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LTCI Reinsurer Guards Against Problems at Its Own Reinsurers

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The managers of GE Capital’s long-term care insurance (LTCI) reinsurance unit are preparing for the possibility that they may have trouble collecting payments from the unit’s own reinsurance arrangements.

(Related: 5 Notes on GE’s $15B in LTCI Reserve Contributions)

GE Capital is a unit of General Electric Company.

GE Capital managers talked about the LTCI reinsurance unit’s own reinsurance concerns during a recent conference call “teach-in” with securities analysts. Managers held the teach-in to go over reinsurance unit information included in General Electric’s annual financial statement filing.

Teach-In Vocabulary

In the insurance industry, a “direct writer” is an insurance company that sells insurance policies directly to customers.

A reinsurer insures the direct writer. An LTCI reinsurer might protect a direct LTCI writer against some or all of the risk associated with providing LTCI coverage.

A retrocessionaire, third-party reinsurer, insures the reinsurer. In the LTCI world, an LTCI retrocessionaire might protect a company like GE Capital against some or all of the risk of providing LTCI reinsurance.

GE Capital

The GE Capital reinsurance unit provides reinsurance for LTCI policies, structured settlement annuities and life insurance.

The unit ended 2018 with a total of $46 billion in reserves, under state insurance regulators’ statutory accounting rules. About $30 billion of the reserves were for LTCI reinsurance.

Bob Deutsch, GE Capital’s managing director for North American Life & Health, said during the conference call that the company has reinsurance arrangements in place that could provide a total of about $3.4 billion in recoverables.

The unit includes about $2.3 billion in reinsurance recoverables in its reserves.

“The $2.3 billion represents money that is held in trust for GE as the beneficiary,” Deutsch said.

GE Capital has put $1.1 billion of the reinsurance recoverables in a category for doubtful accounts, and it does not include that $1.1 billion in its statutory reserves, Deutsch said.

The $2.3 billion 2018 reinsurance recoverable amounts to 7.6% of 2018 statutory LTCI reinsurance reserves, and 5% of all reinsurance reserves, according to ThinkAdvisor calculations.

The $1.1 billion doubtful recoverable figure amounts to 3.6% of GE Capital’s 2018 LTCI reinsurance reserves, and 2.4% of all reinsurance reserves.

General Electric said in its annual financial statement that the $2.3 billion 2018 reinsurance recoverable is down from $2.5 billion in 2017, and that the allowance for doubtful reinsurance arrangements has decreased from $2.2 billion in 2017.

GE says in the financial statement that the reinsurance recoverables are related primarily to reinsurance on LTCI policies.


GE Capital executives suggested during the conference call that the 274,000 holders of the LTCI policies GE Capital reinsures will continue to see premium increases.

As a reinsurer, GE Capital must work with the original direct writers to get LTCI premiums increased.

The 274,000 policies in force cover a total of 342,000 people.

Increases already implemented have increased premiums for the policyholders by an average of about 50%, according to Tim Kneeland, the chief executive officer of the GE Capital North American Life & Health unit.

GE Capital is expecting to implement LTCI premium increases with a net present value of $1.7 billion from now through 2028, according to the teach-in slidedeck.

That amounts to premium increases, and policy benefits reductions, with an average of about $6,300 in net present value per policyholder.

GE Capital has already received regulator approvals for about $500 million of the increases, or about, $1,850 in net present value per policyholder.

The company is seeking, or plans to seek, approval for another $1.2 billion in increases.

GE Capital did not give a figure for the net present value of its current LTCI premium revenue stream.


Links to an audio recording of the LTCI reinsurance teach-in, and a teach-in slidedeck, are available here.

— Read AALTCI Previews Connecticut LTCI Program Claim Dataon ThinkAdvisor.

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