A reinsurance company must maintain sufficient liquidity to pay claims. Premiums received by the reinsurance company should be liquid during the period of time those premiums may be called upon to satisfy claims pursuant to the insurance ceding agreements with primary insurers.
The types of investments that can be utilized in a reinsurance company are:

  • Government bonds
  • Corporate bonds
  • Preferred shares
  • Common shares
  • Letters of credit
  • Certificates of deposit
  • Money market funds

Note that the aggregate amount invested in the obligations and stock of any one issuer cannot exceed 10 percent of the market value of the portfolio. Reinsurance companies must follow the National Association of Insurance Commissioners (NAIC) for maintaining adequate liquidity and safety for paying insurance claims on a timely basis. NAIC is the U.S. standard-setting and. regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories.