Despite the experience of Penn Treaty Network America in Allentown, Pa., which was recently put into rehabilitation, experts say reinsurance is available for long term care carriers.
Among those companies that say they are actively looking to reinsure LTC insurance is Munich American Reassurance Co., Atlanta, according to Jim Sweeney, executive vice president and COO.
“We are and continue to be active in the market,” says Sweeney, who notes that MARC is interested in quota share business as well as LTC/Annuity combo business.
When MARC looks at quota share business, it uses current assumptions on interest and lapse rates, not the assumptions originally used by the direct writers, he says.
Other factors that figure in on whether MARC agrees to reinsure business include underwriting claims control mechanisms and due diligence, and not just actuarial assumptions, according to Sweeney.
Thus, he explains, reinsuring a block of business depends more on the assumptions made than on whether it is a new or old block of LTCI. But Sweeney does note that, in general, in the industry, there are some older blocks that haven’t met interest, lapse and, in some cases, morbidity assumptions.
Steve Johnson, deputy insurance commissioner with the Pennsylvania insurance department, says that the cost of reinsuring Penn Treaty’s LTCI business had gone up dramatically, which resulted in the block of business being recaptured from Imagine International Reinsurance, Ltd., Dublin, its reinsurer. Both the department and the company, Johnson says, agreed that the cost of the treaty had gone up dramatically and the new cost would not be good for the company or its policyholders.
But the recapture of the contract put Penn Treaty into a negative capital and surplus position and as a result the department gave the company 90 days to either renegotiate the treaty or to find another reinsurer, he says.