Portfolio Transfer / Entry-Withdrawal Clause
The portfolio transfer / entry-withdrawal clause governs whether and how, at the start or end of a proportional treaty, unearned premium and outstanding claims reserves are transferred between the parties.
- Clause type
- Condition
- Origin/Market
- Reinsurance market
- Favours
- Neutral
- Negotiability
- Market standard
Purpose
When switching from one reinsurer to another, or at the start or end of a treaty written on a “losses occurring” rather than “risks attaching” basis, the question arises of who is liable for risks that are already in force at the effective date but not yet expired. The clause governs the transition of such open obligations by transferring a share of unearned premium (portfolio entry) on entry, or the reverse (portfolio withdrawal) on exit.
Effect and limits
On portfolio entry, the new reinsurer assumes liability for risks still open at the effective date, and sometimes also for losses already incurred but not finally settled, in exchange for a premium transfer. On withdrawal, the outgoing reinsurer correspondingly returns premium and is released from further liability. The precise calculation method (pro rata, actual reserves) must be fixed contractually.
Negotiation and practice
Key points of dispute are the valuation of transferred reserves and the treatment of late-developing losses from the transition period. The clause is particularly relevant when switching reinsurance partners or restructuring reinsurance programmes.