An insurer books $40 million of ceded recoverables and looks solvent. Schedule F asks the harder question: how much of that money will actually arrive, and from whom?
Schedule F lists every reinsurer the company cedes to. For each, you see amounts recoverable on paid and unpaid losses, unearned premium, collateral held, and how overdue the balances are. It is the credit-risk x-ray of the balance sheet.
KEY: Ceded reinsurance moves risk but not ultimate responsibility. If the reinsurer fails to pay, the ceding insurer still owes the policyholder. Schedule F measures that gap.
An authorized reinsurer is licensed or accredited in the ceding insurer's state. Its recoverables get statement credit without extra security. An unauthorized reinsurer is not, so credit is allowed only to the extent the balance is collateralized.
The split is not purely binary. In 2012 the NAIC added a certified category: non-U.S. reinsurers from qualified jurisdictions that earn a Certified Reinsurer Rating (1 through 6) and post reduced collateral scaled to that rating.
Common mistakes
- Assuming reinsurance removes all liability. The cedant still pays the policyholder; Schedule F prices the reinsurer credit risk.
- Giving unauthorized reinsurers full credit. Credit stops at collateral; the unsecured excess becomes a provision.
- Ignoring the slow-pay penalty for authorized reinsurers. Once overdue paid recoverables reach 20%, the slow-payer charge applies even though the reinsurer is authorized, and it hits the greater of the unsecured recoverable or the overdue balance.
Bottom line
- Schedule F discloses ceded reinsurance by reinsurer: recoverables, collateral, aging, and disputed balances.
- Authorized reinsurers are licensed or accredited in the state; unauthorized reinsurers are not.
- A third category, certified (added 2012), covers qualified non-U.S. reinsurers that post reduced, rating-based collateral; the current blank also pairs reciprocal jurisdiction reinsurers with authorized ones.
- Recoverables from unauthorized reinsurers must be secured by collateral (funds held, letters of credit, trusts) or the unsecured balance is charged; 20% of paid recoverables more than 90 days past due and not in dispute and 20% of all amounts...
Exam shortcut
For unauthorized reinsurers, start the provision as recoverable minus collateral, then add 20% of paid recoverables more than 90 days past due and not in dispute plus 20% of all amounts in dispute, and cap the total at the recoverable itself. Compute the overdue ratio on paid recoverables first.
The full lesson (about 1,595 words, 11 min read) adds 2 worked examples, all 9 common mistakes, a self-check, free in the app.
Learning objectives
- D5
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