Can somebody explain the concept of requiring reinsurers to deposit back? I heard it in sound revise and had not heard of it before. Good luck for Tuesday all!!
Hi Deposits back refers to the reserve in respect of the reinsurer's part of the liability being held by the insurance company rather than the reinsurer. In the event of a claim, the reinsurer then just has to "make up" the shortfall between their share of the claim amount and the reserve. Regulation may require deposits back (to reduce the insurance company's counterparty risk exposure). Even if not required, it may be done anyway, so that the insurance company has the full policy reserves to invest (as presumably the insurance company will have better investment skills than the reinsurance company). If you want to look this up in the notes, it's in Chapter 26, Section 2.3. Best of luck for next week Lynn
