Question 1

What is fully collateralized reinsurance?

Accepted Answer

Fully collateralized reinsurance means that 100% of the reinsurer's obligations are backed by cash and investment-grade assets held in a trust account. Unlike traditional reinsurance where cedents rely on the reinsurer's credit rating, collateralized structures provide direct access to funds securing claims—eliminating counterparty credit risk.

Question 2

How does a Regulation 114 trust work?

Accepted Answer

A Regulation 114 trust is a reinsurance collateral arrangement where assets are held by a U.S. trustee for the benefit of the ceding insurer. The cedent is the sole beneficiary with direct access to funds for claim payments. This structure allows unlicensed or non-admitted reinsurers to provide reinsurance credit to U.S. insurers under state insurance regulations.

Question 3

Does Cover Re use letters of credit?

Accepted Answer

No. Cover Re does not utilize letters of credit (LOCs). All collateral consists of tangible, liquid assets—USD cash, short-duration U.S. Treasuries, and investment-grade bonds—held directly in segregated trust accounts. This eliminates the bank credit risk associated with LOC-backed structures.

Question 4

What lines of business does Cover Re write?

Accepted Answer

Cover Re writes quota share and excess of loss reinsurance across commercial and personal lines including: Commercial Liability, Commercial Property, Commercial Auto, Workers' Compensation, Umbrella & Excess Liability, Professional Liability, Homeowners, and Personal Auto.

Question 5

How do cedents access funds for claims?

Accepted Answer

Cedents are sole beneficiaries of their dedicated trust accounts with direct visibility and immediate access to funds. Claims can be settled via wire transfer directly from the trust without requiring Cover Re approval, ensuring fast and reliable claim payments.

Question 6

What is Cover Re's collateralization ratio?

Accepted Answer

Cover Re posts collateral equal to 110% of cedents' booked loss reserves. This over-collateralization provides a security buffer to ensure coverage even in adverse development scenarios.

Underwriting & Leadership

James Norris

Jonathan Lim

David Hampson

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