Reinsurance Question

[Bballry1234]

On page 132, the last sentence in regards to coinsurance, it says "In fact, if the desired reserve credit were greater than the intended surplus relief, the surplus position would be worsened."

I don't get how this makes sense. It seems that a higher reserve credit would always lead to more surplus relief since the higher reserve credit would further reduce the reserve for RBC calculation purposes and thus the capital requirements. Can someone clarify?

[ACEManual]

You are thinking about this correctly. I believe the author was saying this in the context of a regulator not accepting the reserve credit for an unregistered reinsurer.