how yearly renewable term reinsurance is used
yearly renewable term yrt reinsurance is typically used to reinsure traditional whole life insurance and universal life insurance term insurance wasn t always reinsured on a yrt basis this was so because coinsurance made for a better match of reinsurance costs with premiums received from the policyholder on level premium term products it also passed the risk of the adequacy rates along to the reinsurer however as alternative capital solutions have become more popular yrt became a more popular method of reinsuring term insurance as well yrt is usually the best choice when the goal is to transfer mortality risk because a policy is large or because of concerns over claim frequency yrt is also simple to administer and popular in situations where the anticipated number of reinsurance cessions is low yrt is also good for reinsuring disability income long term care and critical illness risks however it does not work as well for reinsurance of annuities since yrt reinsurance only involves a limited amount of investment risk little persistency risk no cash surrender risk and little or no surplus strain reinsurers may have a lower profit objective for yrt reinsurance yrt can thus usually be had at a lower effective cost than either coinsurance or modified coinsurance as long as annual premiums are paid the reserve credit is equal to the unearned portion of the net premium of a one year term insurance benefit yearly renewable term insurance normally does not provide reinsurance ceded reserve credit for deficiency reserves 