PNC Bank 2014 Annual Report Download - page 234

Reinsurance Agreements
We have two wholly-owned captive insurance subsidiaries
which provide reinsurance to third-party insurers related to
insurance sold to or placed on behalf of our customers. These
subsidiaries enter into various types of reinsurance agreements
with third-party insurers where the subsidiary assumes the risk
of loss through either an excess of loss or quota share
agreement up to 100% reinsurance. In excess of loss
agreements, these subsidiaries assume the risk of loss for an
excess layer of coverage up to specified limits, once a defined
first loss percentage is met. In quota share agreements, the
subsidiaries and third-party insurers share the responsibility
for payment of all claims.
These subsidiaries provide reinsurance for accidental death &
dismemberment, credit life, accident & health, lender placed
hazard and borrower and lender paid mortgage insurance, of
which all programs are in run-off. Aggregate maximum
exposure up to the specified limits for all reinsurance contracts
is as follows:
Table 152: Reinsurance Agreements Exposure (a)
In millions
December 31
2014
December 31
2013
Accidental Death & Dismemberment $1,774 $1,902
Credit Life, Accident & Health 467 621
Lender Placed Hazard (b) (c) 2,056 2,679
Borrower and Lender Paid Mortgage
Insurance 45 133
Maximum Exposure $4,342 $5,335
Percentage of reinsurance agreements:
Excess of Loss – Mortgage Insurance 1% 2%
Quota Share 99% 98%
Maximum Exposure to Quota Share
Agreements with 100% Reinsurance $ 466 $ 620
(a) Reinsurance agreements exposure balances represent estimates based on availability
of financial information from insurance carriers.
(b) Through the purchase of catastrophe reinsurance connected to the Lender Placed
Hazard Exposure, should a catastrophic event occur, PNC will benefit from this
reinsurance. No credit for the catastrophe reinsurance protection is applied to the
aggregate exposure figure.
(c) Program has been placed into run-off for coverage issued or renewed on or after
June 1, 2014 with policy terms one year or less.
A rollforward of the reinsurance reserves for probable losses
for 2014 and 2013 follows:
Table 153: Reinsurance Reserves – Rollforward
In millions 2014 2013
January 1 $ 32 $ 61
Paid Losses (20) (45)
Net Provision 11 16
Changes to Agreements (10)
December 31 $13 $32
The reinsurance reserves are declining as the programs are in
run-off. Existing reinsurance agreements with a single third-
party insurer of Borrower Paid Mortgage Insurance were
terminated resulting in release of reinsurance reserves. The
Lender Placed Hazard program has been placed in run-off as
of June 1, 2014, but there was no material impact to
reinsurance reserves. There were no other changes to existing
agreements nor did we enter into any new relationships.
There is a reasonable possibility that losses could be more
than or less than the amount reserved due to ongoing
uncertainty in various economic, social and other factors that
could impact the frequency and severity of claims covered by
these reinsurance agreements. At December 31, 2014, the
reasonably possible loss above our accrual was not material.
216 The PNC Financial Services Group, Inc. – Form 10-K