Reinsurance Recoverables To Policyholder Surplus
What Does Reinsurance Recoverables To Policyholder Surplus Mean?
Reinsurance recoverable from policyholder surplus refers to the method used to illustrate the extent of an insurance company’s dependence on its reinsurer. This is accomplished by calculating the amount paid to policyholders by the insurance company in relation to the amount provided by the reinsurers. When this calculation indicates a high ratio, it signifies a correspondingly high level of reinsurance dependency.
Insuranceopedia Explains Reinsurance Recoverables To Policyholder Surplus
As part of insurance regulation, an insurance company is required to provide financial reports. These reports detail the amount paid to policyholders for claims and benefits, as well as the contributions made by reinsurers for coverage. If these reports reveal substantial contributions from reinsurers, it indicates a high level of dependence on them. This can be problematic, as it may suggest that the insurance company is not fully financially solvent. Additionally, it could raise concerns for the reinsurer, potentially leading to higher reinsurance costs.
