Reinsurance (Notes) |
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Reinsurance [Text Block] | Reinsurance Reinsurance recoverable on ceded reinsurance
(1)Net of valuation allowance for uncollectible reinsurance. The increase in reinsurance recoverable on losses and loss expenses was primarily due to catastrophe losses. We evaluate the financial condition of our reinsurers and potential reinsurers on a regular basis and also monitor concentrations of credit risk with reinsurers. The valuation allowance for uncollectible reinsurance is required principally due to the potential failure of reinsurers to indemnify Chubb, primarily because of disputes under reinsurance contracts and insolvencies. We have established a valuation allowance for amounts estimated to be uncollectible on both unpaid and paid losses as well as future policy benefits. Management evaluates the need for a valuation allowance for uncollectible reinsurance recoverable using current and historical factors, and forecasts each quarter. These factors include a review of active and run-off lines of business, review of reinsurer financial strength ratings, and review of our largest reinsurers. The evaluation of the valuation allowance includes several judgments including certain aspects of the allocation of reinsurance recoverable on incurred but not reported (IBNR) claims by reinsurer and a default analysis to estimate uncollectible reinsurance. The primary components of the default analysis are reinsurance recoverable balances by reinsurer, net of collateral, and default factors used to determine the portion of a reinsurer's balance deemed uncollectible. Default factors require considerable judgment and are determined using principally the current financial strength rating, or rating equivalent, of each reinsurer. Changes in the valuation allowance for uncollectible reinsurance recoverables are recorded in Losses and loss expenses in the Consolidated statements of operations. For additional information, refer to Note 1 d) to the Consolidated Financial Statements of our 2019 Form 10-K. The evaluation of the valuation allowance at December 31, 2019 was consistent with the new accounting guidance adopted January 1, 2020, therefore, there was no material change to the valuation allowance upon adoption. The following table presents a roll-forward of valuation allowance for uncollectible reinsurance related to Reinsurance recoverable on loss and loss expenses:
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