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.

  • :) Sounds good, thank you!

Sign In or Register to comment.