Funds Held - Asset or Liability?

In the Wiki article for Schedule F, Funds Held is shown as a liability.

However in the fifth Battle Card ('define funds held'), it says this is an asset.

I'm probably reading it the wrong way. Is this a contradiction? Is one of these from the perspective of the insurer, and the other for the reinsurer?


  • First off, I'm going to edit the BattleCard answer because it isn't clear. Thank you for noticing that. The term "funds held" is confusing because there are 2 very similar line items in the financial statements:

    • funds held under reinsurance treaties ==> liability - line 13 (on an insurer's balance sheet)
    • Reinsurance: Funds held by or deposited with reinsured companies ==> asset - line 16.2 (on an insurer's balance sheet)

    The source text states:

    • Funds held by (or deposited with) reinsured companies represent an asset to the reinsurance company and a liability to the ceding company

    In other words:

    ==> If the insurer is ceding then funds held is a liability.
    ==> If the insurer is assuming then funds held is an asset.

    Note the examiner's report answer to 2018.Spring Q9 (iii) asks for the definition of funds held and they give 3 answers, the first and third contradicting each other. The first answer says funds held is a liability for the insurer but the third answer says it's an asset. I would go with the first 2 answers and ignore the third.

  • Thank you for the explanation. It sounds like this item represents a liability for whoever is holding onto the funds. Is that a good way to think of it?

  • I'm leaning towards saying yes. (I think there might be more going on here than is discussed in Odomirok but that would be beyond the scope of the syllabus.)

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