AIG 2015 Annual Report Download - page 283

ITEM 8 / NOTE 7. REINSURANCE
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reinsurance contracts and the portion of premiums relating to the unexpired terms of coverage is included in the reserve for
unearned premiums. For both ceded and assumed reinsurance, risk transfer requirements must be met for reinsurance
accounting to apply. If risk transfer requirements are not met, the contract is accounted for as a deposit, resulting in the
recognition of cash flows under the contract through a deposit asset or liability and not as revenue or expense. To meet risk
transfer requirements, a reinsurance contract must include both insurance risk, consisting of both underwriting and timing risk,
and a reasonable possibility of a significant loss for the assuming entity. Similar risk transfer criteria are used to determine
whether directly written insurance contracts should be accounted for as insurance or as a deposit.
The following table presents short-duration insurance premiums written and earned:
Years Ended December 31,
Non-Life Insurance Companies
(in millions) 2015 2014 2013
Premiums written:
Direct $37,698 $ 39,375 $ 39,833
Assumed 2,972 3,399 4,306
Ceded (7,604) (8,318) (9,514)
Net $33,066 $ 34,456 $ 34,625
Premiums earned:
Direct $37,105 $ 38,707 $ 39,018
Assumed 2,659 3,258 3,516
Ceded (7,593) (8,140) (8,585)
Net $32,171 $ 33,825 $ 33,949
For the years ended December 31, 2015, 2014 and 2013, reinsurance recoveries, which reduced losses and loss adjustment
expenses incurred, amounted to $4.1 billion, $2.6 billion and $3.3 billion, respectively.
Long-Duration Reinsurance
Long-duration reinsurance is effected principally under yearly renewable term treaties. The premiums with respect to these
treaties are earned over the contract period in proportion to the protection provided. Amounts recoverable from reinsurers on
long-duration contracts are estimated in a manner consistent with the assumptions used for the underlying policy benefits and
are presented as a component of Reinsurance assets.
The following table presents premiums for our long-duration insurance and retirement services operations:
Years Ended
December 31, Life Insurance Companies Run-off insurance lines Total
(in millions) 2015 2014 2013 2015 2014 2013 2015 2014 2013
Gross premiums $ 5,234 $ 4,059 $ 4,155 $ 6 $11$ 9 $ 5,240 $ 4,070 $ 4,164
Ceded premiums (756) (661) (620) --- (756) (661) (620)
Net $ 4,478 $ 3,398 $ 3,535 $ 6 $11$ 9 $ 4,484 $ 3,409 $ 3,544
Long-duration reinsurance recoveries, which reduced Policyholder benefits and losses incurred, were approximately
$1.0 billion, $731 million and $714 million, respectively, for the years ended December 31, 2015, 2014 and 2013.
The following table presents long-duration insurance in-force ceded to other insurance companies:
At December 31,
(in millions) 2015 2014 2013
*
Long-duration insurance in force ceded $177,025 $ 180,178 $122,012
* Excludes amounts related to held-for-sale entities.