Which of the following is an example of what might be disclosed as 'special surplus generated' in retroactive reinsurance notes?

Prepare for the CAS Exam 6 with detailed study materials. Use flashcards and multiple-choice questions, each with hints and explanations, to get exam-ready!

Multiple Choice

Which of the following is an example of what might be disclosed as 'special surplus generated' in retroactive reinsurance notes?

Special surplus generated refers to the one-time gain created by the retroactive reinsurance arrangement. When a cedant enters into retroactive terms, the deal can settle or modify the present value of older liabilities in a way that produces an unusual, timing-related surplus on the books beyond normal ongoing results. The disclosed amount captures this net, non-recurring benefit directly tied to the structure of the retroactive deal. Paying premiums, outstanding reserve balances, or routine investment income represent ongoing cash flows or existing balances, not the additional, one-off surplus created by the retroactive transaction.

Special surplus generated refers to the one-time gain created by the retroactive reinsurance arrangement. When a cedant enters into retroactive terms, the deal can settle or modify the present value of older liabilities in a way that produces an unusual, timing-related surplus on the books beyond normal ongoing results. The disclosed amount captures this net, non-recurring benefit directly tied to the structure of the retroactive deal.

Paying premiums, outstanding reserve balances, or routine investment income represent ongoing cash flows or existing balances, not the additional, one-off surplus created by the retroactive transaction.

More practice questions