Schedule F Flashcards
Schedule F contains/provides
- contains details of prospective reinsurance transactions
- provides info on assumed reinsurance that may be useful for reasonableness of loss & LAE reserves
- contains info on reserves for participation in pools and associations
- Schedule F indicates how the BS would look gross of reinsurance basis so gives idea of protection provided to BS via use of reins.
- data from schedule is used to populate BS
Assets: amounts recoverable from reinsurers
Liab: reins payable on paid loss, funds held by company under reins agreements, prov for reins
main purpose of F
- main purpose is to derive provision for reinsurance = min reserve for uncollectible reinsurance; provision booked as a liab in BS
- collectability of recoverables is important because loss & LAE reserves are net of reinsurance
if insurer believes that a higher amount than what is indicated by prov
should hold add. reserve and record this add. amount on IS by reversing accounts that had been used to establish reins recoverable
prov reflects conservative nature of statutory accounting because
entire amount may ultimately be collected
Part1
assumed reins as of 12/31, curr year
- contains reserves for paid loss&case not IBNR
- contingent commissions: based on profit of ceded business
security
required to protect against credit risk
Funds held/deposited with reinsured companies (portion of prem due to reinsurer is withheld), LOC (letter from bank stating it will pay if reinsurer cannot), Amounts of assets pledged or collateral held in trust
Part2
prem portfolio reins effected/cancelled during curr year
- enter into portfolio reins when want to exit certain business, remove uncertainty assoc with liab off books, or obtain surplus relief via discounted prem
- reinsurer will require risk prem to assume risk
Part3
: ceded rein as of 12/31 curr year
- comprehensive listing of ceded balances by reinsurer so can assess credit risk
- protected cells listed separately; separate company with its own assets and liab but has access to parent’s capital
- column5 indicates individual contracts where over 75% prem is ceded; not common as insurer is designed to be risk bearing entity
- insurer could be acting as fronting carrier for another company in state where reinsurer is not licensed to do business
- footnotes disclose top 5 commission rates where prem > $50k; these contracts generate large amounts of surplus relief
Part4
Aging of Ceded Reins
- groups recoverables by age overdue (1-29, 30-90, 91-120, 120+)
- age of recoverable hierarchy: terms that specify when reinsurer needs to pay, terms that specify when insurer needs to report claim, date at which amount recoverable from reinsurer > $50k and is entered into insurer’s account as paid recoverable; if dates have not been mentioned and recov < $50k then amount is currently due
overdue %
overdue % = overdue by 120+ days/payments due
Provision for Reinsurance encourages
encourages insurers to demand prompt payment and to require LOC or other collateral from unauthorized and slow paying
Part5
Prov for Unauthorized Reins
- Unauthorized reinsurers are those that have not been authorized to write business in the jurisdiction
- provision is higher to reflect the fact that they are not regulated
unsecured total recoverables & total recoverables
- unsecured total recoverables = recoverables on paid, case, IBNR, UEPR, commission – security
- total recoverables = recoverables on paid, case, IBNR, UEPR, commission
Provision for Unauthorized Reins
prov = unsecured total recoverables + 20%*(paid recoverables over 90 days overdue + amounts in dispute)
Unsecured include amount in dispute
Recoverables excludes disputed
- regardless if recoverables are fully collateralized
- provision is capped at total amount recoverable
Part6
Prov for Overdue Authorized Reinsurance
prov = 20%*paid recoverables over 90 days overdue
Include disputed balances
