Federal government releases regulations repealing ceding limits

The government of Canada has officially introduced new regulations repealing the 75% and 25% reinsurance ceding limits.
The new rules come into effect on June 30, 2011. As of that date, property and casualty companies will no longer be prohibited from ceding more than 75% of their gross premiums in total and will no longer be limited to ceding only 25% of their gross premiums to unregistered reinsurers.
“The purpose of these prudential rules was to limit counterparty risk in the event reinsurance companies would not be able to meet claim obligations,” a statement on the Canada Gazette says. “However, these rules are easily avoided, and, in essence, can be qualified as obsolete as they no longer fulfil their prudential purpose.”