New York--Finite reinsurance has drawn regulatory scrutiny in recent months, but state regulators in the past have found such transaction "useful" and were "complicit" when insurers created them, according to experts speaking at an industry conference.
The Reinsurance Association of America defines a finite arrangement as "a highly structured reinsurance contract where the structured elements reduce the amount of risk assumed by the reinsurers to the point that it may not meet the accounting requirements of risk transfer."
Speaking at a panel discussion during Standard & Poor's annual insurance conference, Peter Porrino, global director of insurance industry services at Ernst & Young, said "at times regulators found these contracts useful."
"If there was a company that maybe didn't have as much capital as was needed, you could put one of these contracts in, and in fact potentially have a slight discounting of reserves. And that was for the greater good, because it enabled the company to continue," Mr. Porrino said.
"In other words, there may have been some regulatory complicity in [finite re deals]," Mark Puccia, S&P managing director confirmed at the discussion.
But now, with the negative attention to these transactions growing, there are many existing finite contracts that are expiring that are not being renewed. Mr. Porrino said many insurers now feel benefits of these transactions are not worth the risk at this point.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
