Reinsurance Contract Assets
Amounts an insurance company can recover from its reinsurers, on the Balance Sheet. Only insurers under NFRS 17 use this.
In detail
Reinsurance Contract Assets is a ledger only an insurance company uses. When an insurer passes part of the risk on a policy to a reinsurer, the amounts it can recover from that reinsurer for claims and unexpired cover are an asset under NFRS 17, shown separately from its own Insurance Contract Liabilities rather than netted. The balance rises when claims are ceded and falls when the reinsurer settles. The chart includes it so that an insurer can run on the same NFRS layout, but a trading, travel or service business never posts here, and a balance in it on such a company's books is a mistake. Insurance premiums a normal business pays are simply the Insurance expense or a prepayment.
Formula
Reinsurance asset = Reinsurer's share of claims outstanding + Reinsurer's share of unexpired risk - Amounts received from the reinsurer.
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Reinsurance Contract Assets | Rs 20,00,000 | |
| Insurance Contract Liabilities | Rs 20,00,000 |
How to record it in BRAccount
- 01Confirm the company is a licensed insurer with a reinsurance treaty; otherwise leave this ledger unused.
- 02When a claim is ceded, post a Journal Entry: debit this account for the reinsurer's share, credit Insurance Contract Liabilities.
- 03Submit. The entry above posts for a flood claim shared with the reinsurer.
- 04When the reinsurer pays, post a Payment Entry Receive to the bank against this account.
- 05At year end, give the actuary's reinsurance valuation to the auditor and adjust the balance by Journal Entry.
When to use it
Post by Journal Entry when claims are ceded to a reinsurer. A trading or travel company never needs it.
Example from the demo books
Dr Reinsurance Contract Assets Rs 20,00,000, Cr Insurance Contract Liabilities Rs 20,00,000 for a flood claim shared with the reinsurer.