Federal government releases regulations repealing ceding limits

The government of Canada has officially introduced new regulations repealing the 75% and 25% reinsurance ceding limits.The new rules come into effect on June 30, 2011. As of that date, property and casualty companies will no longer be prohibited from ceding more than 75% of their gross premiums in total and will no longer be limited to ceding only 25% of their gross premiums to unregistered reinsurers. “The purpose of these prudential rules was to limit counterparty risk in the event reinsurance companies would not be able to meet claim obligations,” a statement on the Canada Gazette says. “However, these rules are easily avoided, and, in essence, can be qualified as obsolete as they no longer fulfil their prudential purpose.”