Sch. F, Part 1

Let's say assumed loss experience is no bueno and the reinsurer ends up with a "Contingent Commission Receivable". I noticed there is no spot for this in Sch. F so would this just be reflected by a negative amount in Col. 9? If so is it seen as an asset or a contra-liability?


  • Do you mean that if the subsequent loss experience was so bad that sliding scale contingent commissions payable could become negative? Then it would effectively become a receivable for the assuming insurer. In other words the ceding insurer would owe the assuming reinsurer money instead of the other way around? If that's the scenario you're describing, I'm not sure that that could happen. There would likely be an upper and lower limit written into the contract regarding the percentage of contingent commission allowed.

  • The scenario doesn't exist. Ever.

  • Very emphatic answer @WKLANDRY. Thanks!

  • No not really what I meant. I'll try to give an example:

    Premium is $1000 and the sliding scale commissions are based off a 70% expected loss ratio. So on onset the reinsurer pays the insurer the 30% ceding commission. But let's say after 1 year the loss ratio is 90% which drops the ceding commission to be 10% of the premium. In this case the insurer will have to pay back the 20% of premium since their loss experience stunk, right?

    The insurer (ceding entity) books this as a negative contingent commission receivable in Part 3. So would the reinsurer book this as a negative contingent commission payable in Part 1? If so, is this transaction seen as a contra-liability since it reduces a liability, or no?

  • Ok, I see what you mean now.

    The Schedule F entries for the ceding and assuming insurers would have to balance. The ceding insurer would make a negative entry in Schedule F, Part 3 - Col (10). The assuming insurer would make a corresponding negative entry in Schedule F, Part 1 - Col (9).

    As to how & where this is recorded on the balance sheet and income statement, I'm not certain. Those details don't appear to be discussed in the text. Based on some research however, my guess it that the assuming entity might possibly record this not as a contra-liability but as an asset:

    • line 25: Aggregate write-ins for other-than-invested assets

    Since it isn't explicitly discussed in the syllabus however, it shouldn't appear on the exam.

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