Assurant 2014 Annual Report Download - page 129

ASSURANT, INC. – 2014 Form 10-K F-41
14 Reinsurance
14. Reinsurance
In the ordinary course of business, the Company is involved in both the assumption and cession of reinsurance with non-affi liated
companies. The following table provides details of the reinsurance recoverables balance for the years ended December 31:
2014 2013
Ceded future policyholder benefi ts and expense $ 4,052,976 $ 3,355,706
Ceded unearned premium 1,587,583 1,283,674
Ceded claims and benefi ts payable 1,283,510 1,053,640
Ceded paid losses 330,516 59,114
TOTAL $ 7,254,585 $ 5,752,134
A key credit quality indicator for reinsurance is the A.M. Best
fi nancial strength ratings of the reinsurer. The A.M. Best ratings
are an independent opinion of a reinsurer’s ability to meet
ongoing obligations to policyholders. The A.M. Best ratings
for new reinsurance agreements where there is material
credit exposure are reviewed at the time of execution.
The A.M. Best ratings for existing reinsurance agreements
are reviewed on a periodic basis, at least annually. The
following table provides the reinsurance recoverable as of
December 31, 2014 grouped by A.M. Best rating:
Best Ratings of Reinsurer
Ceded future
policyholder benefi ts
and expense
Ceded unearned
premiums
Ceded claims and
benefi ts payable Ceded paid losses Total
A++ or A+ $ 2,569,041 $ 53,580 $ 901,105 $ 15,280 $ 3,539,006
A or A- 1,445,606 107,904 168,859 80,815 1,803,184
B++ or B+ 37,087 22,861 2,881 — 62,829
B or B- — 143 65 23 231
Not Rated 1,242 1,403,095 210,600 245,218 1,860,155
Total 4,052,976 1,587,583 1,283,510 341,336 7,265,405
Less: Allowance — — — (10,820) (10,820)
NET REINSURANCE
RECOVERABLE $ 4,052,976 $ 1,587,583 $ 1,283,510 $ 330,516 $ 7,254,585
A.M. Best ratings for The Hartford and John Hancock,
the reinsurers with the largest reinsurance recoverable
balances, are A- and A+, respectively. A.M. Best currently
maintains a stable outlook on the fi nancial strength ratings of
John Hancock and The Hartford. The total amount of
recoverable for these two reinsurers is $4,549,699 as of
December 31, 2014. Most of the assets backing reserves relating
to reinsurance recoverables from these two counterparties
are held in trust.
A substantial portion of the Not Rated category is related
to Assurant Solutions’ and Assurant Specialty Property’s
agreements to reinsure premiums and risks related to business
generated by certain clients to the clients’ own captive
insurance companies or to reinsurance subsidiaries in which
the clients have an ownership interest. To mitigate exposure
to credit risk for these reinsurers, the Company evaluates
the fi nancial condition of the reinsurer and holds substantial
collateral (in the form of funds withheld, trusts, and letters
of credit) as security. The Not Rated category also includes
recoverables from the Department of Health and Human
Services, the National Flood Insurance Program and the
Florida Hurricane Catastrophe Fund.
An allowance for doubtful accounts related to reinsurance
recoverables is recorded on the basis of periodic evaluations
of balances due from reinsurers (net of collateral), reinsurer
solvency, management’s experience and current economic
conditions. The allowance for doubtful accounts was $10,820
at December 31, 2014 and 2013, respectively. There were
no additions or write-downs charged against the allowance
during 2014 or 2013.