Which combination is required for funds held or deposited with reinsured companies to be admitted assets?

• A. Do not exceed the liabilities they secure
• B. The reinsured is solvent
• C. Both Do Not Exceed and The Reinsured is Solvent
• D. Funds must be held in a bank in the issuing country

Answer: (C)

When funds held with reinsurers are counted as admitted assets, two safeguards are required. First, the amount deposited must not exceed the liabilities it backs, so the asset is tied directly to a specific obligation and not overfunded beyond what it can support. Second, the reinsured must be solvent, ensuring the funds will actually be available if a claim is paid. Together, these conditions ensure the asset is reliable and collectible, providing real value to meet policyholders’ obligations. The location of the bank or country isn’t the determining factor; the crucial points are the exact linkage to the liability and the reinsurer’s solvency.