Provision for Authorized Non Slow Paying reinsurer is:

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Multiple Choice

Provision for Authorized Non Slow Paying reinsurer is:

This question tests how to recognize credit risk on recoverables from a reinsurer that is not paying promptly. For an Authorized Non Slow Paying reinsurer, the standard approach is to set aside a provision on the portion of recoverables that are overdue beyond a 90-day age. The amount of the provision is 20% of those recoverables that are past 90 days overdue. This reflects the higher likelihood that very old balances may not be collectible. For example, if the recoverables overdue beyond 90 days total 500, the provision would be 0.20 × 500 = 100. The other options don’t fit because they either use the wrong base (paid recoverables, unsecured total recoverables) or apply the threshold and rate incorrectly (e.g., including recoverables not yet overdue, or using a different overdue period or percentage).

This question tests how to recognize credit risk on recoverables from a reinsurer that is not paying promptly. For an Authorized Non Slow Paying reinsurer, the standard approach is to set aside a provision on the portion of recoverables that are overdue beyond a 90-day age. The amount of the provision is 20% of those recoverables that are past 90 days overdue. This reflects the higher likelihood that very old balances may not be collectible.

For example, if the recoverables overdue beyond 90 days total 500, the provision would be 0.20 × 500 = 100.

The other options don’t fit because they either use the wrong base (paid recoverables, unsecured total recoverables) or apply the threshold and rate incorrectly (e.g., including recoverables not yet overdue, or using a different overdue period or percentage).

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