There are typically rating clauses in the reinsurance agreements that allow the cedants to cancel the deals mid-term in the event of rating downgrades below a certain level. They could technically earn the premiums unless a company invokes such a clause.
We have updated our privacy policy to be more clear and meet the new requirements of the GDPR. By continuing to use our site, you accept our revised Privacy Policy.
Will someone please educate me about how a downgrade affects a company\’s ability to earn the existing unearned premium?
There are typically rating clauses in the reinsurance agreements that allow the cedants to cancel the deals mid-term in the event of rating downgrades below a certain level. They could technically earn the premiums unless a company invokes such a clause.
OK, so they might have to RETURN unearned premium (along with associated exposure to future losses). Perhaps not such a bad thing.