Which statement accurately describes portfolio reinsurance?

• A. It is a form of fronting arrangement.
• B. It transfers risk only for a subset of policies.
• C. It is accounted as non-retroactive reinsurance.
• D. It transfers entire segments of business and is treated as retroactive reinsurance.

Answer: (D)

Portfolio reinsurance is about moving a whole block of business—an entire segment of policies and the associated liabilities—from the ceding insurer to the reinsurer. This structure is typically used to remove significant exposure or to achieve capital relief by transferring not just future risk, but the liabilities that already exist for that block. Because the transfer often involves existing claims and reserves, the usual accounting treatment is retroactive reinsurance, where the reinsurer assumes those past and future liabilities for the ceded portfolio. It isn’t mainly a fronting arrangement, which would involve keeping risk with the ceding company, and it isn’t limited to a subset of policies or described as non-retroactive.