What Does Reinsurance Recoverables to Policyholder Surplus Mean?
Reinsurance recoverable to policyholder's surplus refers to the method used to show how dependent the insurance company is to its reinsurer. This is done by calculating the amount given to policyholders by the insurance company and the amount provided by the reinsurers. When the calculation shows that the ratio is high, it means that reinsurance dependency is also high.
Insuranceopedia Explains Reinsurance Recoverables to Policyholder Surplus
As part of insurance regulation, an insurance company provides financial reports. These reports show the amount that they have given to their policyholders for claims and benefits. They also show how much the reinsurers have provided for coverage. If they show that the reinsurers have given remarkable contributions, this means that the insurance company is very dependent on its reinsurers. This presents a problem. It could mean that the insurance company is not quite financially solvent. It could also alert the reinsurer and raise the price for reinsurance.