Deposits Back

Discussion in 'SP1' started by Aubameyang, Mar 23, 2021.

  1. Aubameyang

    Aubameyang Made first post

    Why do the notes only mention deposits back under an original terms arrangement?

    Could the reinsurer's share of the reserves not also be deposited back under a risk premium arrangement?

    Thanks
     
  2. Sarah Byrne

    Sarah Byrne ActEd Tutor Staff Member

    Hi

    This question was previously asked in the SP2 forum. You can find the answer from one of the tutor's here:
    https://www.acted.co.uk/forums/index.php?threads/reinsurance-deposits.14639/

    To summarise, whilst it is possible with either type of reinsurance, for risk premiums policies, the premiums paid by the insurer to the reinsurer are generally reviewed each year. The reinsurer will only therefore have to hold reserves for the next year of potential claims. So, the reinsurer is not holding significant reserves for risk premium policies and there is not really much to 'deposit back'. However, original terms are covered or much longer terms and therefore the reinsurer will hold reserves for the whole period of reinsurance and reserves could be significant. Therefore there is more reserve to 'deposit back' for original terms reinsurance.

    I hope this helps.

    Kind regards
    Sarah
     
    Aubameyang likes this.

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