Reinsurance

12 Months Ended

Dec. 31, 2019

REINSURANCE

In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance or reinsurance companies under excess coverage and coinsurance contracts. In the individual life markets, the Company retains a maximum of $8 million of coverage per individual life. Claims in excess of this retention amount are retroceded to retrocessionaires; however, the Company remains fully liable to the ceding company for the entire amount of risk it assumes. In certain limited situations the Company has retained more than $8 million per individual policy. The Company enters into agreements with other reinsurers to mitigate the residual risk related to the over-retained policies. Additionally, due to some lower face amount reinsurance coverage provided by the Company in addition to individual life, such as group life, disability and health, under certain circumstances, the Company could potentially incur net claims totaling more than $8 million per individual life.

Retrocession reinsurance treaties do not relieve the Company from its obligations to direct writing companies. Failure of retrocessionaires to honor their obligations could result in losses to the Company. The Company regularly evaluates the financial condition of the insurance and reinsurance companies from which it assumes and to which it cedes reinsurance. Consequently, allowances would be established for amounts deemed uncollectible. At December 31, 2019 and 2018, no allowances were deemed necessary.

Retrocessions are arranged through the Company’s retrocession pools for amounts in excess of the Company’s retention limit. As of December 31, 2019, all rated retrocession pool participants followed by the A.M. Best Company were rated “A- (excellent)” or better. The Company verifies retrocession pool participants’ ratings on a quarterly basis. For a majority of the retrocessionaires that were not rated, security in the form of letters of credit or trust assets has been posted. In addition, the Company performs annual financial reviews of its retrocessionaires to evaluate financial stability and performance. In addition to its third party retrocessionaires, various RGA reinsurance subsidiaries retrocede amounts in excess of their retention to affiliated subsidiaries.

The following table presents information for the Company’s ceded reinsurance receivable assets, including the respective amount and A.M. Best rating for each reinsurer representing in excess of five percent of the total as of December 31, 2019 or 2018 (dollars in millions):



		2019				2018
Reinsurer	A.M. Best Rating	Amount		% of Total		Amount		% of Total
Reinsurer A	A+	$	367	40.6	%	$	303	40.0	%
Reinsurer B	A+	208		23.0		193		25.5
Reinsurer C	A	84		9.3		70		9.2
Reinsurer D	A++	53		5.9		37		4.8
Reinsurer E	A+	43		4.8		40		5.3
Other reinsurers		149		16.4		115		15.2
Total		$	904	100.0	%	$	758	100.0	%

Included in the total ceded reinsurance receivables balance were $223 million and $243 million of claims recoverable, of which $15 million and $17 million were in excess of 90 days past due, as of December 31, 2019 and 2018, respectively.

The effect of reinsurance on net premiums is as follows (dollars in millions):



Years ended December 31,	2019			2018			2017
Direct insurance	$	76		$	63		$	62
Reinsurance assumed	12,150			11,341			10,642
Reinsurance ceded	(929		)	(860		)	(863		)
Net premiums	$	11,297		$	10,544		$	9,841

The effect of reinsurance on claims and other policy benefits as follows (dollars in millions):



Years ended December 31,	2019			2018			2017
Direct insurance	$	113		$	107		$	104
Reinsurance assumed	11,404			9,997			9,282
Reinsurance ceded	(1,320		)	(785		)	(867		)
Net claims and other policy benefits	$	10,197		$	9,319		$	8,519

The effect of reinsurance on life insurance in force is shown in the following schedule (dollars in millions):



	Direct		Assumed		Ceded		Net		Assumed/Net %
December 31, 2019	$	1,316	$	3,480,206	$	192,864	$	3,288,658	105.8	%
December 31, 2018	1,363		3,329,181		186,172		3,144,372		105.9
December 31, 2017	1,462		3,297,275		205,529		3,093,208		106.6

At December 31, 2019 and 2018, respectively, the Company provided approximately $22.7 billion and $18.1 billion of financial reinsurance, as measured by pre-tax statutory surplus, risk based capital and other financial reinsurance structures, to other insurance companies under financial reinsurance or capital solutions transactions to assist ceding companies in meeting applicable regulatory requirements. Generally, such financial reinsurance is provided by the Company committing cash or assuming insurance liabilities, which are collateralized by future profits on the reinsured business. The Company earns a fee based on the amount of net outstanding financial reinsurance.

Reinsurance treaties, whether facultative or automatic, may provide for recapture rights on the part of the ceding company. Recapture rights permit the ceding company to reassume all or a portion of the risk formerly ceded to the reinsurer after an agreed-upon period of time, generally 10 years, or in some cases due to changes in the financial condition or ratings of the reinsurer. Recapture of business previously ceded does not affect premiums ceded prior to the recapture of such business but would reduce premiums in subsequent periods. Additionally, some reinsurance treaties give the ceding company the right to require the Company to place assets in trust for their benefit to support the ceding company’s statutory reserve credits, in the event of a downgrade of the Company’s credit ratings and or other statutory measure to specified levels, generally non-investment grade levels, or if minimum levels of financial condition are not maintained. As of December 31, 2019, neither the Company nor its subsidiaries have been required to post additional collateral or have had a reinsurance treaty recaptured as a result of credit downgrade or defined statutory measure decline.

Certain reinsurance treaties require the reinsurer to place assets in trust to collateralize the reinsurer’s obligation to the ceding company. Assets placed in trust continue to be owned by the Company, but their use is restricted based on the terms of the trust agreement. Securities with an amortized cost of $3.3 billion and $2.9 billion were held in trust for the benefit of the Company’s

subsidiaries to satisfy collateral requirements for reinsurance business at December 31, 2019 and 2018, respectively. Additionally, securities with an amortized cost of $27.3 billion and $20.1 billion as of December 31, 2019 and 2018, respectively, were held in trust to satisfy collateral requirements under certain third-party reinsurance treaties. Under certain conditions, the Company may be obligated to move reinsurance from one subsidiary to another subsidiary, post additional collateral or make payments under a given reinsurance treaty. These conditions include change in control or ratings of the subsidiary, insolvency, nonperformance under a reinsurance treaty, or loss of license or other regulatory authorization of such subsidiary. If the Company was ever required to move reinsurance from one subsidiary to another subsidiary, the risk to the Company on a consolidated basis under the reinsurance treaties would not change; however, additional collateral may need to be posted or additional capital may be required due to the change in jurisdiction of the subsidiary reinsuring the business, which could lead to a strain on liquidity.