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PMI Says Captive Reinsurance Passes Accounting Test For Risk Transfer Deals.
Walnut Creek, CA -- The PMI Group Inc. here said a self-commissioned study found its deep cede captive reinsurance arrangements satisfy the risk transfer requirements of SFAS 113 because the probability of significant loss to the other party is more than remote.
Furthermore, the study claimed that the structures offered ceded premium levels that are reasonable in relation to the ceded risk and the structures offer reasonable risk-adjusted returns while reducing PMI's own volatility of returns.
PMI hired Milliman Inc., Seattle, to conduct the study. The results were announced on a conference call. L. Stephen Smith, president and chief executive of PMI Mortgage Insurance Co., said the company's beliefs about captives include that they align the interests of the company with its lenders on issues of loan quality, servicing and loss mitigation.
In addition, they create operational efficiencies for PMI, they are an important source of reinsurance to protect against market downturns and they are a source of capital because of the trust account structure in the agreements.
Among the findings by Milliman are that loss ...
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Source: HighBeam Research, PMI Says Captive Reinsurance Passes Accounting Test For Risk Transfer...