Ceding premium in a multicurrency policy

The insurer cedes a portion of the policy premium to the reinsurer. In many cases, multicurrency policies do not alter the calculations for ceded premium. For proportional agreements, the insurer cedes a percentage of the premium to the reinsurer. For each agreement, PolicyCenter calculates the premium ceded by using the percentage specified in the agreement. This is a simple calculation because all agreements in a program have the same currency; PolicyCenter does not do a currency conversion. For example, an agreement specifies that the insurer cedes 10% of the premium to the reinsurer. If the currency is euros and the premium is 100€, the insurer cedes 10€ to the reinsurer. If the currency is U.S. dollars and the premium is $100, the insurer cedes $10 to the reinsurer. A multicurrency policy system does not affect this calculation.

Ceding a fixed amount of premium

The calculation differs for agreements that cede a fixed amount of premium. A facultative excess of loss agreement, with a fixed cost, is an example of this type of agreement. In this case, the premium ceded is a fixed amount. If the currency of the agreement is in a different currency than the currency of the premium, then a plugin determines how to convert to the premium currency. In the base configuration, the conversion uses the same static conversion table as for other currency conversions. You can configure this to meet your business needs.

For example, a insurer provides multicurrency policies that can have risks in different parts of the world. For risks in Europe, the insurer has negotiated a reinsurance program in euros. This reinsurance program contains a facultative excess of loss agreement that covers losses greater than 100,000,000€. The premium ceded is 10,000€.

This agreement is attached to a policy with a premium of $30,000 U.S. dollars. This policy covers building in France. To calculate the gross net premium, 10,000€ is subtracted from $30,000. The plugin calculates how to convert 10,000€ to the premium currency.

The gross net premium is divided among the proportional agreements.