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Old 01-01-2018, 04:52 PM
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Carol Marler
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Originally Posted by Actuary321 View Post
I am aware of a situation where Company A ceded redundant, but statutorialy required, reserves to Company B and Company B held a letter of credit as the asset backing those reserves.

I also am aware of a situation where Company A ceded reserves to Company B to keep the total assets of Company A under $500M so that Company A could still take the small company tax deduction.
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Old 01-03-2018, 01:35 PM
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Originally Posted by JMO View Post
Nope. Note my remark about retaining profit margin rather than paying to an independent reinsurer. This applies even if no benefit from reserves and required surplus.
Furthermore, IFYP. Rules can vary by state within US.

I don't think so, but I'm not going to try to explain why not. Maybe others will step up. I will say that most of the life insurance captives are used because the "economic" reserves are far less than those prescribed by overly conservative rules. (Search for information about regulation XXX. Don't just google XXX, though, you will not find what you are asking about.)

What is R&T module?? And are you talking about Life or P/C? My experience with this has been on the life side.
can confirm this. US reserves are typically much higher for most life and annuity products compared to the European economic requirements for capital. Econ reserves are based on best estimate + risk margin while US reserves are just a giant conservative value. The gap may close a little as PBR products gain some weight.

I worked for a US company owned by a Euro company. We had to hold US reserves, but report under SII. Still makes my head hurt thinking about it.
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Old 01-03-2018, 04:16 PM
pragmatist pragmatist is offline
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Albeit insurance-wise irrelevant, another plausible scenario that might motivate setting a captive reinsurer is the anticipation of some business transition. For instance, (1) where a planned, subsequent splitting would otherwise be costlier, or (2) where some expansion/merge by company A would deem it compelling to handle -from the start- a segment of the business independently.

Of course, this type of scenarios is likely to overlap with the regulatory/fiscal considerations suggested above.
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