Actuarial Notes

Uncollectible Reinsurance Reserves

By Bruce E. Ollodart · Casualty Actuarial Society · 1999

Study guide: Exam 6I

A paper by Bruce E. Ollodart introducing concepts and methods for estimating uncollectible reinsurance reserves, which may be required when an insurer or reinsurer has ceded reinsurance losses recoverable that have become uncollectible. Its abstract lists the topics: sources of uncollectible reinsurance, insolvency issues, data sources, relevant legal concepts, financial reporting issues, contract termination issues, reserve estimation methods and federal income tax matters. It concerns loss and loss adjustment expense reserves for property and casualty exposures, under treaty and facultative reinsurance.

On the syllabus

  • Exam 6I — objective D2; section Sources of Uncollectible Reinsurance, pp. 1–17

Introduction

Background

Reinsurance Recoverable Asset Impairment

Sources of Uncollectible Reinsurance

  • The paper groups the sources of uncollectible reinsurance recoveries into three general categories: disputes, financial difficulty and other.
  • Disputes
    • Arise when the ceding company and the reinsurer interpret complex contract language differently in a way that materially changes the recovery and cannot be resolved easily; attorney involvement is usually required to estimate reserves for disputed reinsurance.
  • Financial Difficulty
    • The author's label for reinsurers that have trouble paying their claims: those that pay late, pay only a portion of what they owe, or cannot pay at all.
    • Late Payers
    • Weakening Financial Strength
    • Receivership
      • Rehabilitation
      • Liquidation
      • Information on Receiverships
  • Other Sources of Uncollectible Reinsurance
    • The two most common are governmental/legal actions and criminal actions.
    • Governmental/Legal Actions
    • Criminal Actions

Offset Rights

Cancellation, Commutation, and Novation

Tax Issues

Estimating Uncollectible Reinsurance Reserves

  • Source of Loss Fact Sheet
  • Specific Versus Bulk Sources of Uncollectible Reinsurance
  • Estimate of Total Exposure
    • Accuracy and Credibility
    • Adjustable/Special Reinsurance Contract Features
  • Credits
  • Probability of Future Liquidation

An Example

Sources

  • Uncollectible Reinsurance Reserves (Bruce E. Ollodart, CAS Forum archive) — the document: title, author, abstract and introduction for the lead, the table of contents and bookmark outline for the divisions, and the text of the Sources of Uncollectible Reinsurance section (sha256 7122230a888ae8b4…); the paper prints no date or publisher, so the year (1999) is taken from the content outline and the CAS as publisher from its hosting the paper in its Forum archive
  • CAS Exam 6I Content Outline, Fall 2026 — the citation ("Ollodart, B. E. … 1999"), objective D2 and the scope (Section Sources of Uncollectible Reinsurance, pp. 1–17)