Hi, I would like to ask about treatment of reinsurance premiums under Solvency II. So far, I've only seen mention about treating PV of expected recoveries from reinsurance as an asset in the Core reading and questions solutions. If question asks about impact of reinsurance on the balance sheet, it just mentions that reinsurance premium paid reduce assets. It is clear, that if it's paid by single premium it will just reduce assets immediately. However, what about expected reinsurance premiums paid in the future? Are the expected reinsurance recoveries reduced by the PV of these and shown netted down in the Asset column? Similarly I would like to ask about reinsurance commissions. Thank you. Best wishes, Michal
Hi - see the thread here re future reinsurance premiums: https://www.acted.co.uk/forums/index.php?threads/reinsurance-under-sii.11574/ In terms of reinsurance commission, if this is paid to the insurer with no obligation to repay (eg under an original terms treaty) then this simply increases assets (cash received). If it is a financing commission arrangement (ie basically a loan), then again the commission amount will increase assets (cash received) but there may well be a need to recognise the offsetting liability to repay the loan - particularly if the repayments are due from future profits that would otherwise be recognised on the Solvency II balance sheet. If the loan repayments are made via higher future reinsurance premiums, then their recognition will depend on the point about contract boundaries as per the above-mentioned thread. Hope that helps.
