First off, it seems from SSAP 62 that there is a difference between the two.
Retroactive reinsurance covers claims that occurred prior to the effective date of the contract. While retrospective reinsurance covers claims that occur after the effective date of the policy and the premium can be adjusted based on loss experience (contingent commissions).
Where I am confused is the SSAP 62 example on page 37-38. I thought that if risk transfer were present we could account for reinsurance with contingent commissions as prospective and then book a liability if additional commission is due. However, the example is footnoted saying that the reinsurance premium is booked as an expense and does not flow through schedule F or schedule P, and that rather than decreasing the reserves, the ceding books a contra liability for the reserves transferred.
Anyone know of any past exam problems that address contingent commissions to see if it is consistent with the SSAP 62 example?
Retroactive reinsurance covers claims that occurred prior to the effective date of the contract. While retrospective reinsurance covers claims that occur after the effective date of the policy and the premium can be adjusted based on loss experience (contingent commissions).
Where I am confused is the SSAP 62 example on page 37-38. I thought that if risk transfer were present we could account for reinsurance with contingent commissions as prospective and then book a liability if additional commission is due. However, the example is footnoted saying that the reinsurance premium is booked as an expense and does not flow through schedule F or schedule P, and that rather than decreasing the reserves, the ceding books a contra liability for the reserves transferred.
Anyone know of any past exam problems that address contingent commissions to see if it is consistent with the SSAP 62 example?
Retroactive vs. Retrospective Reinsurance SSAP 62
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