Which statement is true about disclosures when unsecured reinsurance recoverables exceed the threshold?

• A. Disclosures are required only if collateral is provided.
• B. The threshold is 2% of surplus and collateral matters.
• C. Recoverables exceed 3% of surplus and there is no collateral, disclosure is required.
• D. Disclosures are required regardless of collateral and threshold.

Answer: (C)

The key idea is that disclosures for reinsurance recoverables hinge on credit risk: if the recoverables are unsecured and large relative to the insurer’s surplus, there’s a requirement to disclose the concentration of risk. The rule uses a threshold of 3% of surplus, and whether collateral exists matters because collateral can reduce the apparent risk.

In this scenario, the unsecured recoverables exceed 3% of surplus and there is no collateral. That combination meets the disclosure trigger, so the statement is true: you must disclose the reinsurance recoverables under these conditions.

The other options don’t fit because disclosures are not limited to cases with collateral, the threshold is not 2% (it’s 3%), and disclosures aren’t automatic regardless of collateral and threshold.