Reinsurance

The Company reinsures a portion of the insurance risks associated with its traditional life, DI and LTC insurance products through reinsurance agreements with unaffiliated reinsurance companies. Reinsurance contracts do not relieve the Company from its primary obligation to policyholders.

The Company generally reinsures 90% of the death benefit liability for new term life insurance policies beginning in 2001 and new individual UL and VUL insurance policies beginning in 2002. 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 its universal life product with long term care benefits.

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 UL and VUL 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 has continued ceding 50% of the risk on a coinsurance basis to subsidiaries of Genworth Financial, Inc. (“Genworth”) and retains 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 starting 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 introduced prior to 2007. The Company also retains all risk on accidental death benefit claims and substantially all risk associated with waiver of premium provisions.

At December 31, 2016 and 2015, traditional life and UL insurance in force aggregated $196.5 billion and $196.3 billion, respectively, of which $142.4 billion and $144.2 billion, respectively, 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 traditional long-duration contracts was as follows:



	Years Ended December 31,
	2016			2015			2014
	(in millions)
Direct premiums	$	642		$	629		$	645
Reinsurance ceded	(225		)	(223		)	(222		)
Net premiums	$	417		$	406		$	423

Cost of insurance and administrative charges for non-traditional long-duration products are reflected in other revenues and were net of reinsurance ceded of $110 million, $107 million and $94 million for the years ended December 31, 2016, 2015 and 2014, respectively.

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. For 2016, the Company purchased auto and home reinsurance with a limit of $5 million per loss and the Company retained $750,000 per loss. For 2016, the Company’s catastrophe reinsurance had a limit of $180 million per event and the Company retained $20 million per event. For 2016, the Company ceded 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,
	2016			2015			2014
	(in millions)
Written premiums
Direct	$	1,085		$	1,093		$	1,025
Ceded	(20		)	(19		)	(17		)
Total net written premiums	$	1,065		$	1,074		$	1,008
Earned premiums
Direct	$	1,094		$	1,068		$	979
Ceded	(20		)	(19		)	(17		)
Total net earned premiums	$	1,074		$	1,049		$	962

Reinsurance recovered on all contracts was $323 million, $295 million and $260 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Receivables included $2.7 billion and $2.5 billion of reinsurance recoverables as of December 31, 2016 and 2015, respectively, including $2.0 billion and $1.9 billion related to LTC risk ceded to Genworth, respectively. Included in policyholder account balances, future policy benefits and claims is $529 million and $551 million related to previously assumed reinsurance arrangements as of December 31, 2016 and 2015, respectively.