Government Reinsurance, Funding and Indemnity Net of Private Insurance
Hi,
I have some questions from the Battle Quiz 5 after going through them:
For the Govt Reinsurance, the battle quiz says that "Province may finance deficit as they occur versus regularly contributing to a Gov't reinsurance fund (Government should be the Reinsured, but who is the Reinsurer?). Yet from the Responsibilities and Roles, it says Federal Government is the one who to provide financing mechanism during deficit position. So is it planned by Federal and executed by Province Govt?
For the funding mechanism on Government Reinsurance, it says Provincial producer program contribute a % of premium to (provincial & federal) reinsurance. Does that mean out of the Production Insurance Program, there are always a % of premium go to another Reinsurance Program from the pool, which kind of tie to the 1st point, but who is the "Province" and who is Provincial producer program", I think here is what I am confused in given I understand the Funding from Production Insurance is Producer-Provincial-Federal Partnership.
When triggering Govt reinsurance, Indemnity Net of Private Insurance are paid out of production insurance fund first. Can you please elaborate more here? I thought the Private Insurance is something like uncovered peril like Fire, why shall it be related here? Or it basically means the Government Reinsurance pay lastly if there is any possible recovery before? or Government Reinsurance actually cover more than the Scope of Agri-Insurance?
Sorry, I am quite lost when going over the last few battle cards. 
Thanks and Warm Regards,
Wilson
Comments
I have pasted that short section from the source text below. Note that it doesn't provide many details. Take a look and see if that answers your questions. I think for this, all you have to do is memorize a few key points. (About your first question: the government is the reinsurer.)
Okay, Maybe the Government Reinsurance is purely Optional Deficit Financing mechanism, it is just where a fund can help to recover the deficit. And maybe the premium is on top of those Prem$ charged from Production Insurance Program I think...
I think in either case, the producer is compensated. The mechanism just depends on what the government in each province wants to do. They can either make sure there is a properly capitalized fund for when claims occur or they can finance deficits when claims occur.
(It seems like the paragraph above from the source text is saying that a properly capitalized fund would be considered reinsurance, whereas deficit financing would not be.)
Thanks Graham, I think it is fine. Either properly capitalized fund or deficit financing, the producer will be compensated!
Yup!
Hi,
I have trouble understanding this:
provincial production programs contribute a % of their premiums to the provincial and federal reinsurance funds based on their surplus position, the % of contribution is lower when the financial position is stronger and vice versa.
How come we contribute less when there's more surplus in the fund? it sounds like we contribute more when there's less surplus, imagine the surplus is 0 or negative, we won't be able to contribute any, how can we contribute more than usual??
Thanks,
We contribute less to the fund when it is in a big surplus because it is financially strong.
We contribute more to the fund when it is in deficit/ low surplus because it is in a financially weak position
"it sounds like we contribute more when there's less surplus, imagine the surplus is 0 or negative, we won't be able to contribute any, how can we contribute more than usual" I think you may need to rephrase this because it seems contradictory
We contribute less to the fund when it is in a big surplus because it is financially strong.
I think I was confused about which funds and surplus we're referring to, this is what I understand it now, can you please confirm this is correct?
We(the provincial production insurance program) contribute less to the fund(provincial/federal reinsurance fund) when it(the reinsurance fund) is in a big surplus because it is financially strong.
Yup you have it spot on
Is provincial production insurance program the same thing as provincial producer programs stated in the Battle Cards?
Yes it is
does the 2nd paragraph from the source text refers to the reinsurance load included in the premium? or the reinsurance load only accounts for private reinsurance which seems to be separate from government reinsurance?
No, the reinsurance load is only for private reinsurance (page 18)