Category: Reinsurance fundamentals · Reviewed by Chrissie Anderson, Client Executive · Last reviewed 2026-06-05
A reinsurance recoverable is the asset on a cedant’s balance sheet representing amounts contractually due, or expected to become due, from reinsurers under outwards reinsurance contracts. It comprises paid recoverables (amounts already due) and unpaid recoverables (the reinsurance share of outstanding claims and IBNR).
Category: Reinsurance fundamentals Also known as: reinsurance asset, amounts recoverable from reinsurers Related concepts: bad debt provision (reinsurance), collateralised reinsurance, ceded premium Related legislation: IFRS 17; Solvency II Directive 2009/138/EC
Reinsurance recoverables are a major asset class on the balance sheets of cedants. They comprise: amounts due in respect of paid claims under the underlying business; reinsurance share of outstanding loss reserves (where the cedant has reserved but not paid the underlying claim); reinsurance share of IBNR; and amounts due in respect of profit commission, sliding scale adjustments and other contractual settlements.
Under IFRS 17 reinsurance recoverables are reported as a separate asset, measured on a basis broadly consistent with the underlying insurance liability, with a credit risk adjustment for expected reinsurer default.
The valuation of reinsurance recoverables for Solvency II purposes is governed by Article 81 of the Solvency II Directive [1] and by the PRA Insurance Rulebook. The recoverable is the best estimate of future cash flows from the reinsurer, discounted to present value, with an adjustment for the expected default of the reinsurer counterparty.
For IFRS 17 purposes, the cedant recognises the reinsurance asset on initial recognition of the underlying insurance contract and remeasures it consistently as the underlying liability develops. The default adjustment is recognised in profit and loss as the assessed credit quality of the reinsurer changes.
A cedant’s finance function maintains a reinsurance recoverables ledger that tracks, by reinsurer counterparty, by treaty and by underwriting/calendar year, the amounts due and projected to become due. Where reinsurers are slow payers, the recoverable becomes ageing and the cedant may need to make a bad debt provision.
For unrated or non-admitted reinsurers, recoverables may be secured by collateral such as trust accounts, letters of credit or funds withheld. Collateralised recoverables attract lower default adjustments under Solvency II.
The aggregate of unpaid reinsurance recoverables can exceed the cedant’s equity on long-tail books, making counterparty credit risk a major focus for prudential regulators.
An illustrative example: a UK casualty insurer carries reinsurance recoverables of £150m on its 2018 year of account, of which £50m is paid recoverable (claims paid by the cedant but unpaid by the reinsurer), £75m is reinsurance share of outstanding case reserves, and £25m is reinsurance share of IBNR. The cedant applies a 2 per cent bad debt provision (£3m) based on the credit rating of the reinsurer panel, and reports a net asset of £147m.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
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