuities
The evolution of the typology of the sequelae of victims , for example, better detection and better medical monitoring of the population of head trauma patients.
Before this indemnity derives not compensated by either the decrease in the frequency of the most severe bodily injury or by higher contributions and insurance premiums, the s price of the has Reassur dence have been adjusted s on the rise while insurers, for reasons of budget control, came under increasing their s retention s . The retention of excess claims coverage stood at € 4.3 million on average in 2007 , an increase of around 33% compared to 2006.
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