Assumed Treaty Underwriting Audits

Virtually every reinsurance treaty contains an inspection of records clause. Whether the reinsurer seeks a historical inspection of records for a treaty with deteriorating results, a pre-quote or pre-renewal audit, or an at risk compliance audit, a review of underwriting files is a critical element of the inspection. Chiltington’s experienced staff, including former reinsurance underwriting professionals, has developed a unique and comprehensive approach to performing an underwriting review of assumed treaty business, summarized as follows:

Pre-Audit Preparation before the audit which includes:

• A thorough analysis of the reinsurance contract and treaty underwriting submissions presented to the reinsurer;
• Preparation of an overview report that identifies the more significant contract terms and key representations made to the reinsurers;
• The development of a work program for the on-site inspection;
• Submitting a selection of files to the cedent for the on-site review. 

On-Site Inspection at the cedent’s offices which entails:

• A careful review of each file for compliance with such treaty terms as the class of business, policy periods, excluded types or classes, limit and retention, premium and commission, and any other terms specific to the assumed treaty;
• A thorough examination of the underwriting material in the file to determine if the risk complies with representations made to reinsurers about the subject business;
• Capturing the key data in electronic form during the audit for post-audit analysis;
• Obtaining copies, to the extent possible, of relevant documents for further analysis and to support the findings of the audit.

Post-Audit phase of the assumed treaty underwriting audit involves:

• Analysis of the information gathered during the audit;
• Preparation of the report of audit findings;
• Recommendations to the reinsurer regarding any significant findings.

Assumed treaty underwriting audits can be performed as a stand-alone service or in conjunction with audits of claims or accounting documents. In either case, Chiltington will submit a budget for the assignment, usually with the overview report, so that estimated costs will be known in advance.