Accounting treatment of retroactive reinsurance between affiliates: how is the consideration paid treated?

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Accounting treatment of retroactive reinsurance between affiliates: how is the consideration paid treated?

In this situation the payment for retroactive reinsurance with an affiliate is treated as a deposit with the affiliate and shown as a non-admitted asset. Under statutory accounting, amounts paid to related parties for retroactive arrangements aren’t considered a recoverable asset or revenue. They’re placed in a deposit category because they’re effectively a temporary transfer within the same corporate group and aren’t available to meet policyholder obligations in a way that would allow admission on the balance sheet. So, the proper treatment is to classify the consideration as a non-admitted asset, not as revenue, not as an increase in admitted assets, and not as a reduction of liabilities.

In this situation the payment for retroactive reinsurance with an affiliate is treated as a deposit with the affiliate and shown as a non-admitted asset. Under statutory accounting, amounts paid to related parties for retroactive arrangements aren’t considered a recoverable asset or revenue. They’re placed in a deposit category because they’re effectively a temporary transfer within the same corporate group and aren’t available to meet policyholder obligations in a way that would allow admission on the balance sheet. So, the proper treatment is to classify the consideration as a non-admitted asset, not as revenue, not as an increase in admitted assets, and not as a reduction of liabilities.

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