Reinsurance

For most new life insurance policies, the Company reinsures 90% of the death benefit liability. The Company began reinsuring risks at this level in 2001 for term life insurance and 2002 for individual fixed and variable universal life insurance. Policies issued prior to these dates are not subject to these same reinsurance levels.

However, for IUL policies issued after September 1, 2013 and VUL policies issued after January 1, 2014, the Company generally reinsures 50% of the death benefit liability. Similarly, the Company reinsures 50% of the death benefit and morbidity liabilities related to the RiverSource TrioSource^SM universal life product launched in 2013.

The maximum amount of life insurance risk the Company will retain is $10 million on a single life and $10 million on any flexible premium survivorship life policy; however, reinsurance agreements are in place such that retaining more than $1.5 million of insurance risk on a single life or a flexible premium survivorship life policy is very unusual. Risk on fixed and variable universal life policies is reinsured on a yearly renewable term basis. Risk on most term life policies starting in 2001 is reinsured on a coinsurance basis, a type of reinsurance in which the reinsurer participates proportionally in all material risks and premiums associated with a policy.

For existing LTC policies, the Company ceded 50% of the risk on a coinsurance basis to subsidiaries of Genworth Financial, Inc. (“Genworth”) and retained the remaining risk. For RiverSource Life of NY, this reinsurance arrangement applies for 1996 and later issues only.

Generally, the Company retains at most $5,000 per month of risk per life on DI policies sold on policy forms introduced in most states in 2007 and reinsures the remainder of the risk on a coinsurance basis with unaffiliated reinsurance companies. The Company retains all risk for new claims on DI contracts sold on other policy forms. The Company also retains all risk on accidental death benefit claims and substantially all risk associated with waiver of premium provisions.

At December 31, 2014 and 2013, traditional life and UL insurance in force aggregated $195.5 billion and $194.1 billion, respectively, of which $143.4 billion and $142.1 billion were reinsured at the respective year ends. Life insurance in force is reported on a statutory basis.

The effect of reinsurance on premiums for the Company’s long-duration contracts was as follows:



	Years Ended December 31,
	2014			2013			2012
	(in millions)
Direct premiums	$	645		$	650		$	661
Reinsurance ceded	(222		)	(220		)	(219		)
Net premiums	$	423		$	430		$	442

The Company also reinsures a portion of the risks associated with its personal auto, home and umbrella insurance products through three types of reinsurance agreements with unaffiliated reinsurance companies. The Company purchases reinsurance with a limit of $5 million per loss and the Company retains $750,000 per loss. For 2014, the Company’s catastrophe reinsurance had a limit of $125 million per event and the Company retained $20 million per event. For 2015, the Company’s catastrophe reinsurance has a limit of $155 million per event and the Company retains $20 million per event. The Company also cedes 80% of every personal umbrella loss with a limit of $5 million per loss.

The effect of reinsurance on premiums for the Company’s short-duration contracts was as follows:



	Years Ended December 31,
	2014			2013			2012
	(in millions)
Written premiums
Direct	$	1,025		$	900		$	814
Ceded	(17		)	(16		)	(13		)
Total net written premiums	$	1,008		$	884		$	801
Earned premiums
Direct	$	979		$	868		$	795
Ceded	(17		)	(16		)	(14		)
Total net earned premiums	$	962		$	852		$	781

Cost of insurance and administrative charges on UL, VUL and IUL insurance are reflected in other revenues and were net of reinsurance ceded of $94 million, $87 million and $79 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Reinsurance recovered from reinsurers was $260 million, $229 million and $201 million for the years ended December 31, 2014, 2013 and 2012, respectively. Reinsurance contracts do not relieve the Company from its primary obligation to policyholders.

Receivables included $2.3 billion and $2.2 billion of reinsurance recoverables as of December 31, 2014 and 2013, respectively, including $1.8 billion and $1.7 billion related to LTC risk ceded to Genworth, respectively. Included in policyholder account balances, future policy benefits and claims were $575 million and $597 million related to assumed reinsurance arrangements as of December 31, 2014 and 2013, respectively.