I'm a bit confused about how UEP is ceded under SAP. Suppose an insurer writes a single policy on 1/1 for $10 of direct premium. It immediately purchases an earthquake reinsurance cover for $1. It's net UEPR is $9, and the reinsurer has UEPR of $1.
On 7/1 there is an EQ loss and the reinsurance cover is blown -- per SAP the premium immediately becomes fully earned, so the reinsurer's UEPR - $0. Does this adjustment effect the net UEPR of the cedant in the same way? Upon this loss, does its UEPR increase from $4.5 to $5?
On 7/1 there is an EQ loss and the reinsurance cover is blown -- per SAP the premium immediately becomes fully earned, so the reinsurer's UEPR - $0. Does this adjustment effect the net UEPR of the cedant in the same way? Upon this loss, does its UEPR increase from $4.5 to $5?
Earning of Ceded Premium
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