Statutory Issue Paper No62R - Reinsurance Focus

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Property and Casualty Reinsurance SSAP No. 62R AUTHORITATIVE LITERATURE Generally Accepted Accounting Principles FASB Statement No. 113, Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts FASB Emerging Issues Task Force Issue No. 93-6, Accounting for Multiple-Year Retrospectively Rated Contracts by Ceding and Assuming Enterprises RELEVANT ISSUE PAPERS Issue Paper No. 75—Property and Casualty Reinsurance Issue Paper No. 137—Transfer of Property and Casualty Reinsurance Run-off Agreements © 2009 National Association of Insurance Commissioners 62-22
Property and Casualty Reinsurance SSAP No. 62R CLASSIFYING REINSURANCE CONTRACTS Was the contract entered into, renewed, amended, or does the contract have an anniversary date (i.e., multi-year contract) during or after 1994? Yes Has the reinsurer assumed significant insurance risk, both as to timing of risk (including timely reimbursement) and amount of insurance loss under the reinsured portions of the underlying contracts? Yes Is it reasonably possible that the reinsurer may realize a significant loss from the transaction? Yes The contract has transferred risk and should be accounted for as reinsurance in accordance with SSAP No. 62. No No No Yes The contract would be “grandfathered” and accounted for in accordance with Chapter 22 of the NAIC Accounting Practices and Procedures Manual for Property/Casualty Insurance Companies dated January 1992. Has the reinsurer assumed substantially all of the risk relating to the reinsured portion of the underlying contract (i.e., the reinsurer is in the same economic position as the reinsured)? No The contract has not transferred risk and should be accounted for as a deposit. Any previously recognized gains and losses should not be restated, and existing balances should be reclassified as deposits. Does the contract only reinsure losses from insured events that may occur after the date the contract is entered into? Yes Account for the contract as a prospective reinsurance. No Does the contract only reinsure losses from insured events that occurred prior to the date the contract is entered into? Yes Account for the contract as a retroactive unless paragraph 31 exceptions are met, then account for either prospective reinsurance or as indicated. No Is it practicable to identify and account separately for the prospective and retroactive portions of a blended contract? No Yes Account for the prospective and retroactive components separately. © 2009 National Association of Insurance Commissioners 62-23
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Statutory Issue Paper No62R - Reinsurance Focus

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