Unauthorized Reinsurance

Unauthorized Reinsurance

The sale of an insurance policy to a reinsurer that is not allowed to do business in a state. For example, an insurance company in Oklahoma may cede some of its policies to a reinsurer only authorized to operate in Texas. Selling unauthorized reinsurance is illegal.
References in periodicals archive ?
More than 80 percent of unrated reinsurance transactions are unauthorized reinsurance that includes various types of alternative risk transfers.
insurance regulators applied the Credit for Reinsurance Model Law to unauthorized reinsurance (Cole, McCullough, and Powell, 2010).
A concern regarding collateralization is that insurers that are more likely to be downgraded may choose to use more unauthorized reinsurance with collaterals to lower credit risks.
where Z is a set of factors affecting the usage of unauthorized reinsurance or ratings, which includes investment yield, the ratio of junk bonds to surplus, the percentage of business in catastrophic risk exposed lines, premium to surplus ratio, reserve to surplus ratio, combined ratio, BCAR, log asset, lagged financial rating, industry combined ratio, single unaffiliated firm dummy, and publicly traded firm dummy.
75 percent, and the ratio for unauthorized reinsurance recoverable is 0.
Such reserves include unauthorized reinsurance, excess of statutory loss reserves over statement reserves, dividends to policy-holders undeclared, and other similar reserves established voluntarily or in compliance with statutory regulations.
If the rent-a-captive is acting as a reinsurer, it will be required to establish some form of security, either a trust fund or a letter of credit, with the fronting carrier, to allow the carrier to take credit for the unauthorized reinsurance on its statutory statement.
special report indicates that the use of unauthorized reinsurance is growing in the U.
The rate of unauthorized reinsurance ceded premiums increased from 21% in 1996 to 35% in both 2005 and 2006.
P/C industry's total exposure to credit risk on unauthorized reinsurance during the 11 years held relatively steady, and the net credit exposure to reinsurance recoverable was $133.
Without proper collateral, the state will deem the transaction to be an unauthorized reinsurance placement and the fronting company will need to use its own surplus to offset the liability created by the policy.
The regulations will restrict the amount of unlicensed or unauthorized reinsurance used by a property/casualty carrier to 25 percent of the total risk.