[Current Affairs Terms]Asset Intensive Reinsurance (AIR)

Definition of Asset Intensive Reinsurance

Asset Intensive Reinsurance (AIR) refers to a reinsurance transaction in which the reinsurer assumes both the insurance liabilities and the associated assets from the ceding insurer, managing them directly.

Through such reinsurance contracts, ceding insurers can transfer both risk and assets, thereby achieving greater capital efficiency.

By transferring assets and liabilities to the reinsurer, the reinsurer leverages its investment and asset management expertise to enhance investment returns. This allows for an increase in assets under management and the potential to generate excess profits.

Unlike traditional reinsurance, asset intensive reinsurance focuses primarily on securing investment returns.

Asset intensive insurance typically refers to products with a strong investment component, such as annuities or savings-type insurance policies. By having the reinsurer manage these policies, the ceding insurer can provide policyholders with returns generated from the reinsurer’s asset management.

The Korea Insurance Research Institute has highlighted the need for advanced asset management as a key management strategy for the insurance industry, emphasizing the importance of asset intensive reinsurance.

The institute explained that asset intensive reinsurance is an evolved form of coinsurance, enabling insurers to manage their risk-based capital (RBC) ratios and deliver higher returns through offshore reinsurers.

(Seoul=Yonhap Infomax) Soo Yong Lee

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