On-line reinsurance capacity auction system and method

• US 7,840,473 B2
• Filed: 10/01/2001
• Issued: 11/23/2010
• Est. Priority Date: 10/02/2000
• Status: Active Grant

• Current Assignee: Swiss Reinsurance Company
• Original Assignee: Swiss Reinsurance Company
• Inventors: Mumenthaler, Christian, Kraehenbuehl, Martin, Walter, Ralph
• Primary Examiner(s): Kazimi; Hani
• Assistant Examiner(s): Shrestha; Bijendra K
• Application Number:
  US09/967,045
• Publication Number:
  US 20020046067A1
• Time in Patent Office: 3,340 Days
• Field of Search: 705/4, 705/37
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/08 Auctions
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A system and method of selling reinsurance includes identifying a reinsurance product and a capacity of the reinsurance product to be sold and calculating a fair risk price for the reinsurance product. The reinsurance product is then offered to potential buyers via an electronic auction, wherein a minimum bid in the electronic auction is determined, at least in part, by the fair risk price. Bids are received from the buyers for portions of the capacity of the reinsurance product and are ranked in accordance with a calculated profitability value and/or time of receipt. Buyers are notified of a status of their respective bids, and particularly, whether bids have been tentatively accepted, partially accepted, or excluded, i.e., rejected. Upon notification of bid status, buyers are given the opportunity to modify bid parameters in an attempt to have their bids ranked at higher a level, thereby increasing the chance of the bid being accepted.

Claims

1. A method for auctioning reinsurance products electronically over a communication network, comprising the steps of:

identifying a reinsurance product based on information stored in a database associated with a system;

determining, by a server, capacity of the reinsurance product to be sold;

offering, by the server, the reinsurance product for sale through an auction;

accepting, by the server, bids from reinsurees for at least a portion of the capacity, wherein the step of accepting bids includes,

providing, through the communication network, a status for the bids of the reinsurees, the status comprising one of OK, Partial OK, and Excluded, the status OK representing that a bid will be accepted the status Partial OK representing that only a portion of the capacity in a bid will be filled, and the status Excluded representing that a bid will not been accepted, and

ranking, by an auction ranking element engine, the bids of the reinsurees, wherein the ranking of the bids at least considers a calculated profitability value and a time stamp associated with each of the bids an older time stamp resulting in a higher ranking for a given bid and a higher calculated profitability resulting in a higher ranking for a given bid, and where profits for a provider of the reinsurance product are maximized by selecting from pending and newly entered bids, the bids that are most profitable;

setting, by the server, a reference price for the reinsurance product;

defining, by the server, a ratio of a bid to the reference price that defines a variable index;

using, by the server, the variable index to define profitability, wherein remaining capacity of the reinsurance product is sold when the variable index is below 1;

electronically consummating a contract, using the communication network, for the sale of at least a portion of the reinsurance product to holders of winning bids, and assigning each of the winning bids a status of OK denoting denotes acceptance of a bid, or a status of Partial OK denoting only a portion of requested capacity will be filled; and

ending, by the server, the on-line auction in response to a determination that the capacity is consumed or a predefined date and time is reached, even if all of the capacity has not been sold.

2. The method of claim 1, wherein the reinsurance product is at least one of earthquake reinsurance, windstorm reinsurance and marine catastrophe reinsurance.

3. The method of claim 1, wherein the auction comprises an on-line auction.

4. The method of claim 3, wherein the auction employs the Internet.

5. The method of claim 3, wherein the auction is presented via a browser.

6. The method of claim 1, further comprising accepting bids from at least one of direct insurers and brokers.

7. The method of claim 1, wherein bids comprise at least a bid amount and an indication of the amount of desired capacity.

8. The method of claim 1, wherein the calculated profitability value associated with each of the bids is calculated based a return on sales ratio.

9. The method of claim 8, wherein the return on sales ratio is a selling price minus a fair risk price divided by the selling price or the selling price divided by the fair risk price.

10. The method of claim 8, further comprising changing a status of at least one bid.

11. The method of claim 10, wherein the status is one of OK, Partial OK and Excluded.

12. An online system for auctioning a reinsurance product electronically over a communication network, comprising:

a fair risk price calculator;

an auction and auction participant database;

an auction ranking element engine; and

a web server in communication with the Internet, wherein the fair risk price calculator provides information for calculating a minimum bid, the database stores information related to at least one auction for at least one reinsurance product, and the auction ranking element engine is operable to rank bids submitted to the database via the web server from reinsurees, wherein the ranking of the bids of the reinsurees at least considers a calculated profitability value and a time stamp associated with each of the bids an older time stamp resulting in a higher ranking for a given bid and a higher calculated profitability resulting in a higher ranking for a given bid, and where profits for a provider of the reinsurance product are maximized by selecting from pending and newly entered bids, the bids that are most profitable,

wherein the web server sets a reference price for the reinsurance product, defines a ratio of a bid to the reference price that defines a variable index, and uses the variable index to define profitability, wherein remaining capacity of the reinsurance product is sold when the variable index is below 1; and

wherein the auction ranking element engine provides a status of a bid, and wherein a status of OK denotes acceptance of a bid, a status of Partial OK denotes only a portion of requested capacity will be filed, and a status of Excluded denotes that a bid has not been accepted, and

the web server ends the on-line auction in response to a determination that the capacity is consumed or a predefined date and time is reached, even if all of the capacity has not been sold.

13. The system of claim 12, wherein the reinsurance product is at least on of earthquake reinsurance, windstorm reinsurance and marine catastrophe reinsurance.

14. The system of claim 12, wherein the calculated profitability value associated with each of the bids is calculated based a return on sales ratio.

15. The system of claim 12, wherein direct insurers submit bids to the web server.

16. The system of claim 12, wherein a submitted bid comprises a bid amount and a desired coverage amount.

17. The system of claim 16, wherein the auction ranking element engine determines whether the sufficient capacity remains to satisfy the desired coverage amount.

18. The system of claim 12, wherein the system is operated by or on behalf of a reinsurance company.

19. The system of claim 12, wherein the direct insurers participate as bidders for the reinsurance product.