What Is a Bordereau?
In the insurance industry, a bordereau is an essential reporting tool used by insurers to keep reinsurers informed about insured assets or claims. This document is crucial for managing potential liabilities and understanding expected premiums in reinsurance contracts.
In the language of the insurance industry, the bordereau is prepared by the cedant, the company that has contractually ceded a portion of its business responsibilities to another party, the reinsurer.
Key Takeaways
- A bordereau is a detailed report from an insurer to a reinsurer listing insured assets or claims made.
- Reinsurance companies use bordereaus to assess potential liabilities and forecast premiums.
- The report’s format varies, but it has shifted from paper to electronic form more commonly.
- Premium bordereau includes policy details, while loss bordereau details claims and payouts.
- Bordereau reporting isn’t mandatory for every reinsurance contract, sometimes summaries suffice.
The contents of the bordereau report depend on whether it is outlining actual losses or premiums to be paid. A bordereau report is periodically provided by the reinsured party but is less commonly provided than a summary report.
Exploring the Role of Bordereau in Reinsurance
An insurance company will use a bordereau to provide detailed information on the different risks that a reinsurer has accepted.
Important
The purpose of reinsurance is to alleviate some of the risks associated with insuring assets of very high value.
Insurers use reinsurers to lower risk exposure by sharing premium revenue. The bordereau is needed because the insurer is still the party that is best situated to know the details of the individual insurance contracts involved and their associated risks.
Types of Bordereau: Premium vs. Loss
This documentation is usually required by the reinsurance treaty. The bordereau comes in two varieties:
- A premium bordereau lists all of the items that are protected under the reinsurance contract, including the contact information of the insured, the amount of the risk, the time period of reinsurance coverage, and the critical dates associated with the primary insurance.
- A loss bordereau provides details on any losses and claims that have been made, and what amount the reinsurer has paid out during this time period.
The format of the report varies depending on the needs of the reinsurer and of the reinsured. The report has traditionally been provided on paper but is now more often sent in electronic form.
Practical Applications of Bordereau in Reinsurance
Reinsurers use premium bordereau data to calculate and record ceded premiums. The reinsurer can then audit this information to determine which types of risks are the most profitable to reinsure. If the amount of detail in the bordereau is excessive, the reinsured party also will provide a summary of the positions in an aggregate format.
Not every reinsurance contract requires premium bordereau reporting. A contractual clause may require only summary accounting information rather than the risk detail typically found in bordereau reporting.
The Origin and Significance of the Term ‘Bordereau’
The word bordereau comes from the middle French word bordrel and the old French word bort. Both mean border, edge, or margin.
“Bordereau” is among many art-related terms used in reinsurance. Such terms are used in many professions to set apart insiders from others.
The Bottom Line
A bordereau is an essential tool in the reinsurance industry, bridging the communication between insurers and reinsurers by detailing the assets or losses involved in a reinsurance contract. It allows reinsurers to understand potential liabilities and expected premiums, ensuring informed risk management.
While comprehensive, the bordereau can be replaced by summary reports if detailed reporting isn’t necessary. This practice underpins the vital role of reinsurance in diversifying risks stemming from high-value insurance assets.
