Part 29 (FASB944) (*)

Question 1

If a reinsurance contract does not indemnify the ceding company against loss, the premium paid to the reinsurer (less any premium retained) needs to be accounted as what

In other words, if risk transfer is not found

Answer 1

Deposit by the ceding company

Question 2

Indemnification of a ceding company only exits if both what

Answer 2

• Significant insurance risk applies
• It is reasonably possible that the reinsurer will incur a significant loss

Question 3

The conditions for indemnification are dependendent or independent

Answer 3

Independent

Question 4

The criteria that the reinsurer will incur a significant loss applies to what, opposed to the individual assumptions used in the scenario

Answer 4

The entire scenario

Question 5

Evaluation of if the insurer can incur a significant loss should be based on what

Answer 5

the present value of cash flows occurring between the ceding and assuming companies

Question 6

What is known about the interest rates used to discount cash flows when determining significant loss

Answer 6

The same interest rate must be used and should reflect
- Expected timing of the payments
- Duration over which the cash flows will be invested by the reinsurer

Question 7

Based on how long policies are expected to remain in force, they can be classified into what

Answer 7

Short Duration

Long Duration

Question 8

Criteria for short duration

Answer 8

• Provides protection for a fixed period of short duration
• Contract allows the insurer to cancel or change the provision at the end of any contract period

Question 9

Reinsurance contracts that may include both prospective and retroactive provisions

Answer 9

• The same contract may cover losses from policies written both in prior years, and future years
• Reinsurance may be acquired after the primary policy has been written, but before the end of the coverage period, and made effective as of the beginning of the contract period