funds withheld

Funds withheld refers to a provision in a reinsurance treaty under which some or all of the premium due to the reinsurer, usually an unauthorized reinsurer, is not paid but rather is withheld by the ceding company.

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This enables the ceding company to either reduce the provision for unauthorized reinsurance in its statutory statement or for funds to be on deposit in a loss escrow account for purposes of paying claims. The reinsurer's asset, in lieu of cash, is "funds held by or deposited with reinsured companies."