#27 (b)
One of the flashcards under NAIC.SSAP-62R mentioned that under prospective reinsurance accounting, loss reserves increase when there is a claim but this problem's answer mentions loss reserves decreased so it is prospective reinsurance. May I get a clarification on whether loss reserves should be increased or decreased? Thank you.
Comments
This problem's answer specifically says "loss reserves reduced by ceded amount" and "no negative write-in liability."
The claim increases the cedent's liability, as opposed being put into write-in. Cedent's liability is then reduced by the portion of the total claim liability that belongs to the reinsurer.
In this wiki note:
https://battleacts6us.ca/wiki6us/NAIC.SSAP-62R#:~:text=Question%3A%20describe%20the,write%2Din%20liability
, "increasing reserves" refers to that of both the cedent and the reinsurer.