6Reinsurance

6                      Reinsurance

Reporting by Cedants

6.1 A cedant shall recognise:

(a) premiums ceded to reinsurers as reinsurance expenses;

(b) claim recoveries and commissions from reinsurers as income; and

(c) claim recoveries and other inflows not yet received from a reinsurer as an asset.

6.1.1 Life insurers may reinsure some of their business.  The cedant remains responsible for the total amount of successful claims of policyholders and, through reinsurance arrangements, may be entitled to recover amounts relating to some of those claims.

6.1.2 Reinsurance contracts are considered to be separate transactions from the original life insurance contracts and therefore give rise to separately recognisable amounts.  The cedant recognises the gross amount of premiums received in accordance with paragraphs 5.1 and 5.2 and, where portions of the policies are reinsured, the ceded premiums are recognised as expenses (except where they would otherwise be recognised as deposits, if not reinsured).  Any recoveries from reinsurers are recognised as income by the cedant (except for any amounts representing the return of deposits).  Consistent with this approach, the gross amount of life insurance liabilities is recognised as a liability and claim recoveries not yet received from a reinsurer are recognised as a receivable by the cedant.

Reporting by Reinsurers

6.2 Inwards reinsurance premiums and outwards reinsurance claims shall be recognised by the accepting reinsurer as for premiums and claims in accordance with paragraphs 5.1 and 5.2.  Life insurance liabilities assumed shall be recognised as a liability by the accepting reinsurer in accordance with section 8.

6.2.1 From the perspective of the reinsurer, reinsurance premiums accepted are recognised in the same way as the cedant treats the acceptance of premiums under a direct insurance contract.  Correspondingly, claims paid and payable to direct insurers are recognised as expenses by the reinsurer.  Consistent with these treatments, life insurance liabilities assumed are recognised as a liability by the accepting reinsurer.