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Life Finance and Valuation Exam Old Individual Life and Annuities Forum

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Old 07-14-2018, 07:25 PM
dengel dengel is offline
Join Date: May 2013
College: University of Nebraska-Lincoln Alumnus
Posts: 6
Default Reinsurance - Quarterly Settlement of Amounts

On page 133 of the reinsurance book it states for Funds Withheld Modified Coinsurance...
"Note that non-payment of the allowance within 90 days violates the NAIC and most state requirements for quarterly settlement of amounts due under reinsurance agreements. It may be possible to obtain regulatory approval for this method in specific circumstances."

So Funds Withheld Modified Coinsurance doesn't comply with most states' requirements.

Isn't this also true for Funds Withheld Coinsurance? (even though the book doesn't seem to point it out)
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Old 07-14-2018, 11:44 PM
E's Avatar
E E is offline
Eddie Smith
Join Date: May 2003
College: UGA
Posts: 9,461

Yes, you would think it would be based solely on the way the book presents things, but as you noted, they do not elaborate at all -- certainly not enough for you to be able to explain the difference in an exam question solution.

The authors seem to call out FW mod-co more because it zeros out all cash at inception (i.e. not even the EA is being paid in cash). Therefore FW mod-co would be even more likely to worry a regulator.

When people ask me about this nuance in Tiller Ch. 7, I always recommend going verbatim with what the book says -- i.e. don't try to get too cute. Just recite what the book says for FW mod-co (which is not a lot!)

In reality, a regulator would look at the facts of each specific arrangement when seeing if the criteria in the Model Reg are satisfied.

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Last edited by E; 07-15-2018 at 07:49 PM..
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