Prospective/ Retrospective Reinsurance
If I understand correctly, a reinsurance contract that is written after 9 month of the underlying policy's inception date is considered as a retrospective reinsurance contract (assuming it satisfies risk transfer criteria).
If the statement above is correct, does this mean if we buy reinsurance contract within the first 9 months, it would still be considered as a prospective reinsurance contract?
Comments
Yes, that's correct. Sometimes it just takes a while for everything to be signed and finalized so they allow a grace period of 9 months.
I'm thinking you got this from the answer to Exhibit A - Q27 in the source reading. But the way I interpreted the CAS syllabus for that reading is that you need to know paragraphs 1-90 only. So anything in Exhibit A really shouldn't appear on the exam.
Hi, is commutation considered prospective? I am think yes, b/c schedule P is affected. Thanks.
Yes, it is prospective, because it commutes anticipated future payments on current liabilities.