What is portfolio reinsurance?

• A. It covers a single line of business.
• B. It is accounted as a fronting arrangement.
• C. It is a form of insurance risk transfer that is always proportional.
• D. It is the transfer of entire segments of business and is treated as retroactive reinsurance.

Answer: (D)

Portfolio reinsurance involves transferring a large block of in-force business from the ceding company to a reinsurer, rather than reinsuring individual policies. By bundling policies into a portfolio, the contract can transfer the entire segment of business and the associated liabilities, which is the defining feature of this approach.

When the transfer applies to policies that have already been issued and for which liabilities exist or will arise, the arrangement is typically accounted for as retroactive reinsurance. This reflects the transfer of past or current risk and the liability relief for that block of business. It’s not limited to proportional reinsurance, so it can be either proportional or non-proportional. It also isn’t a fronting arrangement, which typically involves the primary insurer issuing the policy but ceding risk while maintaining responsibility for the policy with the reinsurer.

So the best description is the transfer of entire segments of business, treated as retroactive reinsurance.