The ability to use 100% owned foriegn affiliates to cede retrocessional reinsurance is a operational system that can be abused and create and atmosphere for “creative accounting” for both pure tax reasons as well as increased domestic capacity backed by very questionable surplus , all of which is not good for the ultimate retail insured nor the retail industry itself. It can be used to manipulate the books by using less than acceptable recepticles for loss reserve swaps that can falsely enhance the overall financial position of the Insurer. Transparant retrocesional reinsurance systems which are subject to direct regulation, taxation and credit ratings of the parent corp domicile may cost a bit more, but the elimination otherwise unqualified insurers from the risk transfer chain is well worth it in the long run. The industry is littered with the skeletons of those companies that were “creative”. We cannot, as an industry, do anything that can remotely in appearance or otherwise, be part of another financial meltdown.
The ability to use 100% owned foriegn affiliates to cede retrocessional reinsurance is a operational system that can be abused and create and atmosphere for “creative accounting” for both pure tax reasons as well as increased domestic capacity backed by very questionable surplus , all of which is not good for the ultimate retail insured nor the retail industry itself. It can be used to manipulate the books by using less than acceptable recepticles for loss reserve swaps that can falsely enhance the overall financial position of the Insurer. Transparant retrocesional reinsurance systems which are subject to direct regulation, taxation and credit ratings of the parent corp domicile may cost a bit more, but the elimination otherwise unqualified insurers from the risk transfer chain is well worth it in the long run. The industry is littered with the skeletons of those companies that were “creative”. We cannot, as an industry, do anything that can remotely in appearance or otherwise, be part of another financial meltdown.