Portfolio Entry
What Is a Portfolio Entry?
A portfolio entry is an account of all liabilities a reinsurer is responsible for while entering treaty reinsurance. A portfolio entry accounts for unearned premiums from policies that are inactive during an accounting period, as well as unearned premiums that carry over into a future accounting period.
Figuring out Portfolio Entries
An insurance company consistently guarantees policies throughout the span of the year. At some random time, it will have a portfolio of policies with various expiration dates. Toward the finish of a reporting period — like a fiscal year — the insurer must recognize the dollar amount of premiums earnings and the leftover dollar amount of unearned premiums. Earned premiums are associated with policies that have ended. Unearned premiums, thought about liabilities, address premiums collected on active insurance policies. Active policies are a liability for the insurance company on the grounds that the policyholder may as yet file a claim before the expiration of the policy contract.
Reinsurance deals permit an insurance company to transfer a portion of its underwriting liabilities to a reinsurer. In exchange, the reinsurer gets a portion of the premiums that the insurer gathers. A reinsurer is a company that gives financial protection to insurance companies. Since reinsurers handle risks that are too large for insurance companies to handle all alone, reinsurance companies make it feasible for insurers to acquire more business than they would somehow or another have the option to.
The reinsurance company accepts existing obligations and the risks associated with the insurer's loss reserves and unearned premiums. Reinsurance deals fundamentally transfer the liabilities connected with unearned premiums from the insurer to the reinsurer. Since reinsurance settlements have fixed time spans, similar to insurance contracts, accounting for portfolio changes is a critical part of figuring out a reinsurer's risk exposure.
In reinsurance, the term "portfolio" alludes to existing insurance policies the insurer ceded. Ceded things might incorporate claims that presently can't seem to be paid, new policies ceded by the insurer, and reinsurance restorations. In this way, the portfolio addresses an account of the reinsurer's premium portfolio, loss portfolio, and investment portfolio.
An insurer must rundown the value of unearned premiums associated with unexpired policies toward the finish of a reporting period. A reinsurer must likewise account for unearned premiums and assess its exposure to unearned premiums in an accounting year. At the point when a reinsurance company gets premiums from the ceding company, it deposits them in an unearned premium reserve account. The account is utilized to pay for future claims. Over the long haul, a portion of the premiums is taken out from the unearned premium reserve and set apart as earned. The earned premiums address the reinsurer's profit.
At the point when a reinsurance treaty lapses or is canceled, the reinsurer can shift liabilities back to the ceding company by paying them for any premiums it collected yet stay unearned.
Features
- Every entry in a portfolio is a policy that the insurer has ceded to the reinsurer.
- A portfolio entry is an account of all liabilities a reinsurer is responsible for when an insurer transfers liabilities to it through treaty reinsurance.
- As premium payments are made by the insureds, the insurer transfers them to a separate account kept up with by the reinsurer; after some time, the relating entry is set apart as an earned premium.
