Feldblum’s Retroactive Reinsurance Example
Common Q: In Feldblum’s Notes paper, he gives an example of a retroactive reinsurance contact where the reinsurer can increase the premium if there is adverse development. According to SSAP62, this is forbidden (“Any provision for subsequent adjustment on the basis of actual experience in regard to policy obligations transferred, or on the basis of any other formula, is prohibited”).
I agree that Feldblum’s example is incorrect (as per SSAP62). Hopefully this means that it won’t come up in the exam, but I can not guarantee it. If it does, I would recommend assuming that Feldblum’s paper is correct, and answering accordingly. This is a safer approach IMO than simply saying that the contract does not qualify for retroactive reinsurance accounting (that will most probably receive full credit too, but I can not guarantee this)