Provision for Reinsurance

Question 1

What is an authorized non-slow-paying reinsurer and the respective reinsurance provision?

Answer 1

An authorized non-slow-paying reinsurer is a reinsurer which is licensed or accredited in the ceding insurer’s state or domiciled in a state which is substantially similar to the ceding insurer’s state with regard to reinsurance credit and thus is subject to minimum capital requirements. Additionally, an authorized non-slow-paying reinsurer must have a slow-paying ratio less than 20%.

Reinsurance Provision = 20% of Reinsurance Recoverable on Paid more than 90 days overdue not in dispute + 20% of Reinsurance Recoverable on Paid more than 90 days overdue in dispute

Question 2

What is an authorized slow-paying reinsurer and the respective reinsurance provision?

Answer 2

An authorized slow-paying reinsurer is a reinsurer which is licensed or accredited in the ceding insurer’s state or in a state which is substantially similar to the ceding insurer’s state with regard to credit for reinsurance and thus subject to minimum capital requirements. Additionally, slow-paying reinsurer’s have a slow-paying ratio greater than or equal to 20%.

Reinsurance Provision = [Greater of 20% of Total Reinsurance Recoverable on Paid Net of Collateral and 20% of Reinsurance Recoverable on Paid more than 90 days overdue] + [20% of Reinsurance Recoverable on Paid more than 90 days overdue not in dispute + 20% of Reinsurance Recoverable on Paid more than 90 days overdue in dispute] (Note: This is the provision for non-slow-paying authorized reinsure)

Question 3

What is an unauthorized reinsurer and the respective provision for reinsurance?

Answer 3

Unauthorized reinsurers are reinsurers which are not licensed or accredited in the insurer’s state or state which is substantially similar with regard to reinsurance credit.

Reinsurance Provision = Minimum of [Total Reinsurance Recoverable on Paid and (Reinsurance Recoverable Net of Collateral + 20% of Reinsurance Recoverable on Paid in dispute + 20% of Reinsurance Recoverable on Paid more than 90 days overdue not in dispute)]

Question 4

What is the ratio used to determine whether or not an authorized reinsurer is slow-paying or not?

Answer 4

Slow-Paying Ratio = Reinsurance Recoverable on Paid more than 90 days overdue not in dispute / [Total Reinsurance Recoverable not in dispute + Reinsurance Recoverable Paid in last 90 days]

A ratio of less than 20% indicates an authorized reinsurer is non-slow-paying.