China’s PICC Property and Casualty Company (PICC P&C) has entered into a new Reinsurance Framework Agreement with PICC Reinsurance, under which the two parties will cede insurance premiums to each other in exchange for commissions.
This agreement, effective from January 1, 2025, to December 31, 2025, aims to continue their existing business cooperation.
The transactions are subject to reporting and annual review requirements but are exempt from independent shareholders’ approval.
PICC P&C entered into this agreement to achieve risk diversification and operational stability.
“On 27 December 2024, the Company entered into the Reinsurance Framework Agreement with PICC Reinsurance. Pursuant to the Agreement, the Company agreed to cede insurance premiums to PICC Reinsurance in return for commissions and PICC Reinsurance agreed to cede insurance premiums to the Company in return for commissions,” states a filing on the matter.
The reinsurance businesses include treaty and facultative reinsurance, covering all lines of property and casualty insurance risks. For each reinsurance business, the amount of premiums to be ceded is determined based on the total premiums to be ceded and the reinsurance share allocated to PICC Re.
Commissions are calculated based on the amount of ceded premiums and the commission rate of the ceded-out business. The commission rate is determined using actuarial models based on the historical performance of the business and through open market negotiations.
Premiums to be ceded and commissions will be paid in cash, with payment dates determined according to terms agreed upon by the parties through arm’s-length negotiations when entering into the reinsurance agreements.
The annual caps for Outward Reinsurance Transactions for the year ending December 31, 2025, are estimated at RMB 6,000 million for premiums ceded by the firm to PICC Re and RMB 2,700 million for commissions to be paid by PICC Re to PICC P&C.
PICC P&C determined the annual cap for ceded premiums primarily based on the expected scale of total premiums to be ceded in the future and historical data of premiums ceded to PICC Re.
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