《【英文合同模板】Accounting and Disclosure for Property》由会员分享，可在线阅读，更多相关《【英文合同模板】Accounting and Disclosure for Property（8页珍藏版）》请在金锄头文库上搜索。
1、Accounting and Disclosure for Propertyand Casualty Reinsurance ContractsNational Association of Mutual Insurance CompaniesReinsurance Association of AmericaPurpose of this ReportIn response to recent and ongoing investigations of a few (re)insurance transactions, there have been several media report
2、s, rating agency reports and investment analyst reports which have profiled (re)insurance transactions as “finite (re)insurance”, “financial (re)insurance” or “financial engineering (re)insurance” products. Many of these reports appear to have broadly mischaracterized finite reinsurance as a device
3、of form over substance, used by purchasers to misstate their financial position and operating results. The topic of property and casualty reinsurance accounting and disclosure is challenging because it sometimes involves accounting for complex contracts that embody varying degrees and types of risk,
4、 which may create uncertainty about the range of possible outcomes. As a consequence, each (re)insurance transaction must be evaluated on its own facts and circumstances. The issues surrounding the accounting and reporting for property and casualty reinsurance contracts are not new, as evidenced by
5、the extensive literature which embodies Generally Accepted Accounting Principles (“GAAP”) and Statutory Accounting Principles (“SAP”), along with extensive guidance and interpretations, that has evolved over the past 30 years. Current GAAP and SAP accounting guidance, when properly applied, provides
6、 the appropriate framework to evaluate the economic substance of reinsurance transactions and the appropriate framework for establishing the proper financial accounting and reporting disclosures to address the needs of a broad user base. This report focuses on the development of those current financ
7、ial accounting and disclosure requirements for property and casualty reinsurance transactions. IntroductionReinsurance, when properly structured, provides legitimate economic benefits to ceding insurers. Those benefits include managing volatility of underwriting, credit, investment timing and other
8、risks, capital financing through surplus relief, reduced volatility of financial results and increased underwriting capacity. These benefits are appropriately recognized in the current accounting model for property and casualty reinsurance contracts.Finite reinsurance provides value to the cedant. L
9、ike other reinsurance contracts, a finite reinsurance contract is subject to the GAAP and SAP risk transfer and accounting and disclosure rules for reinsurance contracts. GAAP and SAP accounting and risk transfer rules are comprehensive, have evolved over many years and provide detailed guidance for
10、 accounting and disclosure of property and casualty reinsurance transactions. Finite reinsurance contracts contain most of the same features as other reinsurance contracts. Finite contracts are generally more structured than so-called “traditional” reinsurance contracts in that they often have more
11、specific or defined (finite) limits on the amount of insurance risk assumed by the reinsurer, and accordingly can be less costly for the cedant.Although finite contracts may provide for less risk transfer (indemnification) by the cedant they must still meet the accounting literature risk transfer re
12、quirements to qualify for reinsurance accounting. In order to qualify for reinsurance accounting and provide underwriting accounting benefit to the cedant, all reinsurance agreements (whether characterized by the parties as “traditional” or “finite” or not characterized at all) must transfer insuran
13、ce risk to the reinsurer. The principles-based GAAP and SAP risk transfer standards require that (a) the reinsurer assumes significant insurance risk (underwriting risk and timing risk) under the reinsured portions of the underlying insurance agreements; and (b) it is reasonably possible that the re
14、insurer may realize a significant loss from the transaction.To the extent that the accounting risk transfer thresholds are not met, the reinsurance transaction is accounted for as a deposit. The treatment of reinsurance transactions as deposits does not mean that economic risk has not been transferr
15、ed. It just means that the nature and the amount of the risk transferred do not sufficiently conform to the accounting literature definition of risk transfer to be afforded reinsurance accounting treatment. Finite reinsurance contracts receive close scrutiny by the parties to the contract and their
16、independent auditors, primarily to determine whether the contract should be accounted for as reinsurance or as a deposit. If the cedant is marginally capitalized, the transaction is scrutinized and in certain cases pre-approved by state insurance regulators. Similarly, rating agencies review significant reinsurance transactions. Because of the extent and nature of the authoritative accounting and reporting
