PNC Bank 2013 Annual Report Download - page 234

These subsidiaries provide reinsurance for accidental death &
dismemberment, credit life, accident & health, lender placed
hazard and borrower and lender paid mortgage insurance with
an aggregate maximum exposure up to the specified limits for
all reinsurance contracts as follows:
Table 154: Reinsurance Agreements Exposure (a)
In millions
December 31
2013
December 31
2012
Accidental Death & Dismemberment $1,902 $2,049
Credit Life, Accident & Health 621 795
Lender Placed Hazard (b) 2,679 2,774
Borrower and Lender Paid Mortgage
Insurance 133 228
Maximum Exposure $5,335 $5,846
Percentage of reinsurance agreements:
Excess of Loss – Mortgage Insurance 2% 3%
Quota Share 98% 97%
Maximum Exposure to Quota Share
Agreements with 100% Reinsurance $ 620 $ 794
(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.
A rollforward of the reinsurance reserves for probable losses
for 2013 and 2012 follows:
Table 155: Reinsurance Reserves – Rollforward
In millions 2013 2012
January 1 $ 61 $ 82
Paid Losses (45) (66)
Net Provision 16 45
December 31 $32 $61
There were no changes to the terms of existing agreements,
nor were any new relationships entered into or existing
relationships exited.
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, 2013, the
reasonably possible loss above our accrual was not material.
R
ESALE AND R EPURCHASE A GREEMENTS
We enter into repurchase and resale agreements where we
transfer investment securities to/from a third party with the
agreement to repurchase/resell those investment securities at a
future date for a specified price. Repurchase and resale
agreements are treated as collateralized financing transactions
for accounting purposes and are generally carried at the
amounts at which the securities will be subsequently
reacquired or resold, including accrued interest. Our policy is
to take possession of securities purchased under agreements to
resell. We monitor the market value of securities to be
repurchased and resold and additional collateral may be
obtained where considered appropriate to protect against
credit exposure.
Repurchase and resale agreements are typically entered into
with counterparties under industry standard master netting
agreements which provide for the right to setoff amounts
owed to one another with respect to multiple repurchase and
resale agreements under such master netting agreement
(referred to as netting arrangements) and liquidate the
purchased or borrowed securities in the event of counterparty
default. In order for an arrangement to be eligible for netting
under GAAP, we must obtain the requisite assurance that the
offsetting rights included in the master netting agreement
would be legally enforceable in the event of bankruptcy,
insolvency, or a similar proceeding of such third party.
Enforceability is evidenced by obtaining a legal opinion that
supports, with sufficient confidence, the enforceability of the
master netting agreement in bankruptcy.
In accordance with the disclosure requirements of ASU 2011-
11, Balance Sheet (Topic 210): Disclosures about Offsetting
Assets and Liabilities, Table 156 shows the amounts owed
under resale and repurchase agreements and the securities
collateral associated with those agreements where a legal
opinion supporting the enforceability of the offsetting rights
has been obtained. We do not present resale and repurchase
agreements entered into with the same counterparty under a
legally enforceable master netting agreement on a net basis on
our Consolidated Balance Sheet or within Table 156. The
amounts reported in Table 156 exclude the fair value
adjustment on the structured resale agreements of $11 million
and $19 million at December 31, 2013 and December 31,
2012, respectively, that we have elected to account for at fair
value. Refer to Note 9 Fair Value for additional information
regarding the structured resale agreements at fair value.
216 The PNC Financial Services Group, Inc. – Form 10-K