What a Singapore Board Actually Needs to Understand About Reinsurance Strategy

I sat on a risk committee that approved a property catastrophe reinsurance renewal three years running with barely a question, because the broker's slide showed the same structure, a similar rate, and management's recommendation to proceed. In the fourth year, the market hardened sharply after a regional loss event, capacity tightened, and the renewal came back with a materially higher retention and a narrower scope of cover. The committee's first real question — what happens to our capital position and our appetite if we retain this much more risk — should have been asked three years earlier, when the answer was cheap to get right. That is the pattern I see most often in Singapore boardrooms: reinsurance treated as a procurement decision that recurs annually, not a strategic risk transfer decision that the board actually owns.

Reinsurance is a capital decision wearing an insurance costume

The framing that changes how a board engages with reinsurance is simple: every reinsurance structure is a decision about how much risk the company retains against its own capital, and how much it pays someone else to hold instead. Treated that way, a reinsurance renewal sits in the same category as a capital raise, a dividend policy, or a decision to enter a new line of business — it directly shapes the capital the company needs to hold under MAS's risk-based capital framework, and it directly shapes what happens to solvency in a stress scenario. Treated as a procurement renewal, it gets the scrutiny of a vendor contract. Both framings produce the same signature on the same page. Only one of them reflects what the decision actually is.

“A board that has never asked what happens to its solvency position if the reinsurance market hardens 30% at next renewal does not have a reinsurance strategy. It has a reinsurance habit.”

The questions a board should be able to answer, not just receive answers to

When I review a reinsurance programme with a board, I am not looking at whether the structure is reasonable — brokers and management are generally competent at that. I am looking at whether the board actually understands what it is retaining and why, in terms connected to its own stated risk appetite, rather than in terms connected to what the market was willing to offer this year.

• ◆What is our net retention across the programme, in absolute terms and as a percentage of capital — and has the board explicitly agreed that figure is within appetite, or has it simply accepted whatever retention this year's market pricing produced?
• ◆What is the credit quality and concentration of our reinsurance panel, and what happens to our balance sheet if our largest reinsurer is downgraded or disputes a claim?
• ◆Have we modelled what this programme costs and covers in a hard market — not the base case, the scenario where capacity contracts and rates move against us — and does the board know its fallback if that scenario arrives at renewal?
• ◆Does the reinsurance structure actually match the risks the business has grown into, or is it inherited from a book of business that looked different three renewals ago?

Where this goes wrong most often

The most common failure is delegation without a return loop. Management and the broker negotiate the renewal, present a recommendation, and the board approves it as a single agenda item alongside routine business — with no standing mechanism for the board to have set the retention and appetite parameters before the negotiation started. The second is treating reinsurance strategy as static once set. A programme built for a book of business five years ago, before a shift into a new line or geography, can leave material gaps or unnecessary cost that nobody revisits because the renewal process itself never prompts the question. The third, and the one that causes the most damage when it surfaces, is discovering during or after a large loss that the board's understanding of what was covered did not match the policy wording — because nobody at board level had actually walked through the exclusions and triggers before the loss happened, only the headline structure.

What good oversight looks like

A board that governs reinsurance well sets retention and risk appetite parameters before the renewal negotiation begins, not after seeing the result. It asks for the hard-market scenario alongside the base case every year, not only when the market is visibly hardening. It understands reinsurer credit risk and concentration as a standing agenda item connected to the ERM framework, not a one-line disclosure buried in the renewal pack. And it treats a material change in retention or structure as a decision that deserves the same board-level scrutiny as a comparable-sized capital transaction — because that is what it economically is.

None of this requires a board to negotiate the treaty itself, or to second-guess a competent broker on pricing. It requires the board to own the risk appetite the programme is built around, ask for the stress scenario every single year regardless of market conditions, and refuse to let a renewal become routine simply because the last three were uneventful. The renewal that finally surprises a board is never really a surprise — it is usually the year the market simply stopped being generous enough to hide the questions nobody had been asking.

Common Questions

About the author

Raymond Cheung is a Chartered Actuary, C-suite executive and board adviser with more than 20 years of experience across Asia in risk management, insurance, ESG and corporate governance. He is the CEO of CER Consultancy and an accredited trainer at SMU Academy and the Singapore College of Insurance.