Reinsurance Aspects of the NAIC Annual Statement

This set of vocabulary flashcards covers the key terminology, assets, liabilities, and schedules (specifically Schedules D, T, F, and P) involved in the NAIC Annual Statement with a focus on reinsurance transactions and statutory reporting.

National Association of Insurance Commissioners (NAIC) Annual Statement

The uniform financial report that all insurers (primary and reinsurers) file annually with the insurance department of each state in which they are authorized to do business.

Statutory Accounting Principles (SAP)

The accounting principles used to prepare the Annual Statement, designed to provide state insurance regulators with information needed to regulate insurer solvency.

Admitted Assets

Assets approved by a state insurance department for inclusion on an Annual Statement balance sheet, typically meeting minimum requirements and having a predictable market value.

Nonadmitted Assets

Assets that are not permitted to be shown on an insurer’s Annual Statement balance sheet, typically because they are not readily marketable; investment in these reduces policyholders’ surplus.

Liquidity

The ease with which an asset can be converted to cash with little or no loss of value.

Amortized Value

A value used for bonds on the Annual Statement that reflects the payment of principal and interest over time, making the value immune from current market price fluctuations.

Schedule D

A schedule in the Annual Statement that provide detailed information on each bond and stock the insurer holds, including quality ratings and maturities.

Short-Term Investments

A category of invested assets, including bonds, bills, and commercial paper, that have a maturity period of $1$ year or less.

Amounts recoverable from reinsurers

An asset entry on the balance sheet used by primary insurers to show the total amounts recoverable from all reinsurers.

Funds held by or deposited with reinsured companies

An asset entry used by a reinsurer representing funds deposited with a primary insurer.

Losses (Loss Reserve)

A liability entry representing the insurer’s obligation to make payments for losses that have already occurred but have not yet been settled.

Loss Adjustment Expense (LAE) Reserve

An insurer’s obligation to pay expenses related to losses that have already occurred.

Unearned Premium Reserve

A liability entry representing the amount of premiums received from policyholders that are not yet earned.

Reinsurance payable on paid loss and loss adjustment expenses

A liability representing the amount a reinsurer must pay under assumed reinsurance for losses already paid by primary insurers.

Ceded reinsurance premiums payable

A liability indicating premium owed by the primary insurer filing the statement to its reinsurer.

Funds held by company under reinsurance treaties

A liability representing funds from reinsurers that the primary insurer holds, often used to take credit for reinsurance purchased from unauthorized reinsurers.

Provision for reinsurance

A liability representing the total provision for overdue reinsurance and for any collateral deficiency requirement for unauthorized and certified reinsurers.

Treasury Stock

Corporate stock issued as fully paid to a stockholder and subsequently reacquired by the corporation for business purposes.

Contributed Surplus

Money that outside parties have invested in the organization.

Unassigned Surplus

The undistributed or unappropriated surplus amounts.

Underwriting and Investment Exhibit

A supporting document for the Statement of Income’s Underwriting Income section that provides detail on sources of income and information for the balance sheet.

Schedule T

The Exhibit of Premiums Written, which shows written premiums allocated by state or territory.

Schedule F

A schedule containing nine parts with information pertinent to the insurer’s reinsurance activities, including assumed and ceded reinsurance and the calculation of the provision for reinsurance.

Portfolio Reinsurance

Reinsurance involving blocks of business already written by insurers, which can involve known losses or both known and unknown losses.

Certified Reinsurers

Reinsurers domiciled in qualified jurisdictions that meet specific financial strength criteria, allowed to post reduced collateral ranging from $0$ to $100$ percent.

Slow-paying Reinsurer

A categorization for authorized or certified reinsurers based on having a ratio of overdue reinsurance recoverables to total recoverables plus recent payments equal to or greater than $20$ percent.

Schedule P

A complex schedule used for the Analysis of Losses and Loss Expenses, providing supporting data for loss reserves across a historical period of the most recent $10$ years.

Bulk and IBNR Reserves

Reserves for incurred but not reported claims, reopened claims, and aggregate reserves on newly reported claims without specific case reserves.

Loss Development Triangle

The format used in Schedule P – Part 4 to show the history of bulk and IBNR reserves by type of insurance over time.