Under SII is an asset whereas under SI liability net of reinsurance was shown on the BS. But what are the reinsurance recoveries? The act ed and core notes do not give any examples from real life.....
They are the amounts expected to be received from reinsurers in the event of claims on policies. So if there's a claim on a £100,000 policy that has been 12% quota-share reinsured, then the reinsurance recovery would be £12,000. Under SI, the net claim of £88,000 would be reserved for, but SII takes the view that as the insurer is ultimately responsible for the full amount, the full £100,000 is included in the liability valuation and the £12,000 expected recovery (allowing for possibility of default) is included within the asset side of the balance sheet.
