Reinsurance

a) Consolidated reinsurance

Chubb purchases reinsurance to manage various exposures including catastrophe risks. Although reinsurance agreements contractually obligate Chubb's reinsurers to reimburse it for the agreed-upon portion of its gross paid losses, they do not discharge Chubb's primary liability. The amounts for net premiums written and net premiums earned in the consolidated statements of operations are net of reinsurance. The following table presents direct, assumed, and ceded premiums:



	Year Ended December 31
(in millions of U.S. dollars)	2015			2014			2013
Premiums written
Direct	$	19,879		$	20,069		$	19,212
Assumed		3,932			3,321			3,616
Ceded		(6,098	)		(5,591	)		(5,803	)
Net	$	17,713		$	17,799		$	17,025
Premiums earned
Direct	$	19,355		$	19,555		$	18,856
Assumed		3,676			3,336			3,479
Ceded		(5,818	)		(5,465	)		(5,722	)
Net	$	17,213		$	17,426		$	16,613

For each of the years ended December 31, 2015, 2014, and 2013, reinsurance recoveries on losses and loss expenses incurred were $3.1 billion.

b) Reinsurance recoverable on ceded reinsurance



	December 31			December 31
(in millions of U.S. dollars)	2015			2014
Reinsurance recoverable on unpaid losses and loss expenses ⁽¹⁾		$	10,741		$	11,307
Reinsurance recoverable on paid losses and loss expenses ⁽¹⁾		645			685
Net reinsurance recoverable on losses and loss expenses		$	11,386		$	11,992


⁽¹⁾	Net of a provision for uncollectible reinsurance.

We evaluate the financial condition of our reinsurers and potential reinsurers on a regular basis and also monitor concentrations of credit risk with reinsurers. The provision for uncollectible reinsurance is required principally due to the potential failure of reinsurers to indemnify Chubb, primarily because of disputes under reinsurance contracts and insolvencies. We have established provisions for amounts estimated to be uncollectible. At December 31, 2015 and 2014, we recorded a provision for uncollectible reinsurance of $328 million and $357 million, respectively.

The following tables present a listing, at December 31, 2015, of the categories of Chubb's reinsurers.



December 31, 2015	Gross Reinsurance Recoverable on Loss and Loss Expenses		Provision for Uncollectible Reinsurance		% of Gross Reinsurance Recoverable
(in millions of U.S. dollars, except for percentages)	Gross Reinsurance Recoverable on Loss and Loss Expenses		Provision for Uncollectible Reinsurance		% of Gross Reinsurance Recoverable
Categories
Largest reinsurers	$	5,335	$	69	1.3	%
Other reinsurers rated A- or better	3,078		44		1.4	%
Other reinsurers with ratings lower than A- or not rated	378		68		18.0	%
Pools	347		14		4.0	%
Structured settlements	546		10		1.8	%
Captives	1,786		23		1.3	%
Other	244		100		41.0	%
Total	$	11,714	$	328	2.8	%



Largest Reinsurers
Alleghany Corp	HDI Group (Hannover Re)	Munich Re Group
Atlantic Indemnity	IRB Brasil Resseguros S.A. Group	Partner Re Group
Berkshire Hathaway Insurance Group	Lloyd's of London	Swiss Re Group



Categories of Chubb's reinsurers		Comprises:
Largest reinsurers		• All groups of reinsurers or captives where the gross recoverable exceeds one percent of Chubb's total shareholders' equity.
Other reinsurers rated A- or better		• All reinsurers rated A- or better that were not included in the largest reinsurer category.
Other reinsurers rated lower than A- or not rated		• All reinsurers rated lower than A- or not rated that were not included in the largest reinsurer category.
Pools		• Related to Chubb's voluntary pool participation and Chubb's mandatory pool participation required by law in certain states.
Structured settlements		• Annuities purchased from life insurance companies to settle claims. Since we retain ultimate liability in the event that the life company fails to pay, we reflect the amounts as both a liability and a recoverable/receivable for GAAP purposes.
Captives		• Companies established and owned by our insurance clients to assume a significant portion of their direct insurance risk from Chubb; structured to allow clients to self-insure a portion of their reinsurance risk. It generally is our policy to obtain collateral equal to expected losses. Where appropriate, exceptions are granted but only with review and approval at a senior officer level. Excludes captives included in the largest reinsurer category.
Other		• Recoverables that are in dispute or are from companies that are in supervision, rehabilitation, or liquidation.

