Insurance - PricewaterhouseCoopers

1.6
Reinsurance
Overview
In 2008 several changes were made mainly with respect to the reinsurance
recoverables in order to recognise the greater risk associated with the non-APRA
authorised reinsurers and with respect to premium cession limits to prevent fronting
following the DOFI requirements. The changes were effective from 1 January 2009
unless stated otherwise.
The key changes are as follows:
•
•
•
•
•
•
•
For reinsurance arrangements incepting after 31 December 2008, capital factors
applicable to reinsurance recoverables due from non-APRA authorised reinsurers
will be increased (see section 2.5.1.4 for further details);
Reinsurance arrangement contracts incepting prior to 1 January 2009 will be
grandfathered so no additional capital charges will apply in respect of existing
reinsurance arrangements;
Greater scrutiny will be applied to reinsurance arrangements incepting prior to
1 January 2009 in assessing the security of recoverables under them;
Reinsurance arrangements incepting after 31 December 2008 must stipulate
that Australian law will apply to all the contracts and all disputes will be heard in
the Australian Courts. If this is not specified then reinsurance recoveries will be
excluded from the capital base;
Temporary concessions on intra-group reinsurance will be discontinued
and transitional arrangements considered on a case by case basis
(effective 30 June 2008); and
Premium cessions are to be no more than 90% for Category D and E insurers
(captive insurers including group captives) insurers and 60% for other insurers
(effective 1 July 2008).
PricewaterhouseCoopers | 61
General
insurance