BaFin on Division of Financial and Traditional Non-Life Reinsurance

In the area of non-life insurance, the expected loss of the reinsurer (Expected Reinsurer's Deficit or ERD) is used as a measure of risk transfer when differentiating financial reinsurance from inadequate risk transfer. A sufficient transfer of risk exists if the absolute amount of the expected loss of the reinsurer amounts to at least 1% of the expected premium. It makes sense to use ERD for the distinction between financial reinsurance and traditional reinsurance. In any case, in the field of non-life insurance, the Federal Agency assumes traditional reinsurance if the absolute amount of the expected loss of the reinsurer amounts to 2.5 percent or more of the expected premium. However, the provisions on the demarcation of financial reinsurance from inadequate risk transfer remain unaffected by the interpretative decision.

Related Links (in German)

• Notification
• Interpretative Decision

Keywords: Europe, Germany, Insurance, Reinsurance, Financial Reinsurance, Traditional Reinsurance, Non-Life Insurance, Risk Transfer, Solvency II, BaFin