Administrative Business reinsurance accounting

This section describeshow the co-insurers reinsurance of premium and claims is handled in the system when your company administer both the co-insurance and the reinsurance on behalf of the co-insurers.

For more information on how to set up co-insurance structure when you company administers the co-insurers reinsurance on their behalf, refer to the chapter Set Up Co-Insurance Structure and Administer Reinsurance on behalf of Co-Insurers.

The Administrative Business reinsurance accounting is based on the functionality of handling administration of co-insurance through bookings on Insured’s Contract level, from the moment when the closed worksheet (technical / claim) “lands” on the placements, including the generated reversed balances for the Administrative businesses.

When you make a technical booking on the Insured’s Contract, the system will automatically book on the linked Policy Ceded/Assumed and Administrative Businesses according to each of these businesses Share of the Co-Insurance Agreement. In addition, the system will generate preliminary bookings to the proportional reinsurance of the Policy Ceded/Assumed Business.

When the Administrator also handles reinsurance on behalf of the co-insurers, the system will do the same for the Administrative Business.

Handling Co Insurers Reinsurance Accounting #

Principles

All bookings on the Administrative Business will be carried through to reinsurance. There will however not be calculated any deductions on ORP level on balances originating from the reversed balances of Administrative Business.

The co-insurers will not be provided with information related to reinsurance commission or the fee to be paid to the administrator of reinsurance.

Instead the reinsurance administration fee is assumed to be agreed upfront.
It is however not recorded, but will be represented by the difference between the booked reinsurance commission coming from the reinsurers (receivable) and the common account fee to be paid to the administrator.

Premium/Claim booking details

• Inward ‘normal’ bookings of premiums/commissions and claims originating from Administrative Business are carried through the reinsurance process the same way as for Policy Ceded/Assumed Business bookings, including calculation of commissions according to ORP Deduction Condition

• Treaty Outward Cedent’s Contract/ Placements:

• Preliminary bookings: OCC As Original

• Retrocession Calculation Order: OCC/ORP ‘As Booking’

• Retrocession Account Order: ORP ‘As Account’

• Facultative Outward Cedent’s Contract/Placements:

• ‘As Booking’: FAC OCC

• ‘As Booking’and ‘As Account’: FAC OCC Placements (ORP)

• Whether or not bookings are generated to FAC OCC at all or generated with open or closed worksheet is depending on the selected Premium Basis of the Facultative Outward Cedent’s Contract. For further description of functional impact of Premium Basis, see Add Business Information in chapter Handle Business Life Span Reversed balances

• Reversed balances originating from Administrative Business (including Admin Fee) are also generated as preliminary bookings

• These bookings are exempt from commission calculation on ORP level and get the co-insurer as Payment/Responsible Partner

• The source information such as Business Id and Payment/Responsible Partner (co insurer) is kept throughout the process Worksheet Id

Preliminary bookings generated to an OCC from balances of Policy Ceded /Assumed Business and Administrative Businesses originating from the same worksheet of the Insured’s Contract will get the same Worksheet Identifier.

The worksheet is split into balances representing the payment/responsible partner (one balance for ‘normal’ bookings, one for each of the balances originating from reversed bookings of the Administrative Businesses).

• **Changing Retroceded share on Administrative Business
  ** Retroactive changes of bookings will not be triggered for proportional protection of Admin Businesses.
  Manual adjustments may be required.

• Preliminary Booking Order dos not process IC and its placements (nor Administrative businesses)

• The functionality is supported under the following preconditions:

• Share condition at placement level has not been subject to amendments and is inherited throughout the section hierarchy

• Deduction / Administrator’s Fee at placement level has not been subject to amendments

If you want more details on reinsurance of co-insurance as part of a more general process; like preliminary bookings, creating Retrocession Calculation order, etc. see the section describing the particular process within the Prop Retro Accounting chapter.

**EXAMPLE OF PREMIUM/COMMISSION FLOW
when Administrative business is protected by Facultative Outward Cedent’s Contract:
**(the same principles apply for Treaty Outward Cedent’s Contract provided the required Retrocession orders are run)

Insured Contract - IC with placements:

1. Policy Ceded /Assumed Business - PAB/IAB

• Co-insurer: Vesta - Base Company/Administrator
• Share 40%
• Reinsurance: FAC OCC 80% (Premium Basis: Proportional Premium)

2. Administrative Business - XAB1

• Co-insurer: Troll
• Share 20%
• Admin Fee 5%
• Reinsurance: FAC OCC 60% (Premium Basis: Proportional Premium)

3. Administrative Business - XAB2

• Co-insurer: Vega
• Share 40%
• Admin Fee 5%
• Reinsurance: No proportional protection

4. FAC OCC

• FAC OCC RP1: Share 40%, Commission 20%
• FAC OCC RP2: Share 60%, Commission 15%

(1) Balances to be paid by the Insured to the Co-Insurer/Administrator (Vesta)

(2) Balances to be paid by the Administrator to the Other Co-Insurers

(3) Net Balance in Administrators favor

(1) Balances to be paid by the Co-Insurer/Administrator (Vesta) to the Reinsurers.

(2) Balances to be paid by the Other Co-Insurer (Troll) to the Administrator (Vesta).

(3) Net Balance against Other Co-Insurer (Troll) in Administrators favor

Alternative Handling of Reinsurance Commission #

Reinsurance Commission to Co-Insurers

With this option all bookings on the Administrative Business will be carried through to reinsurance except for Administration Fee.

The Reinsurance commission related to the premium ceded on behalf of the co-insurer will be calculated also for the reversed balances and thereby be exposed to the co-insurer.