Reinsurance Recoverable on Paid Claims
Recording the amount due from the reinsurer after settling a large claim.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Reinsurance Recoverable (Current Asset) | Asset (+) | 80,000.00 | - |
| Claims Expense (Net of Reinsurance) | Expense (-) | - | 80,000.00 |
💡 Accountant's Note
The cedant settles the full claim to the insured and then recovers from the reinsurer. The recovery receivable is recorded net of any deductible or retention. ECL on reinsurance recoverables is required under IFRS 9.
Practitioner & Systems Framework
💻 ERP Architecture
Reinsurance recoverables on paid claims are tracked in the reinsurance accounting module per treaty and per claim. The recoverable is raised when the underlying claim is paid and the treaty trigger conditions are met. Recovery collection is managed through the reinsurance AR sub-ledger. Some insurers net the recoverable against the reinsurance payable in the settlement process (cash call or offset arrangement). Under IFRS 9, ECL must be assessed on all reinsurance recoverables — this typically requires a matrix based on the reinsurer's credit rating.
⚠️ Audit Flags
Auditors assess the age and collectability of reinsurance recoverables. Old uncollected recoverables (over 90-180 days) require specific investigation. Verify that the ECL provision is adequate for the credit risk of each reinsurer, particularly for reinsurers with sub-investment-grade ratings. Confirm that the gross claims paid and the reinsurance recoverable are both presented at gross amounts in the financial statements (no netting at balance sheet level under IFRS).
📄 Required Documentation
Loss advice sent to reinsurer, reinsurer's acknowledgement and claims agreement, reinsurance recoverable aging report, ECL matrix by reinsurer credit rating, and treaty retention and cession schedule.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.