There are typically rating clauses in the reinsurance agreements that allow the cedants to cancel the deals mid-term in the event of rating downgrades below a certain level. They could technically earn the premiums unless a company invokes such a clause.
Will someone please educate me about how a downgrade affects a company\’s ability to earn the existing unearned premium?
There are typically rating clauses in the reinsurance agreements that allow the cedants to cancel the deals mid-term in the event of rating downgrades below a certain level. They could technically earn the premiums unless a company invokes such a clause.
OK, so they might have to RETURN unearned premium (along with associated exposure to future losses). Perhaps not such a bad thing.