If the insurer is transferring outstanding losses (Loss portfolio), then
this transaction must be accounted for as retroactive reinsurance.
Summary of retroactive insurance:
1. The ceding company must record its loss and loss expense reserves on
a gross basis (without recognition of the retroactive reinsurance) on
the balance sheet and in all schedules and exhibits.
2. The assuming company must exclude the retroactive reinsurance from
its loss and loss expense reserves and from its schedules and exhibits.
3. The ceding company and the assuming company must report by write-in
item on Page 3 of the AS, the total amount of all retroactive
reinsurance recorded as a contra-liability.
4. The surplus gained from any reto reinsurance may not be classified as
unassigned funds (considered earned surplus) until such time as the
actual retroactive reinsurance recovered is in excess of the
consideration paid.
This is very general summation. If any one would like the complete
instructions I can scan it to a gif file. Let me know.
The premium side of the portfolio reinsurance transaction is accounted
for in Schedule F, Part 2.
Hope this helps.
Brad Gardner