Intercompany Pooling

It feels like intercompany pooling keeps showing up in random locations and I am confused by it. I understand that Schedule P is net of intercompany pooling, and is the only exhibit that does not treat intercompany pooling as reinsurance, but what does this mean exactly? What is the effect that this has on the Schedule P exhibit, is it just to know that direct + assumed amounts would be net of intercompany pooling, but gross of reinsurance?

Then, intercompany pooling is reflected as in Schedule F as reinsurance (and I think all other annual statement exhibits). Does this mean all entities of the pool will have assumed/ceded amounts in parts 1 and 3? Or would just the lead company have assumed amounts in Part 1?

Then, this section (SSAP 63) says that underwriting results are accounted for as gross: which means that premiums, losses, expenses are recorded separately in financial statements not netted against each other, but doesn't that contradict the statement that other exhibits treat intercompany pooling as reinsurance and thus would be net?

Comments

  • You have the right idea about intercompany pooling in Schedule P versus in the rest of Annual Statement: not treated as reinsurance in P, treated as reinsurance elsewhere. To see how these play out, have a look at this question:

    https://battleacts6us.ca/pdf/Exam_(2017_1-Spring)/(2017_1-Spring)_(13).pdf

    Let me know if you get stuck following it.

    As for SSAP 63, the statement you quoted is in reference to voluntary and involuntary pools, not to intercompany pooling.

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