G
gunnert
Member
Hi,
I don't fully understand the concept of reinsurance deposit back and would appreciate any help.
I understand that the first step in a surplus relief Fin Re arrangement is that the insurer transfers the reserve for the reinsured business to the reinsurer, and that the reinsurer typically deposits this back with the insurer. The second step is that the reinsurer advances a capital sum to the insurer in return for first call on the surpluses arising on the reinsured business.
I can see how the second step improves the insurer's solvency as assets go up (due to capital advance) but liabilities are unchanged due to contingent nature of future surpluses arising. However, I don't see what the role of the first step is.
Thanks
I don't fully understand the concept of reinsurance deposit back and would appreciate any help.
I understand that the first step in a surplus relief Fin Re arrangement is that the insurer transfers the reserve for the reinsured business to the reinsurer, and that the reinsurer typically deposits this back with the insurer. The second step is that the reinsurer advances a capital sum to the insurer in return for first call on the surpluses arising on the reinsured business.
I can see how the second step improves the insurer's solvency as assets go up (due to capital advance) but liabilities are unchanged due to contingent nature of future surpluses arising. However, I don't see what the role of the first step is.
Thanks