The provision for uncollectible reinsurance is principally based on an analysis of the credit quality of the reinsurer and collateral balances. We establish the provision for uncollectible reinsurance for the Other category based on a case-by-case analysis of individual situations including the merits of the underlying matter, credit and collateral analysis, and consideration of our collection experience in similar situations.

c) Assumed life reinsurance programs involving minimum benefit guarantees under variable annuity contracts

The following table presents income and expenses relating to GMDB and GLB reinsurance. GLBs include GMIBs as well as some GMABs originating in Japan.



	Year Ended December 31
(in millions of U.S. dollars)	2015			2014			2013
GMDB
Net premiums earned	$	61		$	71		$	77
Policy benefits and other reserve adjustments	$	34		$	50		$	73
GLB
Net premiums earned	$	121		$	138		$	149
Policy benefits and other reserve adjustments	45			36			27
Net realized gains (losses)	(203		)	(213		)	929
Gain (loss) recognized in Net income	$	(127	)	$	(111	)	$	1,051
Net cash received	$	98		$	125		$	126
Net (increase) decrease in liability	$	(225	)	$	(236	)	$	925

Net realized gains (losses) in the table above include gains (losses) related to foreign exchange and fair value adjustments on insurance derivatives and exclude gains (losses) on S&P put options and futures used to partially offset the risk in the GLB reinsurance portfolio. Refer to Note 10 for additional information.

At December 31, 2015 and 2014, the reported liability for GMDB reinsurance was $117 million and $111 million, respectively. At December 31, 2015 and 2014, the reported liability for GLB reinsurance was $888 million and $663 million, respectively, which includes a fair value derivative adjustment of $609 million and $406 million, respectively. Reported liabilities for both GMDB and GLB reinsurance are determined using internal valuation models. Such valuations require considerable judgment and are subject to significant uncertainty. The valuation of these products is subject to fluctuations arising from, among other factors, changes in interest rates, changes in equity markets, changes in credit markets, changes in the allocation of the investments underlying annuitants’ account values, and assumptions regarding future policyholder behavior. These models and the related assumptions are regularly reviewed by management and enhanced, as appropriate, based upon improvements in modeling assumptions and availability of updated information, such as market conditions and demographics of in-force annuities.

Variable Annuity Net Amount at Risk

The net amount at risk is defined as the present value of future claim payments assuming policy account values and guaranteed values are fixed at the valuation date (December 31, 2015 and 2014, respectively) and reinsurance coverage ends at the earlier of the maturity of the underlying variable annuity policy or the reinsurance treaty. In addition, the following assumptions were used:



(in millions of U.S. dollars, except for percentages)		Net amount at risk
Reinsurance covering		2015		2014		2015 Future claims discount rate	Other assumptions	Total claims at 100% mortality at December 31, 2015⁽¹⁾
GMDB Risk Only		$	364	$	418	3.8% - 4.3%	No lapses or withdrawals	$	229
							Mortality according to 100% of the Annuity 2000 mortality table
GLB Risk Only		$	733	$	440	4.5% - 5.0%	No deaths, lapses or withdrawals	N/A
							Annuitization at a frequency most disadvantageous to Chubb⁽²⁾
							Claim calculated using interest rates in line with rates used to calculate reserve
Both Risks: ⁽³⁾	GMDB	$	89	$	76	4.5% - 5.0%	No lapses or withdrawals	$	56
							Mortality according to 100% of the Annuity 2000 mortality table
	GLB	$	422	$	235	4.5% - 5.0%	Annuitization at a frequency most disadvantageous to Chubb⁽²⁾	$	—
							Claim calculated using interest rates in line with rates used to calculate reserve

⁽¹⁾ Takes into account all applicable reinsurance treaty claim limits.

⁽²⁾ Annuitization at a level that maximizes claims taking into account the treaty limits.

⁽³⁾ Covering both the GMDB and GLB risks on the same underlying policyholders.

The average attained age of all policyholders for all risk categories above, weighted by the guaranteed value of each reinsured policy, is approximately 69 years.