How is reinsurance assets impairment treated?

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How is reinsurance assets impairment treated?

Reinsurance assets represent amounts expected to be recovered from reinsurers, so they are examined for impairment at the reporting date because their collectibility depends on the reinsurer’s credit risk and the expected cash flows, not on market swings. Impairment is recognized only when there is objective evidence that not all amounts due will be received, and the amount can be measured reliably. In practice, this means looking for signs like reinsurer insolvency, default, significant financial difficulty, or disputes over settlements. When such evidence exists, estimate the recoverable amount (often the present value of expected future cash inflows, taking into account any collateral) and compare it to the carrying amount. The difference is recorded as an impairment loss. If there are no objective impairment indicators, no write-down is taken, even if market values fall. The option about impairment arising from a policyholder’s death is not relevant to the recoverability of reinsurance assets.

Reinsurance assets represent amounts expected to be recovered from reinsurers, so they are examined for impairment at the reporting date because their collectibility depends on the reinsurer’s credit risk and the expected cash flows, not on market swings.

Impairment is recognized only when there is objective evidence that not all amounts due will be received, and the amount can be measured reliably. In practice, this means looking for signs like reinsurer insolvency, default, significant financial difficulty, or disputes over settlements. When such evidence exists, estimate the recoverable amount (often the present value of expected future cash inflows, taking into account any collateral) and compare it to the carrying amount. The difference is recorded as an impairment loss.

If there are no objective impairment indicators, no write-down is taken, even if market values fall. The option about impairment arising from a policyholder’s death is not relevant to the recoverability of reinsurance assets.

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