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Reinsurance
 9 Months Ended
Sep. 30, 2024
Reinsurance Disclosures [Abstract]  
Reinsurance [Text Block]
8. REINSURANCE
The Company cedes insurance risk to reinsurers to enable the Company to manage capital and risk exposure. Such arrangements do not relieve the Company of its primary liability to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company's procedures include carefully selecting its reinsurers, structuring agreements to provide collateral funds where necessary, and regularly monitoring the financial condition and ratings of its reinsurers.
Reinsurance Recoverables
Reinsurance recoverables include balances due from reinsurance companies and are presented net of an allowance for uncollectible reinsurance. Reinsurance recoverables include
an estimate of the amount of gross losses and loss adjustment expense ("LAE") reserves that may be ceded under the terms of the reinsurance agreements, including incurred but not reported ("IBNR") unpaid losses. The Company’s estimate of losses and LAE reserves ceded to reinsurers is based on assumptions that are consistent with those used in establishing the gross reserves for amounts the Company owes to its claimants. The Company estimates its ceded reinsurance recoverables based on the terms of any applicable facultative and treaty reinsurance, including an estimate of how IBNR losses will ultimately be ceded under reinsurance agreements. Accordingly, the Company’s estimate of reinsurance recoverables is subject to similar risks and uncertainties as the estimate of the gross reserve for unpaid losses and loss adjustment expenses.
Reinsurance Recoverables by Credit Quality Indicator
As of September 30, 2024As of December 31, 2023
P&C
Group Benefits
CorporateTotal
P&C
Group Benefits
CorporateTotal
A.M. Best Financial Strength Rating
A++$2,284 $— $— $2,284 $2,398 $— $— $2,398 
A+2,066 276 226 2,568 2,030 251 241 2,522 
A808 1 — 809 810 1 — 811 
A-624 4 — 628 653 5 — 658 
B++2 — 2 4 2 — 3 5 
Below B++22 — — 22 22 — — 22 
Total Rated by A.M. Best
5,806 281 228 6,315 5,915 257 244 6,416 
Mandatory (Assigned) and Voluntary Risk Pools206 — — 206 208 — — 208 
Captives373 — — 373 353 — — 353 
Other not rated companies254 6 — 260 226 4 — 230 
Gross Reinsurance Recoverables
6,639 287 228 7,154 6,702 261 244 7,207 
Allowance for uncollectible reinsurance
(99)(1)(2)(102)(100)(1)(2)(103)
Net Reinsurance Recoverables
$6,540 $286 $226 $7,052 $6,602 $260 $242 $7,104 
Balances are considered past due when amounts that have been billed are not collected within contractually stipulated time periods, generally 30, 60 or 90 days. To manage reinsurer credit risk, a reinsurance security review committee evaluates the credit standing, financial performance, management and
operational quality of each potential reinsurer. In placing reinsurance, the Company considers the nature of the risk reinsured, including the expected liability payout duration, and establishes limits tiered by reinsurer credit rating.
Where its contracts permit, the Company secures future claim obligations with various forms of collateral or other credit enhancement, including irrevocable letters of credit, secured trusts, funds held accounts and group wide offsets. As part of its reinsurance recoverable review, the Company analyzes recent developments in commutation activity between reinsurers and cedants, recent trends in arbitration and litigation outcomes in disputes between cedants and reinsurers and the overall credit quality of the Company’s reinsurers.
Due to the inherent uncertainties as to collection and the length of time before reinsurance recoverables become due, it is possible that future adjustments to the Company’s reinsurance recoverables, net of the allowance, could be required, which could have a material adverse effect on the Company’s consolidated results of operations or cash flows in a particular quarter or annual period.
The allowance for uncollectible reinsurance comprises an ACL and an allowance for disputed balances. The ACL is estimated as the amount of reinsurance recoverables exposed to loss multiplied by estimated factors for the probability of default and the amount of loss given a default. The probability of default is assigned based on each reinsurer's credit rating, or a rating is estimated if no external rating is available. Credit ratings are reviewed on a quarterly basis and any significant changes are reflected in an updated estimate. The probability of default factors are historical insurer and reinsurer defaults for liabilities with similar durations to the reinsured liabilities as estimated through multiple economic cycles. Credit ratings are forward-
looking and consider a variety of economic outcomes. The loss given default factors are based on a study of historical recovery rates for general creditors of corporations through multiple economic cycles or, in the case of purchased annuities funding structured settlements accounted for as reinsurance, historical recovery rates for annuity contract holders.
As shown in the table above, a portion of the total gross reinsurance recoverable balance relates to the Company’s participation in various mandatory (assigned) and voluntary risk pools. Reinsurance recoverables due from pools are backed by the financial position of all insurance companies participating in the pools and the credit backing the reinsurance recoverable is not limited to the financial strength of each pool. The mandatory pools generally are funded through policy assessments or surcharges and if any participant in the pool defaults, remaining liabilities are apportioned among the other members.
The Company's evaluation of the required ACL for reinsurance recoverables considers the current economic environment as well as macroeconomic scenarios similar to the approach used to estimate the ACL for mortgage loans. See Note 5 - Investments. Insurance companies, including reinsurers, are regulated and hold risk-based capital ("RBC") to mitigate the risk of loss due to economic factors and other risks. Non-U.S. reinsurers are either subject to a capital regime substantively equivalent to domestic insurers or we hold collateral to support collection of reinsurance recoverables. As a result, there is limited history of losses from insurer defaults.
Allowance for Uncollectible Reinsurance for the Three and Nine Months Ended
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
P&C beginning allowance for uncollectible reinsurance$99 $107 $100 $102 
Beginning allowance for disputed amounts54 62 57 60 
P&C beginning ACL45 45 43 42 
Current period provision1 1 3 4 
Current period gross write-offs(1)— (1)— 
P&C ending ACL45 46 45 46 
Ending allowance for disputed amounts54 60 54 60 
P&C ending allowance for uncollectible reinsurance99 106 99 106 
Group Benefits allowance for uncollectible reinsurance1 1 1 1 
Corporate allowance for uncollectible reinsurance2 2 2 2 
Total allowance for uncollectible reinsurance$102 $109 $102 $109