Shared reinsurance agreements

It is common for multiple reinsurance companies to participate in a reinsurance agreement. Each reinsurer participates for a percentage of the agreement, and the percentages add up to 100%. You specify a shared agreement by adding more than one reinsurer to the Agreement Participants tab of an agreement.

Shared reinsurance agreements are much the same as reinsurance agreements with a single reinsurer. The insurer determines the ceded premiums, commissions, and loss recoverables for the agreement. The insurer divides the net amount due to the participating reinsurers according to their participating percentage. PolicyCenter tracks amounts against the agreement as a whole, but keeps track of the schedule of participants. Therefore, an external accounts payable system can divide these amounts among the participants.

Differential rates of commission in reinsurance

The rate of commission charged or premium ceded to each reinsurer in an agreement can differ. By using differential rates, you can set different values for each agreement participant.

For example, two reinsurers share in the premiums and losses at 50% each. However, one reinsurer agrees to a 10% commission and the other agrees to 15%. The overall commission rate for the agreement is:

(50% * 10%) + (50% * 15%) = 12.5%

PolicyCenter determines the overall commission for the agreement based on this blended commission rate, but the amount of commission deducted from the premiums payable to each reinsurer differs.

You set differential commission rates by selecting Set Differential Commission Rates on the Facultative or Treaty screen. After you select this, you can enter a Commission % for each agreement participant.

For facultative agreements that cede a flat amount, you can set differential rates for ceded premium by selecting Set Differential Flat Premium on the Facultative screen. After you select this, you can enter a Flat Premium for each agreement participant.

For treaties that cede a percentage, you can set differential ceding rates by selecting Set Differential Ceding Rates on the Treaty screen. After you select this, you can enter a Ceding Rate (%) for each treaty participant.