Risk Factor for capital requirement of unregistered reinsurer
Hi,
I saw there is one change in the source material regarding to the risk factor for the capital requirement of unregistered reinsurer:
"The margin is 20% of “Unearned premiums ceded to assuming insurer” and “Outstanding losses recoverable from assuming insurer” (collectively, “ceded policy liabilities”). "
Later under the "Transaction" it goes:
Policy liabilities ceded on or before December 31, 2019 and any associated new claims or development on incurred claims are subject to a 15% margin required until December 31, 2022"
I noticed in the past we have been always used 15% as the risk factor for this component. My guess we can still use 15% as long as the ceded policy liabilities follow the second statement above. Can you please confirm?
Thanks!
Comments
Yes, that's correct. The transition date is still in the future, so you can use 15% for the upcoming exam. After that it gets more complicated for a couple of years during the transition period, then it switches to 20% for all policies.
It's good to know this because the change from 15% to 20% could be significant for some insurers.
Note that this is mentioned in the practice template for the unregistered reinsurance component of insurance risk.