This question is about the delegated regulation article 116 sub 5 on the volume measure for non-life premium and reserve risk. Here it is written that premiums shall be net, after deduction of premiums for reinsurance contracts. The question is how exactly the ‘premiums net, after deduction of premiums for reinsurance’ should be calculated? More specifically, how should the ‘premiums for reinsurance’ be calculated? Is this including or excluding reinsurance commission?
Article 116(5) of Delegated Regulation 2015/35 states that “premiums shall be net, after deduction of premiums for reinsurance contracts”: this means that premiums entering the volume measure calculation should be net of the part of the premiums transferred to the accepting undertaking. As a reinsurance commission is a transaction from the accepting undertaking to the ceding undertaking to cover the overhead expenses incurred by the ceding undertaking and not transferred to the accepting undertaking (e.g. claims management – of all claims – is still performed by the ceding undertaking), the premiums entering the volume measure calculation should include (i.e. be gross of) reinsurance commissions.