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March 11, 2019 at 02:19 PM
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.